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Bank of America Reaches Tentative Settlement with Justice Department [post_view]
Bank of America is closing in on a settlement that would total $16 or $17 billion and would resolve the investigation into its role of selling mortgage-backed securities prior to the 2008 financial crisis, according to The Associated Press.
The settlement still needs to be finalized and it would be the largest settlement with the Justice Department involving the recession so far.
A person close to the situation spoke on the condition of anonymity due to the deal not being announced yet. That person said that both sides reached the agreement in principle after a conversation between Attorney General Eric Holder and CEO Brian Moynihan last week.
The deal will see Bank of America pay $9 billion in cash and the rest of the money will go to consumer relief.
Earlier in this case, Bank of America had argued that it should not be held liable for the subprime mortgage problems experienced by Merrill Lynch and Countrywide. These are two firms the bank acquired back in 2008. All told, the three firms issued $965 billion in mortgage-backed securities between 2004 and 2008. Close to 75 percent of it came from Countrywide.
In a separate case last week, a federal judge from Manhattan shot down the claim that the bank should not be penalized for pre-merger actions by Countrywide. The judge also issued fines totaling $1.3 billion.
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