NEW YORK (Legal Newsline) - Criticism of New York Attorney General Andrew Cuomo has hit the television airwaves, with a banking analyst calling him the "father of the subprime crisis."
Dick Bove's opinion of Cuomo's time as secretary of the Department of Housing and Urban Development joined those already made in the Wall Street Journal. Cuomo recently sued Bank of America over its merger with Merrill Lynch, claiming that the company's actions helped cause the near-collapse of the financial system.
Bove, of Rochdale Securities, made his comments Wednesday on CNBC.
"In that role, he pushed hard to get subprime lending done by Fannie Mae and Freddie Mac," Bove said.
"And as a result of his pushing so hard, you know, Fannie Mae and Freddie Mac made billions of dollars of mortgages in that area and bought millions of dollars of mortgages in that area.
"One of the key reasons why they're bankrupt today and why the government is spending hundreds of millions of dollars in supporting them is because of the edicts pushed through by Mr. Cuomo."
Bove added that individuals who are losing their homes may be able to point their fingers at Cuomo, too.
Cuomo alleged Bank of America withheld Merrill Lynch's projected heavy losses in the fourth quarter of 2008 before a shareholder vote to approve a merger of the two.
It also withheld Merrill Lynch's plans to spend up to $5.8 billion in executive bonuses after the merger, Cuomo claims. He alleged fraud on the parts of former CEO Kenneth Lewis and former CFO Joseph Price in that they misled the federal government into giving Taxpayer Asset Relief Program funds to the bank..
"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 in a press release Feb. 4.
Bove, though, said the merger was a great success for Bank of America. Some have questioned what damages Cuomo can claim in his lawsuit. Lewis and Price lost their jobs and Bank of America repaid the TARP funds with interest.
"If Mr. Cuomo's views were to hold in that Bank of America should not have been allowed to buy Merrill Lynch, not only would tens of thousands of New Yorkers have lost their jobs, not only would Merrill Lynch be gone, but the fact is Bank of America's shareholders would've been harmed," Bove said.
"It's that type thinking that i think makes him very dangerous to be operating in the financial sector."
Bank of America already settled similar allegations with the federal Securities and Exchange Commission for $150 million.
Cuomo served at the HUD under President Bill Clinton from 1997-2001. A Wall Street Journal editorial said that 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 "
Bove said Cuomo would realize what he has done if he becomes New York's next governor. He has not announced his candidacy, but current Gov. David Paterson is not running this year and the Democratic nomination seems to be Cuomo's for the taking.
"If you were looking at California, the attorney general there is not pushing the entertainment industry," Bove said.
"In Michigan, the attorney general is not suing the auto industry. In Texas, the attorney general is not going after the oil industry. It simply makes no sense from a financial or a logical standpoint."
Duke professor and former gubernatorial candidate Michael Munger also recently criticized Cuomo's lawsuit in an interview with Legal Newsline, claiming that Cuomo is either a hypocrite or in it for the publicity.
From Legal Newsline: Reach John O'Brien by e-mail at email@example.com.
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