Billions in Fines, but No Jail Time for Bank of AmericaBy
Bank of America has now joined JPMorgan Chase in a special category called: Banks That Agreed to Pay Billions in Fraud Fines While No Executives Have Gone to Jail.
The company agreed to $9.5 billion in fines to settle civil lawsuits filed by the Federal Housing Finance Agency on behalf of Fannie Mae and Freddie Mac, which claimed that Bank of America had fraudulently misrepresented the quality of $57.5 billion worth of residential mortgage-backed securities leading into the financial crisis. Cash payments of $6.3 billion will be made to Fannie and Freddie, and the bank will buy back $3.2 billion of mortgage securities. This brings the grand total of what the bank has agreed to pay to resolve mortgage claims to more than $50 billion, according to Bloomberg News.
Even with those eye-popping numbers, though, no criminal charges were ever filed against an executive at Bank of America or Countrywide Financial, the mortgage originator bought in 2008 that was the source of many of BofA’s problems. The government’s strategy for punishing big banks for the misdeeds of the financial crisis has revolved around filing civil lawsuits and imposing harsh financial penalties that ultimately fall on shareholders.
The same day that Bank of America announced the billions in fines, New York Attorney General Eric Schneiderman revealed his own $25 million settlement with the bank and its former chief executive, Kenneth Lewis, over allegations that both were less than forthright with shareholders over the 2009 purchase of Merrill Lynch. Lewis agreed to a $10 million fine and a three-year ban on serving as an officer or director of a public company; Bank of America will write another check, this one for $15 million. Schneiderman’s suit alleged that Bank of America hid Merrill’s exploding losses from shareholders, who had to vote to approve the transaction, which was cooked up the same weekend that Lehman Brothers collapsed.
Lewis might experience some irritation writing that $10 million check, but it isn’t likely to last long: When he announced his resignation in September 2009, he was due to receive pension benefits of $53 million, according to the New York Times, as well as $81 million in stock.