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Devlin Barrett, Dan Fitzpatrick, and Christina Rexrode of the Wall Street Journal reveal BofA in Talks to Pay At Least $12 Billion to Settle Probes, with $5 billion to go to consumers.


Bank of America Corp. BAC +1.45%  is in talks to pay at least $12 billion to settle civil probes by the Justice Department and a number of states into the bank's alleged handling of shoddy mortgages, an amount that could raise the government tab for the bank's precrisis conduct to more than $18 billion, according to people familiar with the negotiations.

At least $5 billion of that amount is expected to go toward consumer relief—consisting of help for homeowners in reducing principal amounts, reducing monthly payments and paying for blight removal in struggling neighborhoods, these people said. As the negotiations with the government heat up, the bank is being pressed to pay billions more than the $12 billion it is offering.

The North Carolina bank's total tab to end government probes and lawsuits related to its conduct in the runup to the financial crisis is increasingly likely to surpass the record $13 billion that J.P. Morgan Chase JPM +1.71%  & Co. paid last year to settle similar allegations, these people said. Bank of America has already struck a $6 billion settlement, by the Justice Department's measure, with the Federal Housing Finance Agency.

Attorney General Eric Holder's Department of Justice has taken action against a number of large global banks, and has said that "before he leaves his job, he wants to resolve a number of high-profile probes of financial firms' conduct leading up to the economic collapse."  

As Robert Reich just wrote yesterday, unless the CEOs and other top financial officers face personal criminal charges this mean little to them. This article ends with the the Bank of America CEO saying he's not selling his stock and that this will stimulate the economy - in other words laughing this off.

Here's an example of how sad some of the largest shareholders of Bank America are:

Bill Smead, chief investment officer of Smead Capital Management in Seattle, which owns 2,625,338 Bank of America shares, said "it would only make sense that it would rival or exceed J.P. Morgan's." ... Mr. Smead is also sanguine about the firm.

"The bad news is all six to eight years old, and the good news is all in the future," he said. "As a long-term stockholder, that's what you want. You want the bad news to be backward-looking and the good news to be forward-looking."

Mr. Smead isn't planning on selling any of the stock his firm owns as a result of the negotiations and said he thought the $5 billion or more that could go toward consumer relief would help stimulate the economy.

Meanwhile Eric Holder's DOJ has 160,000 mostly non-violent drug offenders in federal prisons, which more being incarcerated every day, some of possession of marijuana on sentences of 5 to 10 years.

Great job Eric.

4:17 AM PT: Sari Horwitz Bank of America said to be negotiating at least $12 billion fine to settle probes of home loans

Morgan and others are accused of selling shoddy home loans to unqualified consumers, packaging those mortgages into securities — allegedly knowing they would eventually go sour — and selling them to investors around the world.

In 2008, the consequences of the loose mortgage practices began to play out. The losses on mortgage investments sparked bank runs. Lending all but stopped. Stock markets plunged, and home values plummeted across the country.

So far, federal officials generally have preferred to pursue massive civil fines, using securities statutes, rather than pursue criminal cases against financial firms. As a result, banks have struggled to restore their reputation since the financial crisis and have had to spend tens of billions in legal fees to fend off federal and state probes, but almost no senior executives have faced the possibility of jail time.

Still, a $12 billion fine for Bank of America would be hefty for a bank that earned more than $10 billion last year

In retrospect we can see that those responsible for these massive financial crimes walked away scott free, in fact are richer than ever - laughing all the way to the bank.

4:34 AM PT: As we think about Attorney General Eric Holder's tenure do we not have to judge him as nearly complete failure? His Department of Justice as incarcerated hundreds of thousands of of poor, middle-class, African American and Hispanics for minor non-violent drug offenses, such as possession of marijuana, yet not a single leading banking or financial executive after the largest financial collapse since the Great Depression.

We are going to cringe when President Obama says "great job Eric," when he resigns as we imagine the thousands of criminal bankers sipping tea in their mansions laughing, while 160,000 drug offenders rot in prison unable to see their children because of non-violent drug offenders.

He seems to have meant well, but has been largely a complete failure in accomplishing any progressive goals so far. He is still working on a minor sentencing reform bill, that is a small step in the right direction - which will take about 11 months off of the half of drug offenders, most who shouldn't be in prison in the first place. But, only the half that did not get mandatory of absolute sentences.

