The Justice Department sued Bank of America yesterday, accusing the bank of defrauding investors by vastly underestimating the risk of mortgage backed securities, the New York Times DealBook blog reported yesterday. The lawsuit is the latest action by President Obama’s federal mortgage task force that has vowed to hold Wall Street accountable for misconduct in the packaging and sale of mortgage securities during the housing boom. Bank of America, the Justice Department said, cloaked the risk associated with $850 million worth of securities backed by residential mortgages. As Bank of America assembled securities in 2008, the government claimed, the bank ignored that more than 40 percent of the mortgages included did not meet underwriting guidelines. Even though Bank of America knew about the troubled mortgages, the government said, the bank sold the securities anyway.
