Via Benzinga, L. Randall Wray notes more of the same for socializing the costs of our financial woes:
In truly depressing news, Secretary Treasury Geithner announced he was funneling $2.8 billion more bail-out funds to Bank of America. In the deal, Fannie and Freddie would agree to abandon claims that they had been sold trash in fraudulent “mortgage backed securities” by the BofA. (A similar deal was provided to Ally Financial.)
As I have written, holders of the securities have gradually realized that the securitizations did not meet the “reps and warranties” asserted by the banks that pooled mortgages. A growing number of investors have demanded that the originating banks take back the fraudulent securities, including Fannie and Freddie, as well as the NYFed and PIMCO. But true to form, Timmy prefers to backstop the control fraud banks rather than forcing them to bear the costs of their frauds.
The actual losses that Freddie and Fannie will take on the toxic waste sold to them by Countrywide (absorbed by Bank of America, which is now responsible for the put-backs) will undoubtedly be much larger than the $2.8 billion they received in the settlement. And guess who will suffer that extra loss? You betcha: Uncle Sam. As always, Geithner instinctively socializes losses to protect Wall Street’s private bonuses.