The Wall Street Journal today features an op-ed covering Washington’s about face on Bank of America. Yesterday we reported that the Justice Department seeks to extract up to $17 billion from the bank for the alleged misconduct of Countrywide and Merrill Lynch, the two banks that were purchased by Bank of America during the financial crisis. According to this piece, however, Washington encouraged—even demanded—that Bank of America acquire the failing banks during the crisis.
“In 2008, Federal Reserve officials were concerned about their exposure to Countrywide” and commented that its acquisition by Bank of America “should come close to next week, knock on wood.”
New York Fed President and Treasury Secretary Timothy Geithner commented that the Countrywide deal “eased fears of collapse.”
When the bank bought Merrill Lynch, St. Louis Fed President James Bullard said the deal had eliminated one of the “large uncertainties looming over the country.”
Given its reversal on Bank of America’s acquisitions of Countrywide and Merrill Lynch, the pending settlement appears aimed at creating the impression that the Justice Department is being tough on Wall Street rather than “making mortgage investors or borrowers whole.”