NEW YORK (Legal Newsline) - While New York Attorney General Andrew Cuomo has said Bank of America's merger with Merrill Lynch helped lead to the near-collapse of the financial system, a Wall Street Journal editorial says that feeling is misguided.
The WSJ on Saturday wrote of Cuomo's past as Secretary of the Department of Housing and Urban Development, which he served as under President Bill Clinton from 1997-2001. The editorial is titled "Blaming Bank of America."
While at the HUD, Cuomo required Fannie Mae and Freddie Mac to buy $2.4 trillion in mortgages over a 10-year span. Cuomo said that meant affordable housing for 28.1 million low- and moderate-income families.
"Fannie and Freddie's purchases of subprime loans skyrocketed," the editorial says.
"The problem wasn't merely that the Cuomo HUD was raising the volume of loans for which taxpayers would be on the hook. It was also encouraging a dangerous decline in underwriting standards at these government-sponsored enterprises "
Cuomo is alleging that Bank of America misled its shareholders over the financial status of Merrill Lynch. He also says former CEO Kenneth Lewis and former CFO Joseph Price duped the federal government into giving Bank of America Troubled Asset Relief Program funds.
"This merger is a classic example of how the actions of our nation's largest financial institutions led to the near-collapse of our financial system," Cuomo said.
"Bank of America, through its top management, engaged in a concerted effort to deceive shareholders and American taxpayers at large. This was an arrogant scheme hatched by the bank's top executives who believed they could play by their own set of rules.
"In the end, they committed an enormous fraud and American taxpayers ended up paying billions for Bank of America's misdeeds."
Bank of America agreed last week to pay a $150 million civil penalty that will be distributed to shareholders as a result of the agreement with the SEC and $1 million to North Carolina Attorney General Roy Cooper's office for consumer protection purposes. The company is based in Charlotte.
The WSJ editorial says politicians like Cuomo, whose name has been tossed around as a possible gubernatorial candidate, are blaming the financial industry for the bailout to score points with the public.
"(It) certainly beats self-reflection," the editorial says.
From Legal Newsline: Reach John O'Brien by e-mail at email@example.com.