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U.S. Sues Bank of America for $1 Billion for Mortgage Fraud

NEW YORK (AP) – The top federal prosecutor in Manhattan sued Bank of America (BAC) for more than $1 billion on Wednesday for mortgage fraud against Fannie Mae and Freddie Mac during the years around the financial crisis.

U.S. Attorney Preet Bharara said Countrywide Financial, which was later bought by Bank of America, churned out mortgage loans from 2007 to 2009 without making sure that borrowers could afford them.

“The fraudulent conduct alleged in today’s complaint was spectacularly brazen in scope,” Bharara said in a statement. He said the suit was partly to recover money that Fannie and Freddie lost from defaulted loans.

Bank of America had no immediate comment.

Countrywide sold the loans to Fannie Mae and Freddie Mac, which were left to pay for the loans when they defaulted, according to the lawsuit. Fannie and Freddie were effectively nationalized in 2008.

According to the lawsuit, Countrywide used a process called “the Hustle,” shorthand for “High-Speed Swim Lane.” The idea was that mortgage loans, as they were being processed, would “move forward, never backward.”

The lawsuit alleged that Countrywide traded quantity for quality and eliminated underwriters, even from mortgage loans for which borrowers did not have to get their income verified.

Instead, loan processors simply entered data into an automated underwriting system, and if the system gave the go-ahead, “no underwriter would ever see the loan,” the lawsuit alleged.

With few checks and balances, there was “widespread falsification” of the data entered into the program, Bharara charged.

Loan processors were given little guidance, the suit said: Checklists for making sure that loans were compliant – for example, assessing whether the income level that a borrower listed was reasonable – were eliminated. Bonuses were based solely on how many loans an employee could process, not the quality.

The lawsuit said that Countrywide executives were aware of the dangerous path they were treading. For example, a quality review in January 2008 showed that 57 percent of Hustle loans went into default.

Instead of notifying Fannie and Freddie, Countrywide instead set about to conceal the quality of the loans it was selling them, the suit said. It said Countrywide even offered a bonus to quality-control workers who could “rebut” the default rates that the review had found.

The lawsuit didn’t give specifics, but it accused Countrywide, and later Bank of America, of selling “thousands” of Hustle loans to Fannie and Freddie. Bank of America bought Countrywide in July 2008.

Fannie and Freddie buy mortgage loans from banks, package them into securities and sell them to investors. The idea is to free up banks to make more loans. If a loan defaults, Fannie and Freddie guarantee payments to the investors.

According to the lawsuit, Fannie and Freddie don’t review the loans before they purchase them. Instead, they rely on banks’ statements that the loans meet certain qualifications.

Bharara said the lawsuit was the first civil fraud suit brought by the Justice Department concerning loans that were later sold to Fannie and Freddie.

http://www.dailyfinance.com/2012/10/24/u-s-sues-bank-of-america-for-1-billion-for-mortgage-fraud/?ncid=webmail6

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General Motors is becoming China Motors

General Motors is becoming China Motors. Forget the spin. The evidence is clear and convincing. Did U.S. taxpayers save GM for China? Listen to the candid comments of GM’s CEO.

Nancy Pelosi’s brother-in-law is given $737m of taxpayers’ money to build giant solar power plant in middle of the desert

  • Obama administration approved $1bn in green energy loans days after failed Solyndra project due to be completed
  • $737m handed to Crescent Dunes project in Tonopah, Nevada, for 110-megawatt desert solar power plant
  • Investors include firm Minority leader’s brother-in-law and major Solyndra stakeholder
  • Republicans warn Energy Department is ‘rushing’ $5bn in loans ahead of Friday deadline

Cronyism? A solar energy project backed by Nancy Pelosi’s brother has been granted a massive government loan (file picture)

 

Nancy Pelosi is facing accusations of cronyism after a solar energy project, which her brother-in-law has a stake in, landed a $737 million loan guarantee from the Department of Energy, despite the growing Solyndra scandal.

The massive loan agreement is raising new concerns about the use of taxpayers’ money as vast sums are invested in technology similar to that of the doomed energy project.

The investment has intensified the debate over the effectiveness of solar energy as a major power source.

The SolarReserve project is backed by an energy investment fund where the Minority Leader’s brother-in-law Ronald Pelosi is second in command.

PCG Clean Energy & Technology Fund (East) LLC is listed as one of the investors in the project that has been given the staggering loan, which even dwarfs that given to failed company Solyndra.

Other investors include one of the major investors in Solyndra, which is run by one of the directors of Solyndra.

Steve Mitchell, who served on the board of directors at the bankrupt energy company, is also managing director of Argonaut Private Equity, which has invested in the latest project.

Since Solyndra has filed for bankruptcy has been asked to testify about the goings on at the firm by two members of the House and ‘asked to provide documents to Congress’.

