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August 7, 2014

DOJ and Bank of America Closing In on Largest Single Federal Settlement in Corporate History

Bank of America Corp. reportedly has offered the Justice Department a landmark $16 billion to $17 billion settlement over the department’s investigation into the company’s sale of mortgage-backed securities in the run-up to the financial crisis. If finalized, the deal would set a record for fines and damages in a civil settlement between the U.S. government and a company, surpassing the $13 billion settlement reached between J.P. Morgan Chase and the Justice Department just nine months ago.

Including the $6 billion Bank of America agreed to pay to the Federal Housing Finance Agency earlier this year, the total government-related legal penalties to the bank could reach $23 billion.

Bank of America’s decision to settle came after months of negotiations with the Justice Department and a lost battle over the bank’s alleged responsibility for the actions its subsidiaries, Countrywide Financial and Merrill Lynch, which were purchased during the financial crisis. Another courtroom battle could conceivably have cost the bank even more than the present settlement.

Bank of America and the Justice Department are continuing to hash out the details of the still tentative deal which could be seen as an attempt to “make an example” out of the bank. How the bank will divide “soft-dollar” relief to consumers—including the reduction of mortgage balances for some homeowners—is still being decided.

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