The lawsuit perfectly illustrates the lingering material risk and headline risk from former Bank of America CEO Ken Lewis's disastrous decision to purchase Countrywide Financial in July 2008, when it was already apparent that the residential real estate bubble had burst.
Of course, the Justice Department's timing works very well in the election season, once again, pitting the government against the banks. According to the complaint, "Countrywide and later Bank of America, following the acquisition of Countrywide in 2008, implemented a new origination process called 'Hustle,' which was intentionally designed to process loans at high speed and without quality checkpoints, and which generated thousands of fraudulent and otherwise defective residential mortgage loans sold to Fannie Mae (FNMA) and Freddie Mac (FMCC) that later defaulted causing over $1 billion dollars in losses and countless foreclosures."
The branding of an internal loan approval process as "Hustle" perfectly illustrates the gleeful sales culture associated with an asset bubble.Anthony Sabino -- a professor at John's University's Peter J. Tobin College of Business -- expressed sympathy for Bank of America CEO Brian Moynihan, saying that "no sooner than he settles one piece of litigation as part of the fallout of the Great Recession (i.e., the flawed merger with Merrill Lynch), another monstrous lawsuit rises up to take its place." Sabino went on to say that "the news is not all that horrific," since the lawsuit was expected, and "Moynihan has been doing a pretty good job of tackling these problems head on and resolving them. Odds are he will do the same here." The broad indexes saw slight declines on Wednesday, following Tuesday's painful session, despite another strong housing report, with the Census Bureau estimating that sales of new single-family homes in September rose to a seasonally adjusted annual rate of 389,000, increasing 5.7% from a revised August rate of 368,000, and 27.1% from the rate of 306,000 in September 2011.
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