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.

Comments

[sskepticall]

02:44 PM on 10/07/2011

“”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."”

OK HP – tell us…..WHAT IS THE NAME OF THE DIRECTOR?????

Sheesh….I know that I am limited by how many words I can use…but my God…it appears that AOL is saving money by not hiring editors. Can’t you squeeze in a name?

If this is what journalism looks like please add to the story that my Uncle says that BofA “stinks as a financial giant.”

[Jester Strause]

12:31 PM on 08/31/2011

Police Investigation on RBS report PL1644 2011127229-1 in relation to Fraud of £ 32Bn of former RBS(RD Europe)BV credit facilitator Comfort Card between 1995 and 2008 and now under Santander Consumer Finance, more than 1.000.000 customers misled through mis-selling credit contracts without license for credit loans and reselling financial addresses for Mortgages and Insurances. Mr. Stephen Hester is aware of this and has no comment, contact is requested for the Agreement and Settlement, RBS and Banco Santander set aside £ 1.93 Bn for the first 3 Installments and 3 additional amounts for these transactions.

[dblohangel]

10:57 PM on 08/30/2011

Does anyone of you Bank Of the Universe fans happen to know if the "group of investors who claim they lost money when BofA mortgages fell through" is the other banking institutions...such as Chase, Bank of New York, Wells Fargo, Citi? The banks typically invest in other banks, that's why I ask. Your informative responses will be appreciated. ;=D

[tbryant80]

02:18 PM on 08/30/2011

The investment that Buffett made in BofA is as bad a move as BofA's purchase of Countrywide. The Oracle of Omaha had some bad juju on this one.

[xargaw]

12:51 PM on 08/30/2011

Good for the FDIC. This deal that the Admnistration is orchestrasting smells to high heaven. The state AGs don't like it either. The federal government gets a few bucks and everyone else is left holding the bag. As the New York AG stated before getting the boot from the oversight committee, there has not be a complete investigation yet and any deal is WAY premature. This deal is likely only a fraction of a fair settlement. It's past time for BofA to be getting all this preferential treatment when their business model appears to be to shaft everyone, everywhere, all the time.

[jimtodd]

01:53 PM on 08/30/2011

Thought you would like to know, this is a different settlement with a group of institutional investors, not the global multi-state settlement that Schneiderman is resisting. Your comment is still generally correct though.

[sskepticall]

02:46 PM on 10/07/2011

I'd like to see more jail time for the RICO activities of these banks leaders and their Board of Directors.

The Buck Stops There.

[SLIMJIM66]

11:45 AM on 08/30/2011

Let the healing of this nation begin,with the end of Bank Of America . Then prosecute for the destruction of millions of American lives over GREED .

[fozzi58]

12:55 PM on 08/30/2011

The company isn't the problem - the people running it are./ Killing off BoA will only hurt the little people - yet again.

We need to put a couple of these Banker CEOs and CFOs in prison. And not the country club federal prisons - the blue collar prisons where your run for your life. After 5 or 6 of these executive end up in prison, there will be a sharp drop in "fuzzy logic" banking.

[sskepticall]

03:03 PM on 10/07/2011

If the first commenter had the names of the executive offenders (see the story above, the board member isn't even worthy of being identified by HP) maybe he could have been more clear.

If you don't institute harm on the organization (prosecute the leaders, strip out the offending executives and wind down the company so that there isn’t that wholesale harm to lower level workers) then they are automatically TOO BIG TO FAIL. We can no longer support the current government approach to this type of malfeasance.

And–the stockholders have to have a voice to tell them to knock off their dirty deals if the stockholders start to risk losing their investment.

A friend suggested that for every hard core criminal that goes to prison that there be a lottery for the top 10 to get a chance to go to a country club prison. Whatever works at this point.

Do we even know what the country club prison interiors look like? I would love to know what their rooms look like and how much it costs to incarcerate them each day.

What's the saying..... Give a man a gun and he can rob a bank, give another man an education and he can steal the bank. There are far more victims from that inside job - and they should go to jail for a very, very long time.

White collar financial crimes are not properly prosecuted with long prison terms; they are the privileged and connected class.

[WillofthePeople]

11:41 AM on 08/30/2011

Bank of America must have bought Countrywide to gain control of the evidence... to launder and scrub.

How many millionaire politicians (Republicans & Democrats, including Tea Party members) are coddling and protecting the banks? ALL of them.

If YOU do NOT consent to our politicians betraying us, google RIGHTtoCONSENT.

[giwel7]

11:19 AM on 08/30/2011

also remember bank of america did not cooperate with a HUD investigation . refused to turn over documents and refused to let HUD interview employess. and so far they got away with that.

[giwel7]

11:17 AM on 08/30/2011

its amazing bank of america keeps trying to sell the excuse "its countrywides fault" the attorney genereral of calif in 2007 already was investigaing countrywide. in 2007 countrywide had already pulled out their full credit line. mozilo dumped all his stock and in 2008 bank of america thinks its a good idea to do a defacto merger with countrywide? ken lewis has been close to mozilo since 1969.
he knew- and moynihan as "chief councel" knew.

[giwel7]

11:14 AM on 08/30/2011

bank of america reports "compelling reasons" why they think the settlement should go thru.2 top reasons might be they dont want to give out any information and want to "settle" with no admission of guilt and of course the amount is not nearly what the damages are as to what the bank has done

[william 123]

10:29 AM on 08/30/2011

I am just speculating but I suspect the FDIC is an interested player and wants the facts before it OK's the deal BOA has agreed to. I suspect the FDIC invested and encouraged BOA to make the lousey investment to acquire Countrywide Financial. The FDIC often asks banks to acquire failing institutions to prevent market and depositor disruptions, and kicks in bucks to encourage the acquisition. In other words the FDIC could also be an interested investor and is just protecting its (our) interest as well. I applaud, if this is the case. After all, it's not government's obligation to help bail out at-risk investors, unless its in the interest of taxpayers and other institutional funders (member banks) of the FDIC.

[Joe Krumbach]

10:27 AM on 08/30/2011

Break up Bank of America, and have Brian Moynihan arrested for running a ponzi scheme, defrauding the United States Goverment, and crimes against humanity.

Put him in a cell next to Bernie Madoff and someday, Dick Cheney.

[HappyBalance]

10:22 AM on 08/30/2011

"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,"

Uh oh. Someone at the FDIC isn't toeing the party line. Obama will slap them down, just like he is trying to do with the New York Attorney General for having the audacity to actually stand for the people and not for Corporations and Big Banks.

Good for the FDIC.

[AbeMartin]

09:47 AM on 08/30/2011

"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."

I expect the FDIC and the Department of Justice to object that the amount of the settlement is far too high.  Probably a simple typographical error.  Instead of a $8.5 billion settlement; the FDIC will suggest it should be $8.5 million settlement.

[Oginikwe]

10:15 AM on 08/30/2011

Still too high: $8.50

[Shebagirl]

09:19 AM on 08/30/2011

"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.".

That's the crux of the matter isn't it - 'group of investors' and 'claim'. I would think that the Federal Government should have first dibs on any settlement funds before a select group of 'investors' gets one penny.