Bank of America has agreed to pay a total of $16.65 billion to settle a case involving troubled mortgage-backed securities that were instrumental in creating a worldwide financial crisis in 2008. It is the largest settlement thus far in the series of actions brought by the Department of Justice against major financial institutions involved in the financial meltdown.
Announced by Attorney General Eric Holder Jr., the settlement requires Bank of America to pay a $9.65 cash penalty and provide about $7 billion in relief to homeowners and blighted neighborhoods affected by the mortgage debacle. Holder said the settlement "does not preclude any criminal charges against the bank or its employees," but in the cases previously settled in the mortgage scandal no one has yet gone to jail.
As noted in the New York Times on August 21, Bank of America has agreed to write down the balances of mortgages of struggling homeowners and to pay to demolish foreclosed properties contributing to blight in certain cities. In addition to agreeing to the largest government settlement in American history, Bank of America is also saddled with a legal bill approaching $70 billion related to the mortgage issues.
While no bank executives will face charges as part of the civil settlement, the Times said federal prosecutors in Los Angeles are preparing a lawsuit against Angelo Mozilo, Countrywide's co-founder, who came to symbolize the risky mortgages that required homeowners to show little proof they had the ability to pay the loans back. So-called "no-doc" and "low-doc" loans helped spur Countrywide's growth, which by 2006 became the nation's largest mortgage lender. But such exotic loans — and the financial damage they inflicted on the millions of homeowners and investors — have haunted Bank of America for the last six years as it has tried to dig out from under a mountain of lawsuits and investigations related to Countrywide.
The settlement brings to an end a painful chapter for Bank of America, based in Charlotte, NC, which bought both Countrywide Financial, a major player in the mortgage-backed securities scandal, in 2008, and the investment firm of Merrill Lynch during the ensuing financial crisis.
According to the Times, the Justice Department has now shifted its attention to banks like Goldman Sachs and Wells Fargo, which thus far have not been charged in the mortgage securities crisis. Settlements were reached earlier with Citigroup and JPMorgan Chase, which agreed to pay $7 billion and $13 billion respectively in mortgage-backed securities actions.
It's interesting to note some of the comments received by the New York Times in relation to the Bank of America settlement, such as "Once again, no prison, proves who runs the country," or "Given Clinton's and a Republican Congress' removal of laws like Glass-Steagall, it's interesting to see just which laws you believe to have been violated– 'wrong,' 'morally reprehensible,' 'economically destructive' and even 'vicious and evil," are not the same things as 'illegal.'"
And then there's "Surely, surely, surely it is time for criminal indictments and convictions with penalties fitting these crimes. The rule of law, please" and "If you look closely at the penalty, you'll see that Bank of America is also receiving billions in dollars of tax credits to assist paying the fine. This is a travesty. None of the actual people affected by the actual issue receive proper compensation. No one goes to jail. No actual deterrent has been put in place. Same-o, same-o."