FDIC Objects To Bank Of America's $8.5 Billion Mortgage Settlement
In June, a director at Bank of America described the company's 2008 acquisition of Countrywide Financial -- the mortgage lender whose holdings included thousands of toxic assets -- as "the worst deal we ever made."
On Monday, Bank of America hit the latest in a long series of roadblocks in trying to put that deal behind itself. The Federal Deposit Insurance Corporation, the government agency responsible for taking over failed banks, filed an objection with the State Supreme Court of New York regarding an $8.5 billion settlement BofA agreed to pay earlier this summer as a partial result of its Countrywide portfolio collapsing, Bloomberg Businessweek reports.
Bank of America announced in June that it would pay the settlement to a group of investors who claim they lost money when BofA mortgages fell through. But a number of parties have come forward to object to the terms of that settlement, according to Forbes -- including states and investors involved in the claim -- saying they lack sufficient information to tell if the settlement is appropriate
On Monday, the FDIC became the latest party to object -- not in its capacity as a regulator, but rather as one of the investors. The FDIC is responsible for some of the failed securities at the heart of the case, since it took control of a number of collapsing banks during the financial crisis.
"The reason for the FDIC's objection is that it does not have enough information to evaluate the Settlement," the corporation said in a statement.
The FDIC filing is only the latest headache for Bank of America, which recently announced it would be cutting 3,500 jobs and has had to fend off questions about whether it has enough capital to cover its exposure to failed mortgages. Last week, the bank got a $5 billion vote of confidence from Berkshire Hathaway's Warren Buffett, but that did not dispel larger questions about BofA's health and the possible risks posed to its 58 million customers.
Markets had already closed by the time news of the FDIC objection circulated on Monday.
A spokesman for Bank of America said there are "compelling reasons" why the settlement should meet with judicial approval, according to Dow Jones Newswires.