A Bank of America settlement worth $17 billion is likely to be agreed soon with the US government to resolve allegations of selling toxic mortgage securities leading up to and fueling the 2008 global financial crisis.
According to unnamed individuals familiar with the matter quoted by the Wall Street Journal, BoA (Bank of America) will pay approximately $9 billion in cash to several government entities.
America’s second largest bank holding company would aim additional money at reducing mortgage balances for struggling customers, plus other kinds of consumer relief.
According to these informed people, details of the proposed agreement are still being negotiated.
Apparently, the framework for the accord was reached on July 30 when BoA CEO Brian T. Moynihan and Attorney General Eric Holder had a telephone conversation. Mr. Holder told Mr. Moynihan that the US government was set to file a lawsuit if the bank’s offer was not closed to the c. $17 billion the department was demanding.
Record settlement
If agreement is reached, which is looking more likely, the civil settlement involving fines and damages will be the largest between the government and a company in US history, dwarfing the current biggest one worth $13 billion between JP Morgan chase and the government.
The Charlotte-based bank will have settled a total of $23 billion so far this year if the accord goes through at the end of this month.
Earlier this year, it had agreed to pay almost $6 billion to FHFA (Federal Housing Finance Agency) over similar illegal activities. It also reached a deal with AIG (American International Group) worth $650 million to settle defective mortgage-backed securities litigation.
In July, BoA was complaining with the Justice Department, saying a $14 billion penalty was too high. It argued that it was unfair to be punished for the alleged illegal activities of Countrywide Financial Corp. and Merrill Lynch & Co., two companies it had acquired. The bank’s lawyers have clearly advised it to relent and reach a settlement now.
Common stock dividend increased
Yesterday, BoA announced that its Board of Directors had approved an increase in the quarterly common stock dividend to 5 cents per share from 1 cent. The dividend will be paid on September 26.
This is the bank’s first quarterly common stock dividend increase in seven years “and reflects the significant progress the company has made to strengthen the balance sheet and build capital and liquidity.”
The Federal Reserve approved the dividend increase.