Judge Orders Bank Of America To Pay $1.3 Billion; Talks Stall On Big Case


Bank of America and federal prosecutors accelerated their negotiations to resolve an investigation into the bank's sale of troubled mortgage securities before the financial crisis, says the New York Times. The bank's lawyers and Justice Department prosecutors met in Washington, D.C., yesterday to discuss the size of a potential cash penalty, a major sticking point in the settlement talks. The Justice Department was demanding $17 billion to settle the case, more than $10 billion in the form of a cash penalty and the rest in so-called soft dollar payments to help struggling homeowners.

The bank was offering a total of $13 billion. If a deal is not reached in the coming days, the Justice Department might announce a lawsuit against the bank. Yesterday, U.S. District Judge Jed Rakoff in New York City ordered the bank to pay a nearly $1.3 billion penalty in another federal mortgage case. The ruling comes nine months after federal prosecutors persuaded a jury to find Bank of America liable for selling questionable loans to Fannie May and Freddie Mac, the government-controlled mortgage finance giants, before the financial crisis. Bank of America refused to settle the case and went to trial, which the Times calls a roll of the dice that came back to haunt the bank and could now bleed into negotiations in Washington.

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