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Bank of America to pay record $17B to end mortgage probes

By
Kevin Dugan
Published Aug. 21, 2014, 10:32 a.m. ET

Bank of America has agreed to pay a record $16.6 billion — the largest federal fine ever against a single US company — to put the bulk of its mortgage-related woes to bed.

The penalty, announced Thursday by Attorney General Eric Holder in Washington, settles a number of state and federal probes into the sale of shoddy mortgage-backed securities in the run-up to the financial crisis.

Roughly $7 billion of that will go to the states for restitution, with New York pocketing $800 million, according to the terms of the settlement.

More than any other bank, BofA is being held responsible for the subprime crisis — the result of its acquisitions of Merrill Lynch and Countrywide Financial — which peaked about five years ago and continues to take its toll on both the housing market and the broader economy.

“These financial institutions knowingly, routinely, falsely, and fraudulently marked and sold these loans as sound and reliable investments,” Holder said in a statement.

The nearly $17 billion settlement makes clear that prosecutors will pursue the bank that holds the toxic securities regardless of whether that firm originated the problems.

BofA CEO Brian Moynihan hoped to pay less because only about 4 percent of the soured mortgage-backed securities came from his bank. The rest it inherited from Countrywide and Merrill, a source familiar with the investigation told The Post.

The nearly $17 billion fine brings BofA’s legal bill for the mortgage mess to more than $70 billion.

Federal and state prosecutors have been clamping down on big banks in the past year, extracting $13 billion from JPMorgan Chase and $7 billion from Citigroup for their roles in the subprime debacle.

Shares of Bank of America rose 23 cents, or 1.4 percent, to $15.75 at 10:18 a.m. after the settlement was announced.