A California judge has dismissed claims for over $352 billion in losses in mortgage bond securities (MBS) against Bank of America[1]. A group of investors sued the lender after it purchased Countrywide in 2008 because of Countrywide’s now-notoriously poor underwriting criteria. The group had already reduced their claims substantially to $17 million, but the judge ruled that the bank as shielded from “successor liability,” meaning that the pension fund in question could continue to press claims against Countrywide, but that claims against BofA – and likely other defendants like Goldman Sachs and Deutsche Bank – will not stand.
The issue with the Countrywide purchase is, ultimately, whether BofA’s acquisition of the lender was a merger or a purchase[2]. The transaction was not structured as a merger, but investors believe it should be treated as one in the eyes of the court so that BofA can be held accountable for toxic mortgage securities that led to devastating losses. At least in California, though, the courts do not agree with the investors and have cleared the beleaguered lender.
Do you think that this decision is fair, or should BofA be held accountable for Countrywide’s shoddy lending practices?
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[1] http://www.dsnews.com/articles/judge-rules-bofa-not-liable-for-countrywides-mbs-sales-2011-04-25
[2] http://www.theatlantic.com/business/archive/2011/04/is-bank-of-america-off-the-hook-for-countrywides-misdeeds/237893/
April 27th, 2011 at 8:14 AM
Bofa and the government are a bunch of crooks working together bofa should be 100% liable regardless of the loophole in the purchase or merger in question. The whole purcahse is just a cover to escape all responsibility and the courts can blame everything on countrywide but will not hold bofa acountable due to (bofa is shielded from “successor liability”)what a bunch of crap. Wish I could be related to uncle sam borrow from tax payers and pay back only the portion I choose
April 28th, 2011 at 4:06 AM
biggest scam ever steven ruza
April 28th, 2011 at 5:56 AM
What all these lender’s, along with Wall Street did was a scam. Making loans, securitizing the debt and selling to investors, with no regard to the quality of the loans.
If the everyday, tax paying consumer created such a scam, they’d being doing time. Instead, these guys are patting each other on the back, and paying themselves huge bonuses!
Of course, the investors were buying these packaged, securitized loans with little research. But the quality rating of these bundled loans was being controlled by the lenders, too - so the investor would have had to be really diligent.
The fact that these national lenders were creating and then selling mortgages they knew were iffy at best, should make them culpable.
Look what they did with MERS…! Such a scam. These lenders should be held accountable, but by whom? The government? They did such a swell job loaning them taxpayer money with little or no restrictions.
On the flip side, the investors would have been prudent to remind themselves, “If it sounds too good to be true, it probably is too good to be true!”
Everybody was working on a wink-wink, nod-nod basis - with the consumer/taxpayer left holding the bag of flaming poop. And nothing has changed.
Anybody wonder why these lenders have been able to repay these huge government loans so quickly? Anybody questioning why they’re nickel and dimming the consumer relentlessly, now? Look at all the fees that are emerging!
Because of the way our society has evolved, the consumer really cannot function without a credit card and/or a bank account. And now they’re all imposing all kinds of ridiculous fees. It’s a money grab.
Banker, Politician, Wall Street Guru - they all belong to the same club. “National Screw the Consumer Club!”
April 28th, 2011 at 7:38 AM
I think CW investors should appeal to higher courts due to the facts that BOA is CW’s successor along with its rights and obligations. What happens if BOA is making big profit from buying the RE deal from CW if RE price goes up? Business game likes other games, running away from liability or responsibility when RE price going down is unfair!
April 28th, 2011 at 10:06 AM
Just another perfect example of how our government Of the people, By the people, and For the people has transformed into a government Of the Banks, By the Banks, and For the Banks.
It’s time to put the blame on those responsible and make the crooked banks PAY for their dubious actions. So what if it causes them to fail and close their doors, Hallelujah! Let new entreprenurial banks and money people become the New Financial World Order. Let’s just pray they would bring integrity and a concious with them.
April 28th, 2011 at 12:23 PM
Technically, the decision makes some sense, but it also tramples the spirit of the legal protections that those investors (and many others) thought were in place. That said, I think this decision might help to further erode the confidence that many have had in the banks and our government.
I wonder what BoA would do if those investors were to organize a boycott instead, since it’s clear that they won’t get the justice that they’re seeking (at least in CA).