Another Gift from the Fed to Bank of America

"Another Gift from the Fed to Bank of America"

Article Summary:
Original Article by Gretchen Morgenson of The New York Times: Business Day

In a recent article by Morgenson, she explained a secret deal between the Federal Reserve Bank of New York and Bank of America back in 2012. In recent court filings, it has also been revealed that the New York Fed released Bank of America from all fraud claims on mortgage securities the Fed had bought as part of the government's rescue of the American International Group in 2008.

According to Morgenson, the agreement explains the New York Fed received $43 million from Bank of America's Countrywide unit. "The money changed hands to settle a narrow dispute involving cash flows on several mortgage securities held by an investment vehicle, known as Maiden Lane II. That vehicle was created by the New York Fed as part of the rescue of A.I.G., which had held the Countrywide securities. The previously confidential agreement released Bank of America from all litigation claims on the securities held by Maiden Lane II," she wrote.

In return, the New York Fed agreed to testify on behalf of 'BofA' in its legal battle against A.I.G. Bank of America has argued that A.I.G. has no right to sue it for fraud because A.I.G. sold the securities to Maiden Lane II and transferred the litigation rights to the New York Fed, Morgenson explains.

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