Bank of America Agrees to Record-Breaking Settlement

We’re only a week into August, but it’s already a month that will go down in infamy at Bank of America.

The firm agreed temporarily this week to a record-setting $16-17 billion settlement over mortgage misconduct in the build-up to the 2008 financial crisis. This projected settlement comes on the heels of last week’s $1.3 billion deal to resolve some 17,000 bad mortgages handed out by the bank’s Countrywide Financial arm in an operation known as ‘The Hustle’.

Bank of America has agreed to pay a total of $9 billion in restitution, split between the federal government and certain state governments. This portion of the settlement is designed to provide consumer relief in the form of reduced mortgage rates for affected homeowners. The additional $7-8 billion dollars would be paid via so-called “soft dollar” relief. “Soft dollar” relief refers to the practice of paying fines via commission revenue, as opposed to normal, direct payment, which would be known as “hard dollars.” This arrangement opens up the possibility that once again, it will be clients and taxpayers helping to foot the bill for the institution’s wrongdoing.

If the deal is ratified, it would become the most expensive single settlement in the history of corporate America. The current benchmark occurred at the end of 2013, when J.P. Morgan Chase struck a $13 billion agreement with the federal government over similar issues pertaining to the sale of inferior mortgages.

Phil Cannella
Partnered with CBS Radio Network, Phil Cannella reports on the issues most important to the American retiree.
Phil Cannella
- 2 days ago
Phil Cannella

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