The United States can pursue parts of a civil lawsuit against Bank of America Corp over its sale of toxic mortgages to Fannie Mae and Freddie Mac, a federal judge said in Wednesday in a ruling that boosted a largely untested legal theory the government used in the case. Bank of America had sought to dismiss the lawsuit, which seeks penalties under two laws. One is the False Claims Act, which is often used to target fraud against the government, and the other is the 1989 FIRREA law. FIRREA, or the Financial Institutions Reform, Recovery, and Enforcement Act, allows the government to seek civil penalties against anyone who commits a fraud "affecting a federally insured financial institution." FIRREA does not yet have much of a track record in court, but the government turned to it in the wake of the financial crisis as a potential means to target civil fraud involving financial institutions. U.S. District Judge Jed Rakoff issued a two-page ruling that dismissed
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