BofA to Pay $17 Billion for Mortgage Crisis
Do you still think that financial reform is a bad idea? Do you want to weaken the Dodd-Frank Legislation or weaken the Federal False Claims Act? Well take a look at the breaking news from Politico about the Bank of America. They are just now announcing that the Justice Department has reached an agreement to settle “charges related to its marketing of mortgage-backed securities during the financial crisis” for a record $17 billion. This is all in advance of anything on the Justice Department’s website, so it’s hard to confirm. If there is any truth to the report, I think we can all agree that while the bank will undoubtedly avoid having to admit to much wrong-doing, no banker coughs up that kind of money for no reason.
We will check what law the government used to obtain the settlement. The category of financial fraud is huge and to the extent that it involves the government’s funds in the form of protecting Fannie and Freddie mortgage backed securities, it could potentially be the subject of a false claims case. Of course, such fraud could also be the subject of reports to the SEC whistleblower office.
It’s not so much that I necessarily want to see such collections occurring all the time. Although, if the bank is actually culpable its fine with me if the government finally gets its share. It’s worth remembering, however, that reporting fraud like this is difficult and generally puts the whistleblower in a precarious situation.
I’m not claiming that if the Dodd-Frank Act had been passed earlier, we would have had more whistleblowers come forward to prevent this kind of action and, therefore, would have prevented the entire financial meltdown. However, it does seem possible that if whistleblowers in the financial world had more protection back in 2007 some of the activity from that period just might have been dealt with before it snowballed into a financial crisis requiring a $17 billion settlement with the U.S. Department of Justice.
That, unfortunately, is something that we can never know for certain. What we do know is the Justice Department obviously feels that they good reason to collect and BofA apparently didn’t have a good enough reason to fight.