Bank of America is getting blasted with accusations of a "backdoor bailout" for its $2.8 billion settlement with Fannie Mae and Freddie Mac over billions of bad mortgages, according to an article in today's edition of The New York Post by Mark DeCambre.
"Fannie and Freddie, which are wards of the government, accepted pennies on the dollar to settle a dispute over billions of faulty mortgages the bank sold to the pair during the housing bubble. Bank of America breathed a sigh of relief on Monday after the cost was far less than investors feared, sending its shares up as much as 6.4 percent,' the article said.
But the article said that "detractors on Wall Street and in Washington denounced the deal as another taxpayer buyout for a bank that weathered the financial crisis only with the help of a $45 billion government lifeline," adding that "some critics say Bank of America's $2.8 billion settlement with Fannie and Freddie may herald the start of Bailout II for the nation's big banks."
"I'm concerned that the settlement between Fannie Mae and Freddie Mac and Bank of America over misrepresentations in the mortgages BofA originated may amount to a backdoor bailout that props up the bank at the expense of taxpayers," Congresswoman Maxine Waters (D-Calif.) said in a statement yesterday, the article said.
"Analysts estimate the taxpayer bill for propping up troubled institutions Fannie and Freddie could hit a whopping $150 billion, while the entities' recent settlements with banks over bad mortgages represent a drop in the bucket. 'If Fannie and Freddie had really pushed hard on this settlement, it would have really caused problems for BofA,' Edward Pinto, resident fellow at conservative Washington think tank American Enterprise Institute, told The Post," the article continued.
The outrage stems from BofA's agreement to pay just $1.28 billion to Fannie and $1.52 billion to Freddie to resolve a dispute over loans purchased between 2005 and 2007 that the pair claims were improperly created.
"This [settlement is a standing subsidy that has to be worth $10 billion or $15 billion for [BofA," Christopher Whalen, the founder of Institutional Risk Analytics, told The Post.
Bank of America became the largest mortgage lender after it agreed to purchase troubled mortgage giant Countrywide Financial in 2008.
The bank's deal with the mortgage giants comes a week after Ally Financial - the entity formerly known as GMAC, which is more than half owned by the government - agreed to shell out $462 million to Fannie to settle repurchase claims.
An article in yesterday's edition of The New York Times by Ben Protess and Eric Cash said that the Bank of America deal "may prompt a wave of such settlements by big banks," adding that "Fannie and Freddie also are looking to collect from other large lenders, including Wells Fargo, Citigroup and Washington Mutual, now owned by JPMorgan Chase."
"Fannie and Freddie, which are wards of the government, accepted pennies on the dollar to settle a dispute over billions of faulty mortgages the bank sold to the pair during the housing bubble. Bank of America breathed a sigh of relief on Monday after the cost was far less than investors feared, sending its shares up as much as 6.4 percent,' the article said.
But the article said that "detractors on Wall Street and in Washington denounced the deal as another taxpayer buyout for a bank that weathered the financial crisis only with the help of a $45 billion government lifeline," adding that "some critics say Bank of America's $2.8 billion settlement with Fannie and Freddie may herald the start of Bailout II for the nation's big banks."
"I'm concerned that the settlement between Fannie Mae and Freddie Mac and Bank of America over misrepresentations in the mortgages BofA originated may amount to a backdoor bailout that props up the bank at the expense of taxpayers," Congresswoman Maxine Waters (D-Calif.) said in a statement yesterday, the article said.
"Analysts estimate the taxpayer bill for propping up troubled institutions Fannie and Freddie could hit a whopping $150 billion, while the entities' recent settlements with banks over bad mortgages represent a drop in the bucket. 'If Fannie and Freddie had really pushed hard on this settlement, it would have really caused problems for BofA,' Edward Pinto, resident fellow at conservative Washington think tank American Enterprise Institute, told The Post," the article continued.
The outrage stems from BofA's agreement to pay just $1.28 billion to Fannie and $1.52 billion to Freddie to resolve a dispute over loans purchased between 2005 and 2007 that the pair claims were improperly created.
"This [settlement is a standing subsidy that has to be worth $10 billion or $15 billion for [BofA," Christopher Whalen, the founder of Institutional Risk Analytics, told The Post.
Bank of America became the largest mortgage lender after it agreed to purchase troubled mortgage giant Countrywide Financial in 2008.
The bank's deal with the mortgage giants comes a week after Ally Financial - the entity formerly known as GMAC, which is more than half owned by the government - agreed to shell out $462 million to Fannie to settle repurchase claims.
An article in yesterday's edition of The New York Times by Ben Protess and Eric Cash said that the Bank of America deal "may prompt a wave of such settlements by big banks," adding that "Fannie and Freddie also are looking to collect from other large lenders, including Wells Fargo, Citigroup and Washington Mutual, now owned by JPMorgan Chase."
Architecture Critic
Carter Horsley
Since 1997, Carter B. Horsley has been the editorial director of CityRealty. He began his journalistic career at The New York Times in 1961 where he spent 26 years as a reporter specializing in real estate & architectural news. In 1987, he became the architecture critic and real estate editor of The New York Post.
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