Bank of America settles mortgage fraud probe with US for nearly $17 billion. The announcement of a landmark $16.65 billion settlement between Bank of America and the Justice Department over the banks handling of mortgages during the financial crisis generated significant news coverage last night and this morning, with nearly four minutes of coverage on the network newscasts. ABC World News (8/21, story 6, 2:05, Sawyer, 5.84M) reported on the landmark settlement between Bank of American and the Justice Department and the record penalty, $16.65 billion. ABC (Thomas) added that Bank of America admitted to massive fraud that cost thousands of Americans their homes. Eric Holder, Attorney General: Bank of America, Merrill Lynch, and Countrywide, each engaged in pervasive schemes to defraud financial institutions and other investors. ABC noted that junk loans were packaged as good investments and when they failed, it led to a tsunami of bankruptcies and foreclosures, igniting the great recession. Tony West, Associate Attorney General: Its like going to your neighborhood grocery store to buy milk thats advertised as fresh, only to discover that store employees, they knew the milk that you were buying had been left out on a loading dock, unrefrigerated. The CBS Evening News (8/21, story 11, 1:45, Schieffer, 5.08M) reported that in the settlement, Bank of America and two subsidiaries, Countrywide, and Merrill Lynch, admit they sold hundreds of billions worth of mortgage-backed securities to investors when they knew that thousands of homeowners taking out the mortgages could not make the monthly payment. Bank of Americas CEO Bryan Moynihan said in a statement that the deal was in the best interest of our shareholders and allows to us continue to focus on the future. The bank will now pay $9.6 billion in penalties and has promised $7 billion to help homeowners with loans, but part of this fund will also go to housing rehabilitation and to low-income rentals and critics call that a diversion. CBS noted that despite the record fine, this was still a civil not a criminal case, and that six years now after the financial meltdown, not a single top banking official has successfully prosecuted for banking fraud. USA Today (8/22, McCoy, 5.76M) reports that the settlement is the largest in history for an individual company, but watchdog groups say the agreement is undercut by what it doesnt include, including criminal charges against individuals and a prohibition against the bank deducting the payments from tax returns. The Wall Street Journal (8/21, Rexrode, Grossman, Subscription Publication, 5.89M) reports that the settlement follows similar but smaller settlements between the Federal government and Citigroup (for $7 billion) and JPMorgan Chase (for $13 billion). The Journal notes that the Justice Department is expected to similarly pursue other banks for their handling of flawed mortgage securities, including Goldman Sachs and Wells Fargo. The Washington Post (8/21, Douglas, 4.06M) reports that Bank of America became the third Wall Street bank to reach a multibillion-dollar agreement with the Justice Department for allegedly misleading investors about the quality of bonds sold in the lead-up to the 2008 financial crisis. The Post notes that questions have arisen about how much of the money will make its way to investors who purchased the securities, who are directly affected by the alleged misdeeds. The Post adds that there is no specific carve-out to compensate investors, whereas funds are set aside to provide relief to homeowners and blighted communities, but one select group of investors is receiving some relief: public pension funds, as nearly $1 billion of the Bank of America settlement will go to states - California, Delaware, Illinois, Kentucky, Maryland and New York .
Posted on: Fri, 22 Aug 2014 12:50:49 +0000