Attorney General Eric Schneiderman today announced a $16.65 billion settlement with Bank of America (BAC) for its activity leading up to the 2008 financial crisis–marking the largest such settlement of all time and, according to Mr. Schneiderman, leaving the financial institution almost entirely paid up in all outstanding public suits against it.
Under the terms of the settlement between Bank of America and a federal task force Mr. Schneiderman co-chairs, the lender will dole out $300 million in cash and $500 million in assorted relief efforts to New York State alone, with the rest getting spread across the country in the form of both hard currency and assistance to renters and homeowners.
Mr. Schneiderman blasted the bank and its affiliates Merrill Lynch and Countrywide for misrepresenting mortgages both to consumers and investors, which he said led directly to last decade’s economic meltdown.
“They said ‘we know these were problem loans, but we’re putting them in securities anyway,'” said Mr. Schneiderman, co-leader of President Barack Obama’s working group pursuing financial institutions that sold residential mortgage-backed securities. “Anyone in a position of power knew or should have known what they were doing.”
The settlement dwarfs even the working group’s $13 billion settlement against J.P. Morgan last year. Mr. Schneiderman said that the pay-out almost completely clears Bank of America and its subsidiaries of all lawsuits against it by the states and the federal government.
“It is fair to say, with this settlement, Bank of America has put the bulk of claims over mortgage-backed securities, residential mortgage backed securities, behind it,” said Mr. Schneiderman.
The homeowner relief from Bank of America will target low-income communities where many residents have mortgages insured by the Federal Housing Administration, and includes plans to turn over vacant foreclosed properties to land banks and municipalities, and to chip in toward their repair or demolition. It also includes $125 million in credits to create and preserve affordable rental properties in New York State–which brought applause from Mayor Bill de Blasio, who has an ambitious plan to build and maintain 200,000 units of below-market housing citywide.
“We’re in the midst of an affordability crisis hitting New Yorkers,” Mr. de Blasio said in a statement. “We are deeply grateful to the attorney general for securing a historic settlement that will make a real difference for families struggling across the city and state. We are pushing hard to build and preserve an unprecedented amount of affordable housing to meet this crisis.”
While there is help for homeowners, Mr. Schneiderman said the settlement contains no relief for investors. The pol explained this was because those claims are being settled privately.
Mr. Schneiderman’s Republican challenger, John Cahill–former chief-of-staff to Gov. George Pataki–argued that the settlement did not go far enough, calling for the attorney general to fulfill his campaign promise of prosecuting and imprisoning Wall Street bankers.
“Today marks another in a long series of financial settlements with big banks that, through their actions, contributed to the economic crisis in 2008. Yet here we are, over five years later, and not one company executive has been named guilty of fraud or been convicted criminally. Not one individual has gone to jail,” Mr. Cahill said in a statement.
Updated to include comment from Mr. Cahill.