A federal judge has endorsed a broad interpretation of a savings-and-loan era law that the Justice Department is trying to use in cases against Wall Street banks, Reuters reported yesterday. U.S. District Judge Jed Rakoff said Monday that a "straightforward application of the plain words" of the Financial Institutional Reform, Recovery and Enforcement Act allowed the interpretation sought by the government. Rarely asserted until recently, it has become the basis of three lawsuits by lawyers under Manhattan U.S. Attorney Preet Bharara against banks. The latest decision came in a case that the Justice Department brought last October against Bank of America over toxic mortgages that its Countrywide Financial mortgage unit sold to Fannie Mae and Freddie Mac in the financial crisis. The government's case, which is set for trial on Sept. 23, focuses on a program instituted in 2007 by Countrywide called "High Speed Swim Lane." The government contends that the program speeded up some home loan processing by removing quality checkpoints, resulting in thousands of fraudulent and defective mortgages being sold to Fannie and Freddie. Rakoff issued a brief order in May dismissing some claims but largely allowing the case to move forward. His ruling on Monday explained his reasoning, particularly why the government could proceed with claims brought under a law adopted in the wake of the savings and loan scandals of the 1980s.The case is U.S. ex rel. O'Donnell v. Bank of America Corp., et al., U.S. District Court, Southern District of New York, No. 12-01422.
