Washington, Jan 4
Congresswoman Maxine Waters, a senior Democrat on the House Financial Services Committee, issued the following statement today after Bank of America settled with Fannie Mae and Freddie Mac for $2.8 billion over the misrepresentation of loans that the bank originally sold to the GSEs:
“I’m concerned that the settlement between Fannie Mae, 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. Given the strong repurchase rights built into Fannie Mae and Freddie Mac’s contracts with banks, and the recent court setback for Bank of America in similar litigation with a private insurer, I’m fearful that this settlement may have been both premature and a giveaway. The fact that Bank of America’s stock surged after this deal was announced only serves to fuel my suspicion that this settlement was merely a slap on the wrist that sets a bad example for other negotiations in the future.
I understand that the questions raised by fraudulent servicing practices were not addressed in these settlements, and I hope that Fannie Mae and Freddie Mac, along with their conservator, are more aggressive in pursuing banks for the fraud I documented in my Subcommittee during the last Congress.”
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Freddie Mac and Fannie Mae may have shortchanged taxpayers when the U.S.-owned firms settled loan disputes with Bank of America Corp. for $2.8 billion rather than demanding more funds, Representative Maxine Waters said.
“This settlement may have been both premature and a giveaway,” the California Democrat said today in an e-mailed statement. The deal, announced yesterday by the Charlotte, North Carolina-based lender, may “amount to a backdoor bailout that props up the bank at the expense of taxpayers.”
Bank of America gained 6.4 percent in New York trading yesterday after resolving disputes with the firms, which had said the lender sold them mortgages based on faulty data. The settlement was “clearly a gift” to Bank of America, Chris Whalen, a former Federal Reserve Bank of New York analyst said yesterday.
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Maxine grills Geithner.
California Rep. Maxine Waters forces Geithner to listen while she recounts the litany of inappropriate Goldman Sachs influence at Treasury and on financial crisis policy. Finally, somebody had the sack to ask Tim about it publicly. She would have been better served to concentrate on Goldman's role in the AIG decision (why was Lloyd Blankfein at the AIG rescue meeting last Fall?).
Still one more question that Geithner and Bernanke need to answer publicly.
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Maxine is no stranger to TARP scandal.