Bank of America Corp (NYSE:BAC) is said to be nearing a $16 billion to $17 billion settlement with the Justice Department to resolve allegations of mortgage-related misconduct in the run-up to the financial crisis.
The Wall Street Journal cites people familiar with the matter who say that Bank of America Corp (NYSE:BAC) agreed to the outlines of a deal after a night-time phone call on July 30 between the bank’s chief executive officer, Brian Moynihan, and Attorney General Eric Holder.
Bank of America: largest settlement in history
According to the report, Bank of America Corp (NYSE:BAC) has agreed to pay roughly $9 billion in cash to the federal government, states and other government entities as part of an overall pact that could be finalized this month. The additional money would be aimed at consumer relief, such as reducing mortgage balances for struggling homeowners. Bank of America has already shelled out about $60 billion since the financial crisis to settle lawsuits and buy back mortgage securities. This staggering amount is the largest of any of its closest rivals.
For several weeks, Bank of America Corp (NYSE:BAC) has refused to offer more than $13 billion, including cash and consumer relief, while the Justice Department was seeking $17 billion.
Flurry of settlements
There has been a flurry of settlements recently as the Justice Department and other government officials have accelerated their resolutions of big cases against the world’s largest banks. In November, JPMorgan Chase & Co. (NYSE:JPM) announced that it will pay $13 billion for the resolution of all the actual and probable civil claims related to the sale of residential mortgage-backed security. In July, Citigroup Inc. (NYSE:C) agreed to pay a $7 billion penalty to settle mortgage-related security claims.
Bank of America Corp (NYSE:BAC)’s recent decision to back down, despite its earlier bare-knuckle brawls with the government, showed the limitations of the legal arguments it has clung to for years. The bank has long argued that it shouldn’t be harshly penalized for the misdeeds of two companies it bought with the government’s blessing–Merrill Lynch and Countrywide Financial Corp–in the midst of the financial crisis.