US Sues Bank of America for $1 Billion, Asserting Fraud And Recklessness

One. Billion. Dollars.

That's the amount displayed above, tightly stacked atop a dozen loading pallets, in $1 bills.

It's also how much the U.S. government said fraud and recklessness by Bank of America Corp. (NYSE: BAC) and its subsidiary Countrywide Financial Services cost the American taxpayer.

The eye-popping number comes in a landmark lawsuit announced Wednesday by the U.S. Attorney for the Southern District of New York, who has been leading the charge lately to indict those who "helped cause the 2008 financial collapse," in a cross-agency effort organized by President Barack Obama.

In Wednesday's filing, the Dept. of Justice alleged Countrywide acted both independently -- and later, when it had been fully absorbed into Bank of America's corporate structure -- to remove any kind of underwriting standards for mortgage loans, processing as many as it could without regard to creditworthiness. The suit alleges company protocols, nicknamed "the Hustle," were instituted to remove any "tollbooths" that might have injected caution or reason into the loan process.

"The fraudulent conduct alleged in today’s complaint was spectacularly brazen in scope," U.S. Attorney Preet Bharara said in a statement. "As alleged, through a program aptly named ‘the Hustle,’ Countrywide and Bank of America made disastrously bad loans and stuck taxpayers with the bill ... Countrywide and Bank of America systematically removed every check in favor of its own balance -- they cast aside underwriters, eliminated quality controls, incentivized unqualified personnel to cut corners, and concealed the resulting defects."

These packaged loans were then sold to government-sponsored enterprises Fannie Mae and Freddie Mac as good loans, the lawsuit alleges, causing the outsize losses when they went sour.

"This lawsuit should send another clear message that reckless lending practices will not be tolerated,” Bharara added.

A massive lawsuit against Bank of America has been expected for some time, but the amount of losses actually alleged was beyond most Wall Street calculations. Earlier in the month, Bharara had sued Wells Fargo and Co. (NYSE: WFC), alleging similar conduct, for $190 million.

Perhaps the most worrying part of the allegation for Bank of America, which has known for a long time that it would have to deal with the legal fallout from its Countrywide acquisition, was that the government made a point of noting the fraud at Countrywide did not cease, but actually got worse under BofA's stewardship.

"As the warnings about the Hustle went unheeded, Countrywide and later Bank of America knowingly originated loans with escalating levels of fraud and other serious defects and sold them to the GSEs," the filing alleges.

Also worrying to Bank of America should be suggestions in the lawsuit the government could force it to purchase some of its toxic loans back.

Fannie Mae is currently in a spat with the bank over billions in defaulted mortgages the nationalized entity says Bank of America is obligated to repurchase. Negotiations over resolving the dispute are ongoing, according to both parties.

Bank of America representatives did not immediatly respond to the lawsuit.

Shares of Bank of America Corp. (NYSE: BAC), up over 70 percent since the beginning of the year, dropped about 0.85 percent on the news, and were recently trading at $9.38.