Generator: Artist’s impression of the solar plant being constructed north west of Tonopah, Nevada

 

The artist’s impression shows the incredible size of the giant solar power plant, which is being bankrolled by President Obama’s green jobs fund.

Energy will be generated using concentrated solar power technology, in which a series of mirrors direct sunlight to a receiver at the centre of the plant.

The ‘solar tower’ in the middle, which will be taller than the Washington Monument, is the first of its kind to be built.

Stretching out across a plain in Tonopah, Nevada, the mind-bogglingly big project will generate enough electricity to power 43,000 homes.

But the joint announcement by Energy Secretary Steven Chu comes just two days after the doomed Solyndra project, which cost the taxpayer $528 million from the same cash pot, was meant to be completed.

The project approval came as part of $1 billion in new loans to green energy companies yesterday.

Republican critics of the President Obama’s solar energy program have voiced their outrage at the new loans while the Solyndra scandal is still being investigated.

They have raised concerns that the Department of Energy is rushing through the approval of loans before stimulus funds expire on Friday.

While the departments insists the projects are being properly vetted, some lawmakers have written to express concern that they vast loans are not being adequately scrutinised.

‘The administration’s flagship project Solyndra is bankrupt and being investigated by the FBI, the promised jobs never materialised, and now the Department of Energy is preparing to rush out nearly $5 billion in loans in the final 48 hours before stimulus funds expire — that’s nearly $105 million every hour that must be finalised until the deadline,’ said Florida representative Cliff Stearns, who is chairman of the investigations subcommittee of the House Committee on Energy and Commerce.

Tom Schatz, president of Washington-based advocacy group Citizens Against Government Waste, said: ‘It is time for a full audit of their activities, their management and their results.

‘Candidly, it might be time for the federal government to rethink the whole idea of loan programs.’

Energy Department spokesman Damien LaVera said the project, which was had extensive reviews that included scrutiny of the parent companies’ finances.

Investigation: Solyndra CEO Brian Harrison and Chief Financial Officer Bill Stover are sworn in at a House Oversight and Investigations subcommittee hearing

 

The shocking scale of spending Solyndra lavished on the factory it started building alongside Interstate 880 in Fremont, California, has been revealed.When it was completed at an estimated cost of $733 million, including proceeds from the company’s $535 million U.S. loan guarantee, it covered 300,000 sq ft, the equivalent of five football fields.It had robots that whistled Disney tunes, spa-like showers with liquid-crystal displays of the water temperature, and glass-walled conference rooms.John Pierce, 54, a San Jose resident who worked as a facilities manager at Solyndra, said: ‘The new building is like the Taj Mahal.’Designed to make far more solar panels than Solyndra got orders for, the site is now empty and U.S. taxpayers may be stuck with it.Solyndra filed for bankruptcy protection on September 6, leaving in its wake investigations by Congress and the FBI.

 

Mr Chu said the two projects will create about 900 construction jobs and at least 52 permanent jobs.

He added: ‘If we want to be a player in the global clean energy race, we must continue to invest in innovative technologies that enable commercial-scale deployment of clean, renewable power like solar.’

The 110-megawatt Crescent Dunes project will use the sun’s heat to create steam that drives a turbine, SolarReserve, which is based in Santa Monica, California.

Senate Majority Leader Harry Reid is a strong supporter of the Nevada project, which he says will help his state’s economy recover. Former Governor Jim Gibbons, a Republican, also supported the project.

Mr Pelosi is one of several controversial figures set to benefit from the huge loan agreement.

The loan approvals came just two days before the renewable energy loan program approved under the 2009 economic stimulus law is set to expire. At least seven projects worth more than $5 billion are also waiting to be approved.

California-based solar panel maker Solyndra Inc went bankrupt after receiving its money and laid off 1,100 workers. The firm is now under investigation by the FBI.

It was the first renewable-energy company to receive a loan guarantee under a stimulus-law program to encourage green energy and was frequently touted by the Obama administration as a model.

President Barack Obama visited the company’s Silicon Valley headquarters last year, and Vice President Joe Biden spoke by satellite at its groundbreaking ceremony.

Since then, the company’s failure has become an embarrassment for Obama.

Nut Scott Crider, a spokesman for Sempra Generation, a Sempra Energy subsidiary that is developing the Arizona project, said its loan guarantee was not as risky as the Solyndra loan.

Most important, the project has a 20-year agreement with Pacific Gas & Electric Co. to buy power supplied by the solar plant, he said

Mr Crider claimed the purchase agreement is a key element of the project and will ‘provide assurance that there are sufficient revenues in place to support the loan guarantee’.

A similar agreement is in place in Nevada. NV Energy, the state’s largest electric utility, has agreed to buy power from the Tonopah tower, which will connect to NV Energy’s power grid.

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