BoA Bailout Blues: Bank of America subsidiary admits promises to homeowners are "mere puffery"
Yesterday at midnight, Bank of America announced it had finalized a $20 billion infusion of federal cash, largely to cover expected losses from the Charlotte-based bank's takeover of floundering Merrill Lynch.
The deal brought the government's total stake in the banking giant to $45 billion -- making taxpayers the bank's largest shareholders, with a stake of about six percent. But what's the public getting in return for its investment?
A troubling answer to that question was revealed this week, when in a New Hampshire court, BoA subsidiary Countrywide Home Loans admitted that its promises to help homeowners facing foreclosure were "mere commercial puffery." As MSNBC reported yesterday:
The lawsuit alleges that Countrywide strung the Raymonds along for eight months with promises of an interest-rate cut, only to to finally reject them. They'll now lose the house.
New Hampshire courts will decide if Countrywide is legally at fault: The company's lawyers insist that their offers to help borrowers avoid foreclosure -- such as these on Countrywide's website -- were merely "vague advertisements."
But Countrywide may have more difficulty defending itself in the court of public opinion, after a Countrywide CEO told Rep. Henry Waxman's panel last year that "I want to underscore ... what is perhaps the most important goal going forward -- to keep families in their homes."
Other groups are voicing objections to the way BoA used its first round of federal bailout money. Here's how a recent dispatch from the Service Employees International Union begins:
The deal brought the government's total stake in the banking giant to $45 billion -- making taxpayers the bank's largest shareholders, with a stake of about six percent. But what's the public getting in return for its investment?
A troubling answer to that question was revealed this week, when in a New Hampshire court, BoA subsidiary Countrywide Home Loans admitted that its promises to help homeowners facing foreclosure were "mere commercial puffery." As MSNBC reported yesterday:
In marketing, advertising and testimony before Congress, CountrywideHome Loans has said repeatedly that it is working hard to modify themortgages of financially strapped borrowers caught up in the subprimemeltdown. But in a New Hampshire court, attorneys for the lending giantare singing a different tune, describing such assurances as "merecommercial puffery."Countrywide -- the nation's leading provider of sub-prime mortgages when BoA took them over in 2007 -- was forced into this admission after Gary and Jessica Raymond in New Hampshire took Countrywide to court for breach of good faith, fraud, negligence and misrepresentation.
The lawsuit alleges that Countrywide strung the Raymonds along for eight months with promises of an interest-rate cut, only to to finally reject them. They'll now lose the house.
New Hampshire courts will decide if Countrywide is legally at fault: The company's lawyers insist that their offers to help borrowers avoid foreclosure -- such as these on Countrywide's website -- were merely "vague advertisements."
But Countrywide may have more difficulty defending itself in the court of public opinion, after a Countrywide CEO told Rep. Henry Waxman's panel last year that "I want to underscore ... what is perhaps the most important goal going forward -- to keep families in their homes."
Other groups are voicing objections to the way BoA used its first round of federal bailout money. Here's how a recent dispatch from the Service Employees International Union begins:
When taxpayers gave Bank of America a $25 billion bailout, thecountry's largest bank was supposed to use the funds to help jumpstartthe economy.SEIU goes on to claim that 12,000 troubled borrowers could be kept in their homes with the bonus money recently given to BoA executives.
Bank of America instead misspent the money onforeign investments, executive salaries, and corporate jets. To top itoff, Bank of America double-dipped, taking more money from ourcash-strapped states by not paying for their workers' healthcare.
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Chris Kromm
Chris Kromm is executive director of the Institute for Southern Studies and publisher of the Institute's online magazine, Facing South.