Kathianne
02-17-2013, 06:04 PM
There is no end to the repetition of idiotic actions:
http://www.nytimes.com/2013/02/17/business/dont-blink-or-youll-miss-another-bank-bailout.html?ref=todayspaper&_r=1&
February 16, 2013
<nyt_headline version="1.0" type=" ">Don’t Blink, or You’ll Miss Another Bailout</nyt_headline> <nyt_byline> By GRETCHEN MORGENSON (http://topics.nytimes.com/top/reference/timestopics/people/m/gretchen_morgenson/index.html) </nyt_byline> <nyt_correction_top> </nyt_correction_top> MANY people became rightfully upset about bailouts given to big banks during the mortgage (http://topics.nytimes.com/your-money/loans/mortgages/index.html?inline=nyt-classifier) crisis. But it turns out that they are still going on, if more quietly, through the back door.
The existence of one such secret deal, struck in July between the Federal Reserve Bank of New York (http://topics.nytimes.com/top/reference/timestopics/organizations/f/federal_reserve_bank_of_new_york/index.html?inline=nyt-org) and Bank of America (http://topics.nytimes.com/top/news/business/companies/bank_of_america_corporation/index.html?inline=nyt-org), came to light just last week in court filings.
That the New York Fed would shower favors on a big financial institution may not surprise. It has long shielded large banks from assertive regulation and increased capital requirements.
Still, last week’s details of the undisclosed settlement between the New York Fed and Bank of America are remarkable. Not only do the filings show the New York Fed helping to thwart another institution’s fraud case against the bank, they also reveal that the New York Fed agreed to give away what may be billions of dollars in potential legal claims.
Here’s the skinny: Late last Wednesday, the New York Fed said in a court filing that in July it had released Bank of America from all legal claims arising from losses in some mortgage-backed securities the Fed received when the government bailed out the American International Group (http://topics.nytimes.com/top/news/business/companies/american_international_group/index.html?inline=nyt-org) in 2008. One surprise in the filing, which was part of a case brought by A.I.G., was that the New York Fed let Bank of America off the hook even as A.I.G. was seeking to recover $7 billion in losses on those very mortgage securities.
It gets better.
What did the New York Fed get from Bank of America in this settlement? Some $43 million, it seems, from a small dispute the New York Fed had with the bank on two of the mortgage securities. At the same time, and for no compensation, it released Bank of America from all other legal claims.
When I asked the Fed to discuss this gift to the bank, it declined. To understand how the settlement happened, we must go back to the dark days of September 2008. With the giant insurer A.I.G. teetering, the government stepped in. As part of the rescue, A.I.G. sold mortgage securities to an investment vehicle called Maiden Lane (http://www.newyorkfed.org/markets/maidenlane.html) II overseen by the New York Fed. A.I.G. was bleeding from its toxic mortgage holdings, many of which were issued by Bank of America, and it received $20.8 billion for securities with a face value of $39.2 billion.
. . .
http://www.nytimes.com/2013/02/17/business/dont-blink-or-youll-miss-another-bank-bailout.html?ref=todayspaper&_r=1&
February 16, 2013
<nyt_headline version="1.0" type=" ">Don’t Blink, or You’ll Miss Another Bailout</nyt_headline> <nyt_byline> By GRETCHEN MORGENSON (http://topics.nytimes.com/top/reference/timestopics/people/m/gretchen_morgenson/index.html) </nyt_byline> <nyt_correction_top> </nyt_correction_top> MANY people became rightfully upset about bailouts given to big banks during the mortgage (http://topics.nytimes.com/your-money/loans/mortgages/index.html?inline=nyt-classifier) crisis. But it turns out that they are still going on, if more quietly, through the back door.
The existence of one such secret deal, struck in July between the Federal Reserve Bank of New York (http://topics.nytimes.com/top/reference/timestopics/organizations/f/federal_reserve_bank_of_new_york/index.html?inline=nyt-org) and Bank of America (http://topics.nytimes.com/top/news/business/companies/bank_of_america_corporation/index.html?inline=nyt-org), came to light just last week in court filings.
That the New York Fed would shower favors on a big financial institution may not surprise. It has long shielded large banks from assertive regulation and increased capital requirements.
Still, last week’s details of the undisclosed settlement between the New York Fed and Bank of America are remarkable. Not only do the filings show the New York Fed helping to thwart another institution’s fraud case against the bank, they also reveal that the New York Fed agreed to give away what may be billions of dollars in potential legal claims.
Here’s the skinny: Late last Wednesday, the New York Fed said in a court filing that in July it had released Bank of America from all legal claims arising from losses in some mortgage-backed securities the Fed received when the government bailed out the American International Group (http://topics.nytimes.com/top/news/business/companies/american_international_group/index.html?inline=nyt-org) in 2008. One surprise in the filing, which was part of a case brought by A.I.G., was that the New York Fed let Bank of America off the hook even as A.I.G. was seeking to recover $7 billion in losses on those very mortgage securities.
It gets better.
What did the New York Fed get from Bank of America in this settlement? Some $43 million, it seems, from a small dispute the New York Fed had with the bank on two of the mortgage securities. At the same time, and for no compensation, it released Bank of America from all other legal claims.
When I asked the Fed to discuss this gift to the bank, it declined. To understand how the settlement happened, we must go back to the dark days of September 2008. With the giant insurer A.I.G. teetering, the government stepped in. As part of the rescue, A.I.G. sold mortgage securities to an investment vehicle called Maiden Lane (http://www.newyorkfed.org/markets/maidenlane.html) II overseen by the New York Fed. A.I.G. was bleeding from its toxic mortgage holdings, many of which were issued by Bank of America, and it received $20.8 billion for securities with a face value of $39.2 billion.
. . .