Bank of America still Paying
Nearly three years after the economic crisis of 2008, Bank of America is still plagued with the aftermath of issuing risky mortgage securities to investors. That year, former chief executive Kenneth D. Lewis acquired Countrywide Financial Corp. for the price of $2.5 billion. Despite its state of near bankruptcy it was expected to be replete with opportunity and dreams of dramatically enhancing the bank’s profitability. Now, after Bank of America’s recent announcement that it will take a loss of $20.6 billion in pretax charges for mortgage issues, after already swallowing $15.9 billion in mortgage losses since 2008, the deal is revealing itself to be one of the worst in history. Of these losses, billions are directly connected with angry investors demanding that Bank of America buy back the loans Countrywide mishandled.
The bank has paid three hefty settlements in just the past six months, the most recent of which left Bank of America dishing out $8.5 billion to investors claiming they were sold bonds based on below average home mortgages. While this payout will quiet its 22 investor-recipients, the bank continues to fight other investment groups seeking similar outcomes. Lawsuits remain in the balance from the Federal Home Loan Bank of Boston, Syncora Holdings and Municipal Bond Insurance Association (MBIA).
Since the bank’s announcement of its intent to acquire Countrywide in January 2008, Bank of America’s stock price has plummeted more than 70%. With its shareholder value turning into a permanent forfeiture and future losses certain to befall the banking giant, last week’s settlement can come as only a minor relief from this three year battle.