$2.43 bil. the cost of a legal settlement between Bank of America and shareholders source
This time the piper pays: A group of shareholders and investors alleged that Bank of America misled them in 2008 regarding the institutional health of Merrill Lynch, prior to its acquisition by BofA, hiding huge losses mounting on the floundering bank’s record. This is the largest class-action settlement to emerge from the financial crisis, and there’s a reason if companies seem so eager to settle – doing so can limit further action that might be taken by attorneys general, in this case New York AG Eric Schneiderman.
It is the worst deal in the history of American finance. Hands down.UNC-Charlotte finance professor Tony Plath • Discussing Bank of America’s buyout of Countrywide four years ago, which made the company one of the biggest mortgage lenders in the world just as the market was going bust. Gotta love the timing. The company has lost roughly $40 billion (and counting) on the deal, and its stock price, which once neared $40, closed at roughly $8 at the end of Friday trading. But on the other hand, perhaps it wasn’t all bad for the economy — see, the deal put Countrywide in the hands of another company which was slightly less likely to fail. While the deal was clearly a bad move for Bank of America, the economy might not have recovered as easily if Countrywide totally crashed and burned.
» In other words … If you take out the charge, their profits were nearly $5.5 billion this quarter. This total beat the street’s estimate by a wide margin — a reported profit of 31 cents per share, versus what investors thought would be a profit of 12 cents per share. As a result, the stock made a fairly big leap this morning, surging 6 percent in pre-market trading.
On behalf of American consumers, we’re concerned about Verizon’s actions and are looking into the matter.The FCC, in a statement saying they’ll look into Verizon’s controversial new $2 bill-pay convenience fee. 2011 has not been a good year for nickel-and-dimers — between Bank of America and Ticketmaster, “convenience charges” are starting to look like something consumers will not stand for, and will complain about loudly on the internet. On a side note, Change.org has had a bit of a banner year.
emptybrackets says: it seems a little disingenuous to me to call 335m “massive” considering the scale countrywide and boa operate on
» SFB says: Well, considering it’s the “largest residential fair-lending settlement in history,” as the source article puts it, there’s not another settlement of this type bigger than this one, so that’s why we called it a “massive” settlement. And let’s face it, $335 million is not something the average person has lying around. — Ernie @ SFB
» They allegedly steered minorities towards bad mortgages. The company, something of the focal point of the subprime housing scandal, now has to face the music. Bank of America, the parent of Countrywide Financial, had to settle claims from before it purchased the company, a four-year period during the housing boom when loans were handed out very easily. In the case of Countrywide, however, there is evidence that while white homeowners got offered normal mortgage, black or Latino homeowners of similar stature received a subprime mortgage instead, meaning that they were given higher interest rates and unfavorable terms for loans, making it easier to default. As part of the settlement with the Justice Department, the company denied the charges, while Bank of America distanced itself from the housing-boom-era actions
» The deluge of home foreclosures that the U.S. has suffered since the financial crisis has been a crippling blow to the general economy, land value rates in high-foreclosure areas, and most of all the families who’ve found themselves unceremoniously cast out. A notable amount of these foreclosures appear to have been fraudulently engineered, rife with examples of flat-out false documentation, as well as “robo-signing,” a practice in which foreclosure documents are fast-tracked with (in some cases) fraudulent signatures and without the signee ever having read them. This was the impetus for Massachusetts Attorney General Martha Coakley filing suit against five major banks — BofA, JPMorgan Chase, Wells Fargo, Citi, and Ally Financial.
» How they worked: These banks took advantage of a set of emergency loans from the Federal Reserve distributed between August 2007 and April 2010. Bloomberg Markets magazine did the math on the numbers and figured out that, by looking at the companies’ net interest margin, you could see how the companies took advantage of the below-market rates they got on the loans to earn a profit. The companies that scored the biggest paydays? Citigroup, which earned $1.8 billion, and Bank of America, which earned $1.5 billion.
» Nickel and diming: You may remember that last month, Bank of America indicated they were going to start charging a $5/month fee for all their banking customers with debit cards. The ostensible justification for this was new regulation imposed by the Dodd/Frank financial reform bill, which some banks warned would result in hidden fees moving out into the open. This upset a great deal of people, though (the massive profits BofA continues to reap in a bad economy does make it seem questionable whether these are fees of necessity), and now the fee plan has been eliminated. Other banks considered following suit, then backed down, leaving BofA out in the cold.
It may be too early now to talk about the Law of Unintended Consequences, but years from now, we may owe a debt to reforms like Dodd-Frank for finally weaning us off the physical wallet and encouraging us to experiment with the new technologies helping to create the Digital Wallet.The Washington Post’s Dominic Basulto • Arguing that Dodd-Frank’s side effects — such as Bank of America’s decision to start charging people for the right to use a debit card — will be great in the long run, because it will push consumers and businesses to stop relying on banks for these sorts of services, instead going for phone-based options, provided by companies such as Google or Square, instead. Basuito compares Bank of America’s controversial move to Netflix’s price-raising scheme, and suggests it will hurt them long-term. source (via • follow)