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Banking Troubles, but Not a Word About Fraud Claims

publiceditor.blogs.nytimes.com | April 22, 2014

By Margaret Sullivan

Reading The Times’s coverage of Bank of America’s quarterly loss last week, I almost felt sorry for the financial behemoth. It has mortgage troubles, you see. It has onerous legal costs.

“The disappointing news shows how Bank of America is still paying for its mortgage problems nearly six years after the financial crisis,” the article said.

I thought of sending a small check to help or at least conveying my sympathy.

I really should have remembered what this is all about because it was only last month that Bank of America settled a lawsuit that claimed the bank had committed mortgage fraud. The cost of the settlement? More than $9 billion. Bank of America was one of the banks that sold mortgage securities backed by subprime mortgages, which went south during the housing and financial crises – in many cases driving American consumers into financial ruin.

Some Times readers wrote to me about it, pointing out that there was more to the story. They hadn’t forgotten what happened, it seemed. Jamison Wilcox, for example, noted in an email that he was “dismayed to see the term ‘legal costs’ given a vague and euphemistic meaning – and repeated in a headline – as a short replacement for the specific identification of monies paid out … as a legal consequence of wrongful conduct by a corporation or bank.”

I asked the business editor, Dean Murphy, to respond.

Mr. Murphy told me in an email that the language was appropriate:

In all of our coverage of banking troubles, including those involving Bank of America, we make a concerted effort to be precise in the language we use to describe the various allegations and prosecutions. While we understand the desire of some people to pillory a bank at every opportunity, we are in the business of reporting the facts in a straight and accurate manner. In reporting Bank of America’s quarterly performance, we summarized the issues clearly without engaging in overheated language.

The language certainly isn’t overheated. In fact, nowhere in this article is there any straightforward mention of what really caused these legal troubles and costs.

It says only this: “At the heart of the additional legal expenses was a $6.3 billion settlement that the bank announced last month to settle a lawsuit arising from troubled mortgage-backed securities it bundled and sold to Fannie Mae and Freddie Mac before the financial crisis.” (The bank also agreed to buy back $3.2 billion in mortgage securities, bringing the penalties to $9.5 billion.)

Bundles and troubles and costs, yes. Fraud accusations, not so much.

Sheelah Kolhatkar, national correspondent for Bloomberg Businessweek, was considerably more direct when she wrote about the settlement a few weeks ago. Her first sentence was “Bank of America has now joined JPMorgan Chase in a special category called: Banks That Agreed to Pay Billions in Fraud Fines While No Executives Have Gone to Jail.” And she described the settlements of claims that the bank had “fraudulently misrepresented the quality of $57.5 billion worth of residential mortgage-backed securities leading into the financial crisis.”

The Los Angeles Times, in writing about the $9.5 billion settlement last month with Fannie Mae and Freddie Mac, the two government-sponsored mortgage finance firms on whose behalf the suits were brought, quoted Dennis Kelleher, chief executive of Better Markets Inc., a nonprofit concerned with financial reform. He was even more direct: “Wall Street enriched itself on a massive fraudulent scheme that paid their bonuses and stuck the American people with the bill.”

Granted, these were articles on the settlements, not on quarterly performance. When The Times covered the settlements last month, it at least described, although in restrained language, their basis.

But even in this routine earnings story, a couple of sentences on the causes of these “legal costs” and “mortgage troubles” would not only have been welcome, they would also have made the article much more useful to readers – and in a big-picture way, more accurate.

 

Back to April 2014 Archive

CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

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