Although, it is not clear even this minor sentencing reform bill will pass, in part because his own DEA Director, Michele Leonhart, a holdover from the Bush administration renominated by President Obama has testified against it. What a tragic waste of six years of what should have been a premier example of how different Democrats would be from Republicans.

To add insult to injury, we have two and half years of Democratic control of the DOJ but no evidence of having learned anything from this failure, and no plans to do anything differently, and no calls from either Holder or Obama for Leonhart's resignation.

Last night I wrote up Robert Reich's excellent opinion piece that is more poignant today than ever.

The way to stop corporate lawbreaking is to prosecute the people who break the law says Robert Reich

Below I replicate it.

 photo RobertReich_zpsb586adbc.jpg

Robert Reich, Professor of Public Policy, at the University of California at Berkeley, calls for holding more corporate executive lawbreakers criminally liable for corporate crimes in The Way to Stop Corporate Lawbreaking Is to Prosecute the People Who Break the Law

After reviewing allegations that GM, Credit Suisse, and Arthur Anderson broke the laws, receiving relatively trivial fines, which they consider part of the cost of doing business, Robert Reich notes that no executives have been charged with any crimes and suggests that until we start putting senior corporate executives in jail, we will see no diminution of corporate wrong doing.

For a decade GM had been receiving complaints about the ignition switch but chose to do nothing. Who was at fault? Look toward the top. David Friedman, acting head of the National Highway Traffic Safety Administration, says those aware of the problem had ranged from engineers "all the way up through executives." ...

Yet in neither of these cases have any executives been charged with violating the law. No top guns are going to jail. No one is even being fired.

Reich obviously wrote this prior to the late afternoon announcement of executives at GM losing their jobs. But, this announcement does not change the validity of his basic point. Relatively puny corporate fines are not a sufficient deterrent. The $35 million fine of GM is "peanuts" to a hundred-billion-dollar corporation.  

Reich also thinks it is absurd to have corporations pleading guilty to criminal conduct, as Credit Suisse did, it means nothing. He notes that in the rare case of corporations being "executed" as was the case with Arthur Andersen, the wrong people paid the price - the 28,000 employees who lost their jobs had nothing to do with the crimes. The guilty senior partners skulked off to work in other accounting or consulting firms.

The truth is, corporations aren't people -- despite what the Supreme Court says. Corporations don't break laws; specific people do. In the cases of GM and Credit Suisse, the evidence points to executives at or near the top.

Conservatives are fond of talking about personal responsibility. But when it comes to white-collar crime, I haven't heard them demand that individuals be prosecuted.

Yet the only way to deter giant corporations from harming the public is to go after people who cause the harm.

I agree.

Some of Robert Reich's best writing has been on income inequality which has been one of his top issues for as long as I can remember. He apparently has a movie coming out about it in September, although this may be a spoof, joking that the topic of income  inequality could make it to a movie coming to a theater near you in September. Maybe you can help me figure it out. Either way it seems like a clever way to call attention to a vital issue that gets way too little attention for its importance.  


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Comment Preferences

  •  Tip Jar (9+ / 0-)

    Humor Alert! No statement from this UID is intended to be true, including this one. Intended for recreational purposes only. Unauthorized interpretations may lead to unexpected results. This waiver void where prohibited. Artistic License - 420420

    by HoundDog on Fri Jun 06, 2014 at 04:04:20 AM PDT

  •  I wonder if they admitted guilt. (5+ / 0-)

    I'm not paranoid or anything. Everyone just thinks I am.

    by Jim Riggs on Fri Jun 06, 2014 at 04:26:08 AM PDT

  •  Nobody going to jail (2+ / 0-)
    Recommended by:
    Gooserock, HoundDog

    though. Here in Florida the housing disaster is still unfolding. A fine is nice but more than likely will be a tax writeoff. So mostly symbolic. It certainly won't help the people whose lives they ruined.

    ~War is Peace~Freedom is Slavery~Ignorance is Strength~ George Orwell "1984"

    by Kristina40 on Fri Jun 06, 2014 at 04:46:19 AM PDT

    •  Some may say "hey, look, we imposed a $12 billion (0+ / 0-)

      fine." This is just barely more than a year of earnings and it is being paid by the stockholders.

      The banking execs who made scandalous bonuses from 2000 to 2008 have not had to return those. Most have been promoted and are still receiving bonuses.

