Monday - Sep 25, 2017

Bank of America agree to pay $16.65 billion in damages- to settle allegations of impropriety in mortgage case

Bank of America agree to pay $16.65 billion to settle allegations of impropriety in mortgage case

In order to resolve allegations that it misled investors to purchase mortgage-backed securities, the Bank of America have agreed to pay a record $16.65 billion.

The agreement between the Bank of America and the Department of Justice, the Securities and Exchange Commission and six state attorneys-generals, is being regarded as another milestone in concerted efforts by the US government’s to hold banks accountable for the financial crisis of 2008.

A spokesperson for the Department of Justice has already stated that the Bank of America civil settlement was the largest made with a single entity in American corporate history.

Eric Holder, US attorney-general, went on to describe that the settlement as a “historic step forward in the American’s government’s ongoing effort to protect the American people from financial fraud”, going on to warn that the settlement would in no way “preclude any criminal charges against the bank or its employees”.

As part of the deal, the Bank of America had agreed to pay $9.65 billion in cash with a further $7 billion coming in the form of consumer relief, to be paid to communities who are still struggling to recover from the effects of the housing crisis of 2008. The relief will come in the form of reduced mortgages of homeowners who now found themselves owning properties with negative equity while re-imbursing others who are liable to incur higher tax bills as a result.

The Bank of America has reportedly admitted to committing “repeated mistakes” by failing to disclose to investors the poor quality of mortgages that were packaged and sold in securities by the bank, as well as those marketed by Countrywide and Merrill Lynch, whom were both acquired by the bank in 2008 at the height of the “sub-prime” financial crisis.

The agreement includes a record $5 billion penalty, bringing the amount that the Bank of America has paid in US government settlements to more than $50 billion since 2009.

Bank of America’s settlement follows in the footsteps of similar agreements between the US Government and JPMorgan Chase who paid out $13 billion and Citigroup’s $7 billion, as the the Department of Justice continues to extract major penalties from offending banks following years of criticism for been too forgiving to the major banks for their behavior that contributed to the financial crisis.

A special government task force is reportedly in the advanced stages of investigating a number of other US banks for similar financial indiscretions with similar scale settlements expected to follow.

Photo credit: Billy Hathorn

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