According to The Wall Street Journal, Bank of America (BAC) has reached a record $17 billion settlement with the U.S. Department of Justice [DOJ] to resolve claims over the toxic residential mortgage-backed securities the lender issued in the run-up to the 2008 financial crisis.
The report says BofA will pay $10 billion in cash and provide consumer relief – which would consist of help for homeowners in reducing principal amounts and monthly payments – valued at $7 billion. The report also said that the deal requires Bank of America to acknowledge making serious misrepresentations about the quality and the risk of its faulty mortgage-backed securities issued by itself and in those by Countrywide Financial and Merrill Lynch.
If finalized, the $17 billion settlement, which could be announced as early as Thursday, would set a record for fines and damages in a civil settlement between the U.S. government and a single company, and exceed the previous high of $13 billion paid by JP Morgan (JPM) in November to settle similar claims. At the time, the DOJ labeled JPM’s accord “the largest settlement with a single entity in American history.”
Shares of BofA are almost flat year-to-date and are currently trading around the mid-$15 level.
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Bank of America has paid tons of settlements since the 2008 financial crisis. It is sad that they have such weak institutional memory and no learning culture. We can expect more of the same from big banks in the next crisis.