Bank of America is getting whacked where it hurts the most — their pockets! The multinational banking corporation has agreed to pay a fine of $17 billion — or $16.65 billion if you want to get technical — for purposely selling “toxic mortgages” to investors. It’s the largest settlement yet, The Associated Press reports. This is the hefty price for Bank of America’s part in the recent economic crisis. The settlement includes $9.65 billion in cash and $7 billion in “consumer relief,” like refinanced mortgages and modified home loans.
“The deal requires Bank of America to acknowledge making serious misrepresentations about the quality of its residential mortgage-backed securities issued by itself and by Countrywide Financial and Merrill Lynch. Those institutions were acquired by the bank when they were on the brink of failure in 2008 and they were responsible for the bulk of the questionable loans,” the article says. Say hello to the Great Recession — a wave of foreclosures and massive losses for investors.
In response, the Securities and Exchange Commission filed a federal lawsuit against Bank of America for misrepresenting these residential subprime loans to unwitting investors.
Bank America argued that they shouldn’t be held responsible for the faulty loans that they inherited from Countrywide and Merrill Lynch, two subsidiaries the bank acquired in 2009. All three firms issued $965 billion in mortgage-backed securities between 2004 and 2008 — 75 percent of that figure came from Countrywide, CBS News says.
The U.S. Justice Department wasn’t buying Bank of America’s finger-pointing. The settlement beats out J.P. Morgan’s $13 billion settlement in November of 2013.
Hopefully, this penalty will dissuade banks from engaging in risky practices. Large banks will think twice about carelessly dishing out sub-prime mortgages. In the end, it will cost them — though it will be years later. And there’s still the issue of personal responsibility. Only one financier has gone to prison for causing the meltdown, and by all accounts, he wasn’t a major player. There are many other CEOs and executives who bear the brunt of the blame.
“Even reputable institutions like Bank of America caved to the pernicious forces of greed and cut corners, putting profits ahead of their customers,” U.S. Attorney Anne M. Tompkins for the Western District of North Carolina said in a statement.
“As we deal with the aftermath of the financial meltdown and rebuild our economy, we will hold accountable firms that contributed to the economic crisis. Today’s settlement makes clear that my office will not sit idly while fraud occurs in our backyard,” Tompkins continued concluded.