Bank of America’s big fine

August 22, 2014

You’d be forgiven for thinking that Bank of America settles crisis-era mortgage cases with the U.S. government once a week or so. But the one this week, at $16.65 billion, is the big one. That is, it’s the biggest settlement to date, eclipsing not only previous settlements by the bank (which now come to a total of about $65 billion), but also all of the similar settlements reached by other banks. JP Morgan paid $13 billion and Citigroup $7 billion recently for similar reasons. The bank will pay “$9.65 billion in cash to resolve more than a dozen federal and state investigations, and provide $7 billion in help to struggling homeowners and communities,” according to Reuters.

Here’s our updated chart of the biggest bank settlements in history:

bank fines (again!)

 

No individuals were charged, but Bank of America has admitted to some of its terrible pre- and post-crisis behavior. There are, as usual, some embarrassing emails involved. Here are some details from the Reuters story:

Under the out-of-court settlement, Bank of America acknowledged that Merrill Lynch told investors in subprime mortgage bonds in 2006 and 2007 that the loans generally complied with underwriting guidelines, though reviews suggested as many as 50 percent did not.

A statement of facts cites one email in which a Merrill employee wrote: “(h)ow much time do you want me to spend looking at these (loans) if (the co-head of Merrill Lynch’s RMBS business) is going to keep them regardless of issues?”

Bank of America also acknowledged that Countrywide did not generally tell investors the extent to which it made exceptions to its own internal guidelines.

The settlement also covered some post-crisis conduct, including Bank of America’s admission that from 2009 to 2012 it submitted loans for government insurance under the Federal Housing Administration that did not qualify.

6 comments

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/

What an innovative way for the US government to tax these companies without the approval of congress. But as with all else this administration does, the massive consequences are yet to be seen. Next time, healthy banks will not rush to put their balance sheets on the line to acquire floundering institutions that could put our markets at risk.

Posted by JustProduce | Report as abusive

These fines are about 4-5% of the actual losses from the “mortgage mis-selling” for U.S. citizens, corporations and government portfolios, right? Also, they’re about four years late,(assuming 2 years to aggressively pursue the perpetrators), right? So, can we please get competent DOJ, FDIC, SEC, HUD, FHFA, and “other” administrators soon? We really can’t afford another housing abuse meltdown, or, any other industry meltdown.

Posted by hometown | Report as abusive

They don’t need to worry, they will just write more “bad” home loans for Americans who are unsuspecting…..

Posted by ArborGal | Report as abusive

We do not have a financial system, we have interlocking criminal conspiracies worthy of RICO prosecution – if white men in suits went to jail.

Posted by ElizabethM | Report as abusive

Wretched financial institution, Bank of America is and has been for the past several decades. Hopefully, someone is also looking into its other non-Merrill subsidiaries, like U.S. Trust. Way past time BoA was broken into smaller parts. A tiger never changes its stripes and this one brought down a good portion of American homeowners and the economy.

Posted by timebandit | Report as abusive

It’s not enough of a fine and the Bankers should be jailed. It won’t happen. They own the Government.

Posted by Maestro1 | Report as abusive