Years ago, a jury found Bank of America, which had acquired Countrywide Financial, liable for mortgage fraud and fined them $1.27 billion. That pently is now thrown out, poof, gone, voided into the abyss. Here are some interesting details.
The 2nd U.S. Circuit Court of Appeals in New York found insufficient proof under federal fraud statutes to establish Bank of America's liability over a mortgage program called "Hustle" run by the former Countrywide Financial Corp.The Justice Department claimed Countrywide, which Bank of America bought in July 2008, defrauded government-sponsored mortgage financiers Fannie Mae and Freddie Mac by selling them thousands of toxic loans.But in a 3-0 decision, U.S. Circuit Judge Richard Wesley said the evidence at most showed that Countrywide breached contracts to sell investment-quality loans, and that there was no proof it intended any deception."The trial evidence fails to demonstrate the contemporaneous fraudulent intent necessary to prove a scheme to defraud through contractual promises," Wesley wrote.
This is all strange since to anyone who has watched prosecutors throw out the idea of intent mattering when they choose to prosecute. How many arrest and prosecution outrage stories have you seen libertarian and law reform bloggers share that show the judicial system going after people who are not powerful enough to use the "I didn't mean to" defense successfully.
This all sounds worse when one realizes it was Countrywide's "Hustle" program, the high speed swim lane, for originating loans. The high speed swim lane was a disgusting shirking of underwriting responsibility. From the link:
But while things were going bad though 2007, and Fannie and Freddie began to reconsider their loan buying requirements, Mr. Bharara alleges that Countrywide invented the hustle to push the process along faster.
As Fannie and Freddie tried to stomp out risk, “Countrywide eliminated every significant checkpoint on loan quality...” and, according to internal Countrywide documents the DA obtained, took away “toll gates” that were slowing things down in order to assure loan quality.
Who were the underwriters assigned this work? According to the complaint they were “loan processors who were previously considered unqualified to answer borrower questions.” Countrywide also took away their instructional “job aids” or check lists – anything to speed up the swim lane, it is alleged.
Now the convenient thing missed in all of this is of course reality. Who were receiving loans in 2007? Who were the unqualified originators? The below chart shows, by race, the home value appreciation that peaked right before and crashed through the HSSL era.
What no one can talk about is how the banks and mortgage firms made a killing as middle men and fee collectors handing out easy money mortgages to people who had no hopes of paying them back and were fresh into the country. The movie The Big Short's famous angry line from Steve Carell is absolutely wrong, and Hollywood knows it. In any bubble, the late receivers are the Ponzi borrowers. Who were the late receivers? The worst quality borrowers and immigrants that middlemen could swindle. Those late receivers helped raise the real estate wealth of the earliest receivers, which only made economic inequality worse in America.
A proper chase of causation would ask why the loans went out, which would lead to Steve Sailer's oft-cited Bush Minority Home-Ownership initiative. That would also lead back to the repeal of Glass-Steagall, and the community reinvestment act provisions that were forced on banks in order for them to be allowed to grow and merge. America would then discover that immigration is not just to lower their wages but to provide the new, marginal borrower.
Bank of America acquired Countrywide, and the bank takeover of the Left has come in real handy for them. No prosecutions, no fines and the presumptive nominee continuously says how breaking up the big banks won't end racism or sexism. It's the perfect high capital and technical prowess with low information and pay off combination for democracy.