“With Citigroup Inc. agreeing to pay $7 billion for issuing toxic mortgage securities, the Justice Department now turns to settling its case against what analysts call the biggest mortgage miscreant of all: Bank of America Corp.
“The government has contended that the Charlotte, N.C., lender bears responsibility not only for its own mortgage bonds, but also for those at two firms it took over during the financial crisis: Countrywide Financial Corp. in Calabasas and Merrill Lynch & Co. in New York.
“Analysts said BofA will feel the heat of investigations stemming from the subprime housing boom. Countrywide was once the biggest originator of high-risk home loans, and Merrill was one of Wall Street’s largest producers of bonds back by subprime mortgages.
“But Dennis Kelleher, president of Better Markets, a public interest group that supports tougher financial regulations, said the Citibank settlement and others have been sweetheart, back-room deals that failed to penalize the banks proportionately for the financial trauma they caused.
“The Justice Department provided no information about how much in profit Citigroup made from its mortgage-backed securities business to put the $7-billion settlement into context, he said.
“What the department didn’t mention at its news conference, Kelleher said, was that Citigroup, unlike JPMorgan, also resolved legal claims stemming from its huge business in the mortgage-related securities known as collateralized debt obligations — the “jet fuel” for the financial crisis, Kelleher said.
“Kelleher, whose group is suing the agency for more details on the JPMorgan settlement, said the government should have demanded a bigger settlement from Citigroup.
“What DOJ apparently is doing is to work hand in hand with Wall Street’s biggest banks to sweep as much under the rug so the American people know as little as possible, and the deal with Bank of America will probably be the same,” he said.
“They’re pretending to punish Wall Street while effectively letting Wall Street off with less than a slap on the wrist.”
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