Bank of America has asked a federal court to throw out two government lawsuits alleging that the lender defrauded investors in mortgage-backed securities during the financial meltdown.
The lawsuits, filed by the Justice Department and the Securities and Exchange Commission, allege that the bank bilked investors in its sale of $850 million in mortgage bonds, according to a Reuters report. Usually cases like that are tried under federal securities laws, which require authorities to prove that a defendant knowingly broke the law.
The DOJ suit, however, is being tried under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA), which gives prosecutors considerably more latitude. In a court filing Friday, Bank of America accused the government of playing fast and loose in its use of the law, according to Reuters.
“Despite repeatedly stating that the Bank violated the securities laws — (the Justice Department) conspicuously avoids bringing any claims under the securities laws,” the bank said, adding that letting the case proceed “would create an unprecedented, new regime for regulating securities-in addition to and inevitably inconsistent with the federal securities laws. …Generalized assertions of ‘corporate’ or ‘constructive’ knowledge do not suffice as a matter of law, but that is all the complaint serves up.”
The government has successfully used FIRREA before in litigation against big banks – notably in last month’s victory against Bank of America’s Countrywide unit, which was found liable for defrauding Fannie Mae and Freddie Mac through the sale of defective mortgages.