Update: CNBC confirms that the New York Fed is part of a consortium that have launched a lawsuit against BofA regarding Countrywide mortgages.
Shares are now off 3%.
Bank of America is getting hit in the credit markets as well. Spreads on Bank of America CDS were at 185 bps prior to the news, then widened to 200, but have since tightened to 195, according to Markit.
It’s particularly surprising to see the NYFED jump in on the action, since that means they’d be actively working to weaken Bank of America.
PIMCO is private, so their only interest is making more money. It makes sense.
All told, the parties may be looking for as much as $47 billion in reimbursements for soured mortgages.
The Dow is off 200 points.