      We've trained the top several thousand of the up and coming leaders of America's financial institutions that crime pays.

      And, we've now promoted these criminals into the leadership positions of our financial institutions for the next 10 to 20 years.

      If anyone had been honest, they could not have prospered while he criminals were receiving record bonuses, and being promoted over them. The more talented of any highly ethical financial talent most likely fled the industry, or are now bitter underlings working under the criminal bosses.

      This will be remembered as Eric Holder's legacy. Other than the 160,000 federal prisoners doing tragically long sentences for non-violent drug offenses.

      "Nice job Eric."

      Humor Alert! No statement from this UID is intended to be true, including this one. Intended for recreational purposes only. Unauthorized interpretations may lead to unexpected results. This waiver void where prohibited. Artistic License - 420420

      by HoundDog on Fri Jun 06, 2014 at 06:09:58 AM PDT

      [ Parent ]

  •  marijuana is still illegal (1+ / 0-)
    Recommended by:
    HoundDog

    and lots of states -- roughly half -- have it as completely illegal.  so it's really not appropriate to blame holder for states following current federal law.  

    and how many of those over 100,000 in prison were there before obama took office?

    Please don't dominate the rap, Jack, if you got nothin' new to say - Grateful Dead

    by Cedwyn on Fri Jun 06, 2014 at 05:03:36 AM PDT

    •  Some, do you really want to quibble over if he (0+ / 0-)

      is "only" responsible for 60,000, or 30,000.

      Hey, why don't we give him a "bonus credit" of 10,000 who where nasty bastards who may have been latently violent but just didn't get caught with guns - but drug dealers who we would all agree should be in jail.

      So would you feel better if we said he was only directly responsible for putting 25,000 to 50,000 working class minor drug offenders in jail, while putting zero banking industry execs in jail?

      Oh, we could quibble there too if we want to bring up Bernie Maddoff, or however you spell the pyramid scheme hoodlum was. He wasn't a financial a CEO of a major banking or financial institution like J.P. Morgan, BoA, but he did run an investment advisory firm and is jail. So there is one white collar criminal in jail.

      But, I accept you point about the 160,000 federal prisoners, which is number I remember from writing a post praising him and Obama for trying to get this sentence reform past, despite the objections and chastising they have received from DEA Director Michele Leonhart, and her GOP backer in Congress.

      We could do a rough estimate if we knew the average prison sentence.

      If we guess 10 years as the "average dwell time" and Holders been there 6, then so far he will only have been responsible for 60% of them. But headed towards 80% for full term. So only about 100,000.

      I saw an interview with one of them on CNN, that brought me to tears Cedwyn. He was a 35 year old black man, father of two young children, he was the only provider for his wife and kids.

      You could tell this guy was a good guy. He was stopped and frisked in one of this "walking while black" operations, and police found some crumbs of an old joint in his pocket, that amounted to less than a gram of marijuana. But because he had a previous possession charge when he had been a teenager, the mandatory sentence was 10 years.

      He was crying about not seeing his kids grow up, and they are on welfare now. He had a good job, and was being a good father.

      Maybe not smart enough in doing risk assessment calculations that there bankers had PhDs  in math to calculate how pull tens of thousands of dollars of home equity value out of.

      Those real criminals are walking free. How many fewer than 100,000 just in federal prisons would we have to get to before you felt good about it.

      And, Cedwyn, I have a lot of respect for you personally, we've both been here a long time and you know how hard I've worked to get Obama elected several times and in primaries.

      I have railed against Republicans for just short of 10 years here.

      How does someone like me face my sons friends who I promised Democrats would be better than Republicans.

      Many of them do not understand the ins and outs of federal budgets, fiscal policy, chained CPI, etc. But they understand seeing DEA agents harassing state legal entrepreneurs in medical marijuana dispensaries, who are their role models.

      Do you know how many young people aspire to having their own "marijuana business." Tragically sad, maybe almost as bad as the 30 million kids whose career plan is to become NBA or NFL multi-millionaires.

      Nearly every call I have with my 23 year old son, who is a strong Democrat he is asking me what he should tell his friends who are becoming Libertarians, because Rand Paul got a standing ovation at his college for saying that our nation's drug laws are stupid, authoritarian, and that Democrats are just as bad or worse than many mainstream Republicans on this issue.

      Turning a generation that should be thinking,"hey Democrats and strong government are allowing me to have health care and stay on their parents health pan until they are 26.

