The Department of (In)Justice under the leadership of Eric Holder has been busy this year suing and obtaining mega-settlements from the Wall Street banks for their roles in subprime mortgage-backed bubble the broke in 2008. The latest case against Bank of America. The Competitive Enterprise Institute (CEI) has the story:
“Bank of America failed to make accurate and complete disclosure to investors and its illegal conduct kept investors in the dark,” declared a government official in a Department of Justice press release announcing yesterday’s record settlement in which Bank of America agreed to fork over $16.65 billion to settle charges it and companies it had purchased had deceived investors.
Back in Washington from Ferguson, Mo., Attorney General Eric Holder announced at a press conference: “As part of this settlement, Bank of America has acknowledged that, in the years leading up to the financial crisis that devastated our economy in 2008, it, Merrill Lynch, and Countrywide sold billions of dollars of RMBS [residential mortgage-backed securities] backed by toxic loans whose quality, and level of risk, they knowingly misrepresented to investors.”
Not a bad job by our Department of Justice, right? Bank of America and the companies it absorbed (Merrill Lynch and Countrywide) admitted that they misled investors on the quality of those mortgaged backed securities and they agreed to pay a settlement of nearly $17 billion. Good job, Mr. Holder!
So, how much of that $17 billion did the victims (the investors) of BOA get? They got a whopping $0.00 billion. That’s right! The DOJ sued BOA for defrauding its investors in their mortgage-backed securities and none of the settlement monies will go to the victims. So, what becomes of the $17 billion?
More than $9 billion from this settlement goes to the federal and various state government coffers. And, as Holder proclaimed at the press conference: “Under the terms of this settlement, the bank has agreed to pay $7 billion in relief to struggling homeowners, borrowers, and communities affected by the bank’s conduct. More than $9 billion from this settlement goes to the federal and various state government coffers. And, as Holder proclaimed at the press conference: “Under the terms of this settlement, the bank has agreed to pay $7 billion in relief to struggling homeowners, borrowers, and communities affected by the bank’s conduct. This is appropriate given the size and scope of the wrongdoing at issue.”
Okay. Typically, in civil suits, the lawyers, in this case the government(s), get the biggest piece of a settlement and what is left over goes to the victims. But not when Eric The Red is in charge. What was left over after the government(s) took their cut did not go to the victims, the investors. Instead it went to struggling homeowners and borrowers because according to Mr. Holder: “This is appropriate given the size and scope of the wrongdoing at issue.” This is appropriate, Mr. Holder? How is it appropriate? Your suit did not name “struggling homeowners” and “borrowers” as victims of the BOA practices. Your suit, Mr. Holder, named the “investors” as the victims. and they get nothing?
So, thanks to Eric “The Red” holder the victims of BOA’s misdeeds (individual investors, pension funds, money market funds, 401K plans) get screwed twice just so he could do some wealth redistribution.
Well, that’s what I’m thinking. What are your thoughts?