What did the ‘Friends of Angelo’ know and when did they know it? I know it’s not respectable to blame Fannie Mae for the financial meltdown. I understand that the Wall Streeters who oversold toxic securities bear much of the blame. But I don’t understand why the Justice department’s civil lawsuit against Bank of America for “brazen” mortgage fraud doesn’t put Fannie Mae back in the center of the vortex of culpability.
Bank of America is on the hook because it’s now owner of Countrywide Financial, (formerly headed by Angelo Mozilo, who liked to shower favors on powerful politicos like Dem bigshot and former Fannie CEO Jim Johnson). If I read the allegations in the stories correctly, Fannie bought up Countrywide’s crap mortgages (from which internal controls had been removed) and then repackaged them into securities for sale–laundering and legitimizing them, in effect, for Wall Street to then spread around. This enabled Countrywide to gin up more crap mortgages.
Did Fannie officials know the mortgages were crap? Shouldn’t they have known? Isn’t that their business? Did they try to find out about Countrywide’s allegedly “brazen” practices? Did they care? ** It’s not like they didn’t know Mozilo!
Maybe I’ve missed something …
Update: Readers of books like Architects of Ruin and Reckless Endangerment are tweeting me to suggest there is nothing new here. It seems to me what might be new is that now you have 1) a government agency 2) charging actual fraud (not bad judgment etc.) in connection with mortgages that 3) were bought by Fannie Mae, in the process 4) giving an interested party (Bank of America) the tools of pre-trial discovery to find evidence of what Fannie actually knew about the mortgages. … P.S.: I’m assuming (4) is why they will settle. After the election, will the Obama administration want Fannie to be further embarrassed? …