Bloomberg: Fannie Deal With BofA Faulted by Waters as ‘Giveaway’
By Hugh Son
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 and co-founder of Institutional Risk Analytics in Torrance, California, said yesterday.
"The fact that Bank of America's stock surged after this deal was announced only serves to fuel my suspicion," said Waters, who is on the House Financial Services committee.
Fannie Mae Chief Executive Officer Michael Williams said in a statement yesterday that the agreement with Bank of America was "a fair and responsible resolution." Bank of America said the deals "largely addressed" liabilities from Fannie Mae and McLean, Virginia-based Freddie Mac, which were taken over by the government in 2008.
The agreement provides for a $1.28 billion cash payment to Freddie Mac to resolve claims arising from 787,000 loans with unpaid principal of $127 billion sold through 2008 by Countrywide Financial Corp. Bank of America also agreed to pay $1.52 billion to Washington-based Fannie Mae.