The Justice Department is close to settling with Bank of America over the subprime mortgage debacle for about $17 billion, and could announce the deal as soon as this week.
The DOJ has tentatively accepted the deal, under which $9 billion would be paid to the US Treasury and to states and other local jurisdictions, with the rest going to consumer relief, a person familiar with the negotiations told The Post on Wednesday.
Brian Moynihan, CEO of the Charlotte, NC, bank, reportedly had been unwilling for months to meet Attorney General Eric Holder’s demand for $17 billion — sticking with BofA’s position that the payout should be more in the $13 billion range, what JPMorgan Chase paid in November to settle a probe into similar matters.
The impasse broke last week, after Judge Jed Rakoff fined BofA $1.3 billion for soured mortgages sold by Countrywide Financial, which the bank bought in 2008, the person said.
The bank had been trying to argue that it shouldn’t be held responsible for Countrywide’s behavior. But Rakoff’s decision made that legal argument seem like it was less likely to hold sway among DOJ prosecutors, the person said.
Moynihan called Holder on July 31 to tell him that he was willing to pay more to settle the case.
The Rakoff decision — plus Holder’s threat that the DOJ was ready to file a court case over the matter if Moynihan didn’t budge — broke the stalemate, according to a report.
The deal isn’t final and could still collapse, two sources told The Post.
The Wall Street Journal, which first reported the impending settlement, told of the Holder threat.
The fine is about one-and-a-half times the bank’s 2013 profit of $11.4 billion.
While it would be the largest fine ever paid to financial regulators in dollar terms, it is comparable to other fines