Boston, MA 10/25/2013 (wallstreetpr) – It seems that ghost of 2007 – 2008 Crisis will continue to haunt US financial conglomerates for some more time. In a latest case, Bank of America Corp (NYSE:BAC) has been found liable of fraud. And to make matters worse, it has been proved that bank committed the fraud against the federal government of United States.
In a charge which could hit Bank of America with almost $850 million penalty, a federal jury sitting in New York has decided that bank is guilty of originating questionable home loan products. In what has been referred to as ‘shoddy’, bank’s CountryWide unit used a process called “Hustle” for loan origination. And once completed, these products were sold off to government giants Freddie Mac and Fannie Mae. A deeper study of this so called questionable process Hustle, or what is technically called as High Speed Swim Lane (HSSL) shows that in an effort to pay employees on basis of loan volumes and speed, Countrywide removed few very important checkpoints to gauge the quality to borrowers. And this in turn affected the overall rise in number of loans going bad. As per points made by government lawyers, an estimated 43% of the loans sold to Freddie and Fannie were worthless. And since Bank of America bought Countrywide in mid 2008 and government took over the mortgage giants later on, the government has therefore right to press charges against Bank of America.
Till date, the bank has shelled out more than $40 billion to resolve disputes originating in 2007-08 credit crisis. And if this current penalty is to be paid fully by the bank, it would take the figure close to $41 billion. Shares of this 150 billion dollars financial giant are trading at $14.14 apiece and are not showing too much of a reaction from trader or investor’s community.
