This morning, Bank of America posted better than expected earnings. While the results may have been positive, they also had to be adjusted for major litigation costs. Second-quarter profits fell 43 percent due to these legal charges.
On a call with analysts, Bank of America noted that they have resolved private legal matters with American International Group Inc (AIG) about the mortgage securities they sold leading up the housing crisis. Bank of America will pay $650 million to AIG.
As for their other legal matters, a Department of Justice investigation and settlement is still looming. On Tuesday, Bank of America met with the DOJ in Washington, where they attempted to negotiate a mortgage securities settlement. Bank of America's legal team requested the meeting. Though it was just after the announcement of a Citibank settlement for $7 billion, no progress was made on the Bank of America front.
Bank of America offered to pay $13 billion, which would be paid as cash and consumer relief, however the Department of Justice is seeking billions more. This brings us back to the Citibank deal, in which the bank initially offered $363 million when the Justice Department was seeking over $10 billion. Now, it looks like the government is pushing for a massive settlement, even larger than the $12 billion previously expected. If the settlement exceeds $13 billion, it will be the largest of its type to date.
On today's analyst call, Bank of America noted they had set aside $4 billion for litigation expenses, which they noted were for "previously disclosed legacy mortgage related matters." That $4 billion will go to pay AIG and these Department of Justice negotiations, but it's still far less than it seems they will need.
This article is from the archive of our partner The Wire.