RegionsNorth AmericaBank of America Agrees US$17bn Settlement with US Justice Department

Bank of America Agrees US$17bn Settlement with US Justice Department

Bank of America (BofA) has agreed to pay nearly US$17bn to settle US federal and state allegations it sold risky, mortgage-backed securities to investors before the 2008 financial crisis.

The deal will resolve a US government investigation that stems largely from BofA’s purchases of Merrill Lynch and Countrywide Financial Corp, which were both hard hit when the crisis developed.

A settlement was hammered out during months of negotiations between BofA’s lawyers and prosecutors for the US Department of Justice (DoJ), as well as direct talks between the bank’s chief executive (CEO) Brian Moynihan and attorney general Eric Holder.

The deal concludes the latest in a series of DoJ legal actions focused on financial institutions whose marketing and sale of risky mortgage-backed securities contributed to a US real estate market collapse six years ago. Reports suggest that more than US$9bn of the total payment is likely to be in cash.

It is the largest settlement to date between the federal government and a single company. The previous record was set last November, when JP Morgan Chase agreed a US$13bn payment to settle allegations that it sold toxic mortgage investments.

In negotiations with the DoJ, lawyers for BofA argued the bank was being unreasonably punished for the actions of Merrill and Countrywide, which together issued most of the questionable mortgage securities at the centre of the probe.

However, prosecutors retorted that the bank had benefited from Merrill and bought Countrywide without any urging from the government. The bank also lobbied unsuccessfully to pay most of the settlement in consumer aid to homeowners, which would impact less heavily on the bank’s bottom line.

Related Articles

India-US trade corridor: Accelerating growth with reverse factoring

Deals & Markets India-US trade corridor: Accelerating growth with reverse factoring

5m Vinod Parmar
Treasury TV: Yeng Butler compares US and European MMF reforms

Compliance Treasury TV: Yeng Butler compares US and European MMF reforms

6m Victoria Beckett
Money market reforms: Navigating LVNAV, CNAV and VNAV

EEA Money market reforms: Navigating LVNAV, CNAV and VNAV

6m Victoria Beckett
Cash repatriation: The bar is now set

Cash Management Cash repatriation: The bar is now set

7m Bob Stark
New accounting standards may bring treasury losses: S&P interview

Accounting New accounting standards may bring treasury losses: S&P interview

9m Victoria Beckett
AFP interview: Treasurers prepare for US interest rate hike with synthetic euro debt

Economy AFP interview: Treasurers prepare for US interest rate hike with synthetic euro debt

9m Victoria Beckett
AFP Day 1: Rising interest rates and blockchain use cases

Banking AFP Day 1: Rising interest rates and blockchain use cases

10m Victoria Beckett
TreasuryXpress Receives Major Growth Investment

EEA TreasuryXpress Receives Major Growth Investment

10m Guest Writer