DOJ and BOA Come Up With “One Last” Settlement, Announcement Set For Thursday
In a settlement with the justice department, Bank of America is predicted to pay around $17 billion for its part in the financial crisis. The agreement is expected to be announced on Thursday.
The U.S. Department of Justice accused the company of putting together shoddy mortgages into securities, selling them to investors during the financial crisis. If there is an agreement, it would be the biggest settlement to date between the government and one company.
The nearly $17 billion would be a blend of both consumer aid and cash – an amount that would equal to the profit the bank has had for the last three years.
This would be the latest penalty the Justice Department has imposed on a big bank over the mortgage securities. For BOA, it would be the latest in a line of regulatory costs and litigation the bank has been paying for its infractions. This has made shareholders angry and depressed the company’s earnings.
According to Brian Moynihan, who has been BOA’s chief executive officer for nearly five years, the deal with the DOJ is theoretically to be the last of the company’s big problems that occurred because of the financial crisis. Since Moynihan’s CEO tenure, the bank has spent or paid nearly $60 billion to get over the legal troubles.
This latest settlement is a reminder of the bank’s cost for the 2008 purchase of Countrywide Financial Corp, which led to BOA being a key player in handing out mortgages, but also caused it to be stuck with the unusual loans. The majority of the mortgage securities was made right before the crisis and is attributed to Countrywide, although Bank of America now owns it all.
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