      Instead they are quoting Rand saying "keep fascist government DEA agents out of our state, and to hell with Eric Holder and the Democratic Party."

      What am I supposed to tell them Cedwyn? I've been doing my best for the last six years, but I'm losing this battle big time.

      Meanwhile I've been trying to write pep rally posts envisioning us winning back the House by overcoming our usual Democratic big falloff, of young and minority voters in some kind of wonderful surge of women, the GLBT, young, and AA voters getting fired up to defy our history.

      It ain't gonna happen at this rate. I'm trying to turn this around, not trash ourselves. It may be too late for 2014, but we haven't lost 2016 yet.

      Let's try to turn this disaster around. The first step is facing the reality of what we've done, and what we are doing, and what we are currently, planning to continue to do.

      Humor Alert! No statement from this UID is intended to be true, including this one. Intended for recreational purposes only. Unauthorized interpretations may lead to unexpected results. This waiver void where prohibited. Artistic License - 420420

      by HoundDog on Fri Jun 06, 2014 at 06:48:17 AM PDT

      [ Parent ]

    •  I'm not talking about the 775,000/year state (0+ / 0-)

      marijuana arrests per year. Or maybe that includes feds. So the state share may "only" be 700,000. I'm just talking about federal DOJ arrests that Holder and the DEA are responsible for.

      Humor Alert! No statement from this UID is intended to be true, including this one. Intended for recreational purposes only. Unauthorized interpretations may lead to unexpected results. This waiver void where prohibited. Artistic License - 420420

      by HoundDog on Fri Jun 06, 2014 at 06:50:59 AM PDT

      [ Parent ]

  •  Holder and Obama have failed justice. (0+ / 0-)

    No Justice Department has been as politicized as Obama's. From ignoring ware crimes and torture, preventing investigations of war profiteering and outright fraud of Haliburton, Blackwater, etc., protecting bank executives, their pay and their bonuses, expanding domestic surveillance and crackdowns on lawful protestors, prosecutions of whistleblowers, his war on medical marijuana, etc.

    No Attorney General has done more to prevent the laws from being faithfully executed than Holder. And Obama has been with every step.

  •  The bulk of these bad loans were from Countrywide (2+ / 0-)
    Recommended by:
    VClib, virginislandsguy

    no Bank of America exec is responsible for them.

    "The way to see by faith is to shut the eye of reason." - Thomas Paine

    by shrike on Fri Jun 06, 2014 at 06:37:31 AM PDT

    •  I'd be happy if executives from Countrywide (0+ / 0-)

      went to jail. They are Bank of America execs now.

      Drawing bonuses and being promoted.  

      Humor Alert! No statement from this UID is intended to be true, including this one. Intended for recreational purposes only. Unauthorized interpretations may lead to unexpected results. This waiver void where prohibited. Artistic License - 420420

      by HoundDog on Fri Jun 06, 2014 at 06:55:06 AM PDT

      [ Parent ]

      •  I think BofA cleaned the house of the Countrywide (2+ / 0-)
        Recommended by:
        JML9999, virginislandsguy

        senior management. I don't think any of them are now at BofA.

        "let's talk about that" uid 92953

        by VClib on Fri Jun 06, 2014 at 07:21:30 AM PDT

        [ Parent ]

        •  They certainly didn't go to jail. It would be (2+ / 0-)
          Recommended by:
          VClib, JML9999

          interesting to see where they are now. I haven't seen any articles saying that BofA got rid of them, but it wouldn't be surprising. I know people in the BofA mortgage division and they've been slowly downsizing it for a while.

          Humor Alert! No statement from this UID is intended to be true, including this one. Intended for recreational purposes only. Unauthorized interpretations may lead to unexpected results. This waiver void where prohibited. Artistic License - 420420

          by HoundDog on Fri Jun 06, 2014 at 07:40:28 AM PDT

          [ Parent ]

        •  Read Crash of the Titans if you haven't (0+ / 0-)

          It describes a BofA culture that causes everyone to hire somebody dumber than them.

          I want 1 less Tiny Coffin, Why Don't You? Support The President's Gun Violence Plan.

          by JML9999 on Fri Jun 06, 2014 at 08:20:08 AM PDT

          [ Parent ]

    •  shrike - I bet BofA regrets that acquisition (2+ / 0-)
      Recommended by:
      HoundDog, JML9999

      As you note nearly all the issues are with the Countrywide mortgage portfolio.

      "let's talk about that" uid 92953

      by VClib on Fri Jun 06, 2014 at 07:20:19 AM PDT

      [ Parent ]

      •  I agree with on this one VClib. Although I guess (3+ / 0-)
        Recommended by:
        VClib, JML9999, nextstep

        it depends on the price they got it for. When Countrywide was going under and the government needed someone to take it over, BofA was one of the few large enough.

        The feds often write down the assets enough to make it profitable enough for bigger banks to take them over, and take the risk, so depositors, and debtors have continuity of operations and confidence in the banking system is restored.

        Humor Alert! No statement from this UID is intended to be true, including this one. Intended for recreational purposes only. Unauthorized interpretations may lead to unexpected results. This waiver void where prohibited. Artistic License - 420420

        by HoundDog on Fri Jun 06, 2014 at 07:44:25 AM PDT

        [ Parent ]

      •  BoA was strong armed into buying Countrywide (0+ / 0-)

        and BoA was not given the opportunity to review the business and books of Countrywide.

        It is terrible policy to fine BoA for what Countrywide did before the merger.  Next time the government needs to get a buyer for a troubled business, I will not be surprised if a deal is virtually impossible.

        The most important way to protect the environment is not to have more than one child.

        by nextstep on Fri Jun 06, 2014 at 10:00:36 AM PDT

        [ Parent ]

  •  Collateral damage is PHH corp (0+ / 0-)

    http://www.nationalmortgagenews.com/...

    Merrill Lynch Renews Private Label Deal with PHH Mortgage

    Merrill Lynch Credit Corp. has renewed its private label production and servicing agreement with PHH Mortgage, Mt. Laurel, N.J., according to a new filing with the Securities and Exchange Commission.

    The private label relationship – where PHH funds and originates residential loans for MLCC – has been in place since 1997, said a PHH spokesman.

    The relationship has continued although Merrill is now owned by Bank of America, the nation's second ranked funder of home mortgages and largest servicer.

    The PHH spokesman declined to provide any details on the private label agreement between the two parties. (PHH is one of the largest private label lender/servicers in the U.S. A few years back the company was being eyed for a purchase by Countrywide Financial Corp.)

    http://corporate.phh.com/...=
    Five Leading Financial Institutions Select PHH as Mortgage Origination and Servicing Partner;
    Adds More Than 25,000 Financial Advisors to Sourcing Footprint

    MT. LAUREL, N.J.--(BUSINESS WIRE)-- PHH Mortgage Corporation (“PHH Mortgage” or the “Company”), a subsidiary of PHH Corporation (NYSE:PHH - News), today announced that it has agreed to provide mortgage services to five new financial institution clients through its Private Label Solutions (PLS) business.

    The Company reported that, in the second and third quarters of 2011, it signed agreements with these new PLS clients to provide end-to-end mortgage process management services to loan officers, financial advisors and their customers. The Company also said it was unable to reach an agreement to renew an existing relationship with Charles Schwab Bank, and indicated that it expects the addition of its new PLS clients to more than offset any resulting lost income from Charles Schwab Bank.

    Luke Hayden, president of PHH Mortgage, commented, “PHH Mortgage is the preferred mortgage solution for the nation’s leading financial institutions, large regional banks, community banks, credit unions and real estate companies, and we are pleased to welcome these five new PLS clients. As a result of these signings, we will expand our nationwide footprint for sourcing mortgage originations, with a net gain of more than 25,000 financial advisors affiliated with our PLS clients, further strengthening our position as one of the leading knowledge-based mortgage originators and servicers in the United States.”

    PHH Mortgage provides end-to-end mortgage process solutions for its client partners, from origination to loan processing, underwriting and servicing, allowing financial institutions to offer mortgages under their own brand names while reducing the operational costs and risk of their mortgage businesses. The company’s PLS resources consist of a broad product menu, experienced regulatory compliance staff, innovative technology and an award-winning loan servicing platform; existing clients include leading financial institutions such as First Tennessee Bank, Key Bank, Merrill Lynch and UBS.

    I want 1 less Tiny Coffin, Why Don't You? Support The President's Gun Violence Plan.

    by JML9999 on Fri Jun 06, 2014 at 08:17:00 AM PDT

  •  A drop in the bucket that they will quickly (0+ / 0-)

    write off on their taxes.....business as usual....

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