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The DOJ has filed a $1 billion civil lawsuit alleging that Countrywide committed fraud “spectacularly brazen in scope” by selling defective mortgages to Fannie Mae and Freddie Mac between 2007-2009. (Full PDF here).

Once the nation’s leading subprime lender, Countrywide was acquired Bank of America in 2008, and it has proven to be an epic money pit. Last month, David Benoit wrote that the acquisition had cost Bank of America at least $29 billion in settlement costs in the last 3 years. The WSJ says the bank has dished out something like $42 billion since 2010, if you include reserves and expenses.

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Among tonight’s foreign policy debate topics is the vague-yet-lofty “the rise of China and tomorrow’s world”.

Much of the discussion is likely to focus on whether China should officially be labeled a “currency manipulator” for keeping the value of the yuan low, thereby boosting its exports. Romney has said he’d use his first day in office to apply this label, and would hit Chinese imports with tariffs. Obama generally isn’t in favor of naming China as a manipulator — though Treasury Secretary Tim Geithner been calling for China’s currency to appreciate for years. (Treasury is due to release a semi-annual currency report in November).

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How you feel about the American economy right now depends on your answer to one question: are we recovering from a recession or from a financial crisis?

Renowned academics Kenneth Rogoff and Carmen Reinhart aren’t happy with the way a group of economists associated with the Romney campaign are answering this question. “We we have to take issue with gross misinterpretations of the facts,” they write in a Bloomberg op-ed, which summarizes their new white paper (PDF here).

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Wall Street is having a hard time enjoying itself these days. Bloomberg recently reported there was “no sexiness … no fun … no intellectual intrigue” left for some bankers, and wrote that $63 billion in big bank profit somehow just isn’t enough. New York magazine declared that, faced with tighter regulations and falling profits, Wall Street had been fully emasculated.

Which is strange because on aggregate Wall Street pay actually rose 4% last year – this despite, as DealBook notes, the industry losing a net of 20,000 jobs since late 2007. Over the past two years, according to data compiled by the New York State Comptroller’s Office, securities industry salaries rose 16.6% to an average of $362,950 – or 5.3 times the average New York City worker’s salary.

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Newsweek/Daily Beast has become something of a media whipping post in the last several months. Editor Tina Brown, Michael Wolff wrote last month, is “the most famous magazine editor of her generation”, “engaged in a desperate and operatic struggle.” This summer, the family of the late Sidney Harman stopped pouring money into the company, and Barry Diller suggested that Newsweek could move into online-only mode.

If Newsweek has had trouble figuring out what it is, it’s also had difficulty determining what is. First, there was Niall Ferguson’s essay on Barack Obama, which featured elided quotes from the CBO, and amounted to “counterfactual history” that Paul Krugman called  ”deliberately misleading“. Then there was a cover story on Muslim rage, which Twitter mercilessly mocked. There was also a recycled cover on vegetables and a story on the 10 best presidents in history in which Newsweek printed ”an entirely different version of the list than the one historians submitted.”

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Even with mortgage rates at record lows and the Fed’s recent $40 billion per month commitment to the market, mortgages aren’t terribly easy to get these days. Mitt Romney, for his part, blames confusion over “qualifying mortgages“. But the mortgage market is also being held back by the scourge of “put-backs”.

In the post-housing-bubble era, Nick Timiraos reports, mortgage giants Fannie Mae and Freddie Mac have hired “bounty hunter” consultants to apply a ridiculous amount of scrutiny to billions of solid loans from mortgage lenders. If these consultants find even small problems – like a stray deposit in a borrower’s bank account – Fannie and Freddie can force lenders to buy back loans:

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We’re entering a strange time in the politics of the American economy. If Congress doesn’t act by January 1, a series of expiring tax cuts and automatic spending cuts will kick in. This “fiscal cliff” or “taxmageddon”, the CBO says, will send us back into recession and slash GDP.

More specifically, almost 90% of Americans would see their taxes rise by an average of roughly $3,500 per household, according to a report released yesterday by the Tax Policy Center: “Average marginal tax rates would increase by 5 percentage points on labor income, 7 points on capital gains and 20 points on dividends.” Households in the top quintile of income would see their after-tax income fall 7.7%; those in the lowest quintile would see this income would fall 3.7%.

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The Wheatley Review is out. No, that’s not an obscure literary magazine – it’s a British regulator’s proposal to overhaul Libor, everyone’s favorite manipulated benchmark interest rate. In June, Barclays agreed to pay a $470 million fine for manipulating Libor.

Libor is calculated daily based on banks’ own reporting of their borrowing costs, which, of course, left it open for manipulation. If banks report high borrowing costs, the markets can get spooked and think they’re in trouble; report artificially low borrowing costs, like Barclays did, and your traders could make millions.

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The pattern of Euro crisis flare-ups is getting very familiar:

Step 1: News of political turmoil in ailing European Country X raises questions about their dedication to austerity. This is often be accompanied by missing deficit targets, riots and/or burgeoning political change.

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The most telling quote about Apple’s recent stumbles didn’t come from CEO Tim Cook. It came last month from Terry Gou, the chairman of Apple manufacturer Foxconn. Discussing the rise of robots in production Gou said: “As human beings are also animals, to manage one million animals gives me a headache”.

If you’ve been in a coma, Apple’s “animals” have been quite productive lately: The iPhone 5 came out last week, selling some 5 million phones in three days. In a few years, Apple could very well be the first company valued at $1 trillion. But, yes, there have been “headaches”. Riots shut down Foxconn’s factory in the Chinese city of Taiyuan on Monday. Reuters reported that at least 40 people were hospitalized, and 5,000 police were dispatched — though it’s unclear if the riot came from a fight among workers or in a clash with guards. Engadget’s Richard Lai has pictures.