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U.S. government files $1 billion suit against Bank of America

Officials accuse the financial giant of committing fraud against Fannie and Freddie

Bank of America (BofA) is making headlines once again—and, once again, the U.S. government is breathing down its neck.

Yesterday, the Department of Justice (DOJ) filed suit against BofA, claiming the country’s second-largest financial institution committed fraud when it sold defective residential mortgage loans to Fannie Mae and Freddie Mac. Those loans later defaulted. In the suit, the DOJ says BofA and its subsidiary, Countrywide Financial, generate thousands of these defective loans and cost the government about $1 billion.

“The fraudulent conduct alleged in yesterday’s complaint was spectacularly brazen,” U.S. Attorney Preet Bharara in Manhattan said in a statement today. “Through a program aptly named ‘the Hustle,’ Countrywide and Bank of America made disastrously bad loans and stuck taxpayers with the bill.”

The suit is the first of its kind the DOJ has filed against a bank accusing it of fraud over mortgages sold to Fannie and Freddie. It covers BofA’s and Countrywide’s conduct between 2007 and 2009. This is the sixth suit, however, the DOJ has brought against a major U.S. financial institution in the past year-and-a-half over “reckless mortgage practices in the lead-up to the financial crisis,” Bharara said.

Read more about this suit on Bloomberg Businessweek.

Read more recent InsideCounsel stories about the financial crisis:

Barney Frank defends JPMorgan against government lawsuit

Homeowners accuse 12 banks of manipulating Libor

Bank of America pays $2.43 billion in shareholder suit settlement

Lehman Brothers to pay another $10.5 billion to creditors

Citigroup will pay $590 million in settlement related to financial crisis

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Cathleen Flahardy

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