Bank of America, U.S. near record $17B settlement 

The Department of Justice and Bank of America have reached a record settlement in principle in which the bank will pay just under $17 billion to resolve allegations related to fraudulent marketing of mortgage-backed securities that helped cause the nation’s economic crisis, an official with knowledge of the negotiations said Wednesday.

The tentative deal, reached July 30 during a night telephone conversation between Attorney General Eric Holder and Brian Moynihan, CEO of the nation’s second-largest bank, surpasses a similar $13 billion settlement with JPMorgan Chase last November, said the official, who is not authorized to comment publicly.

Last week’s telephone call, the official said, came as Justice officials in New Jersey prepared to file a complaint against Merrill Lynch, a unit that Bank of America acquired during the financial crisis. The official said the bank then requested the call with Holder, and subsequently raised its payment offer to reach a tentative settlement.

Although there is an agreement in principle on the value of the deal, the official said other issues have yet to be resolved, and it could be days before any public announcement is made.

A second government official briefed on the negotiations said the settlement is expected to include “hundreds of millions” of dollars in consumer relief to help struggling homeowners cope with their mortgages. The official, who also was not authorized to speak publicly because the negotiations are confidential, cautioned that final deal terms are not yet complete.

Financial watchdogs and others who questioned past settlements among major banks and the Department of Justice questioned whether the tentative settlement would represent a sufficient penalty.

“The DOJ can be counted on to brag that the settlement dollar amount with Bank of America sets yet another record and claim, again, that this shows DOJ is tough on Wall Street,” said Dennis Kelleher, president and CEO of Better Markets, a financial watchdog group. “But, unlike other recent settlements, will DOJ provide the public with the key information on investor losses, Bank of America profits, the names of involved executives, specific laws broken and the actual systemic illegal schemes and activities?”

Similarly, Sen. Bernie Sanders, I-Vt., noted that Bank of America received more than $1 trillion “in virtually zero-interest loans” through government bailouts during the financial crisis. Given that, plus the fact that nobody from the bank has gone to prison for failings related to the meltdown, “this is a very modest settlement,” said Sanders.

 

Source: Usatoday

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