LOS ANGELES (CBS) —Taxpayers may have been shortchanged after a deal between failed mortgage giants Freddie Mac and Fannie Mae settled loan disputes with Bank of America Corp. for $2.8 billion rather than demanding more funds, Representative Maxine Waters (D-CA) said.
Waters, a senior Democrat on the House Financial Services Committee, said the settlement “may amount to a backdoor bailout that props up the bank at the expense of taxpayers”.READ MORE: Staples Center Rebranding To Crypto.com Arena Underway
The lawmaker representing the cities of Gardena, Hawthorne, Inglewood and Lawndale suggested the move may have been “both premature and a giveaway”.
Under the agreement, Freddie Mac receives $1.28 billion in cash to resolve claims arising from 787,000 loans totaling $127 billion sold through 2008 — losses largely stemming from the mortgage meltdown that has seen foreclosures soar amid largely stagnant property values.
In addition, Bank of America also agreed to pay $1.52 billion to Washington-based Fannie Mae.READ MORE: After Hitting Record High, LA County Gas Price Drops For 8 Straight Days
Waters also commented on traders’ reaction to the deal.
“The fact that Bank of America’s stock surged after this deal was announced only serves to fuel my suspicion that this settlement was merely a slap on the wrist that sets a bad example for other negotiations in the future,” said Waters.
Shares of Bank of America jumped 6.4 percent on Wall Street after the deal was announced.MORE NEWS: Man Attacked During Possible Early Morning Robbery Outside Brentwood Hotel
(©2010 CBS Local Media, a division of CBS Radio Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. Wire services contributed to this report.)