Bank of America (BAC) Makes Whopping Mortgage Settlement

Aug 21, 2014 9:01am

Morning Money Memo:

Today’s Bank of America settlement with the federal government is a record. The nearly $17 billion deal resolves an investigation into allegations the bank misled purchasers of mortgage-backed securities before the 2008 financial crisis. The settlement is the largest ever reached between the government and a U.S. company.

Until now the biggest bank deal involved JPMorgan Chase, which agreed to pay $13 billion for its role in selling flawed mortgage investments. Bank of America is expected to pay $9.65 billion in cash and provide consumer relief valued at $7 billion.

The deal was worked out over the past few months and involved negotiations between Attorney General Eric Holder and bank CEO Brian Moynihan. The government’s settlement with the banks has many critics. Consumer groups say the Obama administration has been slow to go after the banks for wrongdoing and say no senior executive has been charged with wrong doing.

But some financial industry experts say the huge penalties will make banks more reluctant to lend money.

Federal prosecutors in Los Angeles are preparing a civil lawsuit against Angelo Mozilo, co-founder of Countryside Financial, which was purchased by Bank of America in 2008.

Customers of The UPS Store may have had their credit and debit card information exposed by a computer virus.

UPS says this involves the names, card numbers and postal and email addresses from about 100,000 transactions between Jan. 20 and Aug. 11. Spokeswoman Chelsea Lee says the company isn’t aware of any fraud related to the attack.

The stock market rose for a third straight day on light volume. Futures are up slightly this morning. The S&P 500 rose 5 points and is less than 2 points away from its late-July record close of 1,987.

Another troubled retailer is reporting a big loss. Sears shares fell more than 5 percent after the company announced it lost $573 million during its latest quarter, compared with a loss of $194 million a year earlier.

The company, which also runs Kmart stores, is still working to turn itself around, with efforts that include lowering costs, investing in its loyalty program and improving prices and promotions. Sales declined 10 percent to $8 billion from $8.87 billion.

Richard Davies Business Correspondent ABC News Radio abcnews.com Twitter: daviesnow 212-456-5100

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