Bank of America
Reaches $17 Billion Mortgage Settlement with US
Wednesday, 20 Aug 2014 06:48 PM
Bank of America has reached a record $17
billion settlement to resolve an investigation into its role in the sale of
mortgage-backed securities before the 2008 financial crisis, officials directly
familiar with the matter said Wednesday.
One of the officials, who spoke with The Associated Press on
condition of anonymity because the announcement isn't scheduled until Thursday
at the earliest, said the bank will pay $10 billion in cash and provide
consumer relief valued at $7 billion.
The deal is the largest settlement arising from the economic
meltdown in which millions of Americans lost their homes to foreclosure. It
follows agreements in the last year with Citigroup for $7 billion and with JPMorgan Chase
& Co. for $13 billion.
Like the Bank of America deal, those settlements were a
mixture of hard cash and "credits" for various forms of consumer aid
that the banks promised to provide in coming years.
The Bank of America settlement was negotiated through a
joint federal and state working group established by President Barack Obama two
years ago with the Justice Department and other federal and state authorities.
Individual states are expected to share in the settlement.
Justice Department spokeswoman Ellen Canale declined to
comment, as did New York Attorney General Eric Schneiderman, a co-chairman of
the group. The bank also declined comment.
The deal requires Bank of America to acknowledge making
serious misrepresentations about the quality of its residential mortgage-backed
securities issued by itself and by Countrywide Financial
and Merrill
Lynch. Those institutions were acquired by the bank when they were
on the brink of failure in 2008 and they were responsible for the bulk of the
questionable loans.
The deals are intended to offer some financial relief to
homeowners, whose mortgages were bundled into securities by the banks in
question and then sold to investors.
The securities contained residential mortgages from
borrowers who were unlikely to be able to repay their loans. Still, the
securities were promoted as relatively safe investments until the housing
market collapsed and investors suffered billions of dollars in losses.
The poor quality of the loans led to huge losses for investors and a slew of foreclosures, kicking off the recession that began in late 2007. The cash totals now being paid by some of the country's largest banks are not nearly enough to reverse the damages caused by the bursting of the housing bubble and the ensuing recession.
Bank of America had argued that it shouldn't be held liable
for the subprime mortgages issued by Countrywide and Merrill Lynch. Combined,
those three firms issued $965 billion in mortgage-backed securities from 2004 to
2008, according to public records. Roughly 75 percent of that total came from
Countrywide.
In a federal lawsuit last year, the Securities and Exchange
Commission charged Bank of America and two subsidiaries with defrauding
investors in an offering of residential mortgage-backed securities by failing
to disclose key risks and misrepresenting facts about the underlying mortgages.
The Justice Department filed a parallel civil action against
Bank of America alleging violations of the Financial Institutions Reform,
Recovery, and Enforcement Act.
Bank of America
Bank of America Corp. acquired Merrill Lynch
& Co., Inc.
Note: A.W. Clausen was the chairman & CEO for the Bank of America Corp., and an honorary
trustee at the Brookings Institution (think
tank).
Foundation
to Promote Open Society was a funder for the Brookings Institution (think
tank).
George Soros
was the chairman for the Foundation to Promote Open Society.
Judith Rodin was an
honorary trustee at the Brookings
Institution (think tank), and is a director at Citigroup Inc.
Joan E. Spero was an
honorary trustee at the Brookings
Institution (think tank), and is a director at Citigroup Inc.
Ann Dibble Jordan
is an honorary trustee at the Brookings
Institution (think tank), and was a director at Citigroup Inc.
Charles O.
Prince III was a trustee at the Brookings
Institution (think tank), and the chairman & CEO for Citigroup Inc.
Klaus Kleinfeld is a trustee at the Brookings Institution (think
tank), was a director at Citigroup
Inc., and a 2008 Bilderberg conference participant (think tank).
Lawrence H. Summers was a trustee at the Brookings
Institution (think tank), is a consultant for Citigroup Inc., and a 2008 Bilderberg conference participant
(think tank).
Geoffrey T. Boisi
is an honorary trustee at the Brookings Institution (think tank), and
was the vice chairman for JPMorgan Chase & Co.
Crandall C. Bowles
is a trustee at the Brookings
Institution (think tank), and a director at the JPMorgan Chase & Co.
Ellen V. Futter is
a trustee at the Brookings Institution (think tank), and was a director
at the JPMorgan Chase & Co.
James A. Johnson is an honorary trustee at the Brookings Institution
(think tank), a member of the American Friends of Bilderberg (think
tank), received five real-estate loans from the Countrywide Financial Corporation, and a 2008 Bilderberg conference
participant (think tank).
Donna E. Shalala
was a fellow at the Brookings Institution (think tank), and a mortgage
recipient from the Countrywide Financial
Corporation.
No comments:
Post a Comment