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Behind Bank of America's Toxic Assets, Subprime Links
Obscured But Continued
Byline: Matthew R. Lee of Inner
City Press on Wall Street: News Analysis
NEW YORK, January
21 -- Bank of America is now
headed down a Citigroup-like path. A
second serving of TARP bailout funds, government insurance for a
widening range
of toxic assets, a chief executive on the ropes. While Ken Lewis
claimed to
have gotten BofA out of the world of subprime, its investment banking
arm
continued to buy and trade subprime mortgages, and to prop up subprime
lenders.
Now Lewis implies that the $108 billion in toxic assets being insured
by the
government came from Merrill Lynch. But a quarter of them come from
BofA
itself.
As
reported by Inner City Press, Bronx-based Fair Finance Watch documented
this to
the Federal Reserve in Communiuty Reinvestmeent Act comments filed in
opposition to Bank of America's applications for
regulatory approval to merge and expand. In its responses to FFW's
comments,
BofA begrudgingly acknowledged that it did business with, among others:
Ameriquest
Mortgage Corporation, since
defunct; Saxon, through which Morgan Stanley tells FFW it has stopped
lending, Option
One, Centex, New Century, bankrupt; Metris (a subprime card lender HSBC
later acquired),
Delta Financial, First Franklin, WMC (subprime lender owned by GE),
Fremont
Investment & Loan, rogue subprime lender which told FFW it would
only give
its Home Mortgage Disclosure Act data if one signed a confidentiality
agreement), Capital One, CIT, WFS
-- and Ownit, regarding which Bank of America blacked-out a column
labeled
"ABS/MBS Underwriting," after elsewhere publicly admitting it
performs those functions for Ownit’s loans.
In Charlotte, vertigo, BofA's subprime connections not shown
BofA wrote:
"Bank of
America indirectly
owns 24.9% of the voting common equity of Ownit... In August 2005, Bank
of
America, N.A. transferred the Ownit residential mortgage loan portfolio
purchased during March 2005 to Asset Backed Funding Corporation
(‘ABFC’). ABFC
is an affiliate of Bank of America Corporation that is a limited
purpose
corporation that securitizes residential mortgage loans... ABFC
securitized these
Ownit loans, along with similar loans from another loan originator, in
its
approximately $1.2 billion ABFC Asset-Backed Certificates, Series
2005-HE2
transaction. Banc of America Securities LLC served as the underwriter
in that
transaction....
In
two separate transactions on March 9 and March 14, 2005 Bank
of America N.A. purchased Ownit residential mortgage loans in an
aggregate
amount of approximately $265 million. These loans were held for the
account of
Bank of America, N.A. until they became part of the August 2005
securitization
described at Item 2.b above. These loans were purchased in a
competitive,
arms-length process at fair market terms" -- followed by more than half
a
page blacked out.
This was
the level of secrecy in the time leading up to the subprime lending
meltdown.
Now Ken Lewis implies that the assets being insured by the government
all came
from Merrill Lynch, when 25% are from BofA itself. Will Ken Lewis go
the way of
Citigroup's Chuck Prince and Robert Rubin?
Many say that he should.
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