Bank of America asked a federal court on Friday to dismiss two US government lawsuits accusing the bank of defrauding investors during the financial crisis.
The US Justice Department and the Securities and Exchange Commission both have lawsuits against the nation’s second-largest bank for fraud in its sale of $850 million of residential mortgage-backed securities.
Cases like this are normally brought under the federal securities laws, reports Reuters, where authorities need to prove that the defendant intended to break the law.
However, the Justice Department case relied on the Financial Institutions Reform, Recovery and Enforcement Act or 1989. The government is using that law more and more when pursuing cases against banks linked to the financial crisis, partially because of its 10-year statute of limitations.
Bank of America accused the government of stretching the 1989 law too far in one of its Friday filings, notes NBC News. The motion explained, “[Despite] repeatedly stating that the Bank violated the securities laws, [the Justice Department] conspicuously avoids bringing any claims under the securities laws.”
The bank added that allowing the Justice Department case to go forward “would create an unprecedented, new regime for regulating securities-in addition to and inevitably inconsistent with the federal securities laws.”
The Justice Department has had some recent success with the FIRREA, including a victory in a separate trial last month accusing Bank of America’s Countrywide unit of selling bad home loans to government-controlled mortgage companies Fannie Mae and Freddie Mac.
In contrast, the new cases, filed in North Carolina in August, involve securities that were backed by seemingly high-quality loans that were sold in early 2008 to other investors. But the lawsuits claim Bank of America made misleading statements and failed to disclose all the facts about the mortgages underlying the securities it sold.
In Friday’s response, Bank of America claimed the Justice Department’s allegations are vague and there isn’t any evidence, even after a three-year investigation, that any bank employees knowingly made false statements or that they concealed any problems with the securities they sold.