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Bank of America agrees to pay $16.65bn in respect of "major financial fraud"
By Finfacts Team
Aug 21, 2014 - 3:03 PM
Bank of America has agreed to pay $16.65bn
to settle the government's accusations of "major financial fraud" involving
selling mortgage securities before the outbreak of the financial crisis,
in the biggest settlement ever reached between the US and a single company.
The Wall Street Journal says that the settlement requires the bank to pay
$9.65bn in cash to the Justice Department, six states, and other government
agencies, including the Securities and Exchange Commission. The bank will also
provide $7bn worth of aid for struggling consumers, through actions such as
modifying mortgages for borrowers who owe more than their homes are worth, or
demolishing derelict properties.
The settlement comes on the heels of similar, but smaller, deals over precrisis
mortgage-related conduct with Citigroup Inc. C +0.34% for $7bn and J.P. Morgan
Chase JPM +0.47% & Co. for $13bn.
The Journal says that many of the mortgage securities in question were made by
Countrywide Financial Corp. and Merrill Lynch & Co., before Bank of America
agreed to buy the two companies in 2008. But the government found problems with
Bank of America's own mortgage securities as well.
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