NEW YORK: Bank of America (BoA) put $13bn on the table in negotiations with US authorities over a mortgage-linked securities settlement, although negotiations are far from over, a source familiar with the matter said.
Bank of America, the second largest US bank in terms of assets, had been in talks for several months with the Justice Department when it made the offer Tuesday during a meeting with federal prosecutors, the source said, confirming reports in The Wall Street Journal. The Department of Justice, however, has demanded $17bn from the bank, US media reported.
Negotiations between the two had become deadlocked in mid-June, but the resumption of talks were not an indication that they were headed towards a settlement, the source said.
Bank of America has expressed its desire to pay for large parts of the settlement under structuring that would allow for payment of damages to clients in different forms, such as consumer relief.
The Department of Justice alleges that Bank of America profited from mortgage-linked securities that sank in value after the housing bust, generating billions of dollars in losses for investors who bought them. These toxic loans were related to complex financial products. The penalty would be equal in value to a record $13 billion settlement between the Justice Department and JPMorgan Chase concerning high-risk mortgage securities it sold ahead of the housing bust. Earlier, Bank of America reported a 43 percent drop in second-quarter earnings weighed down by heavy litigation costs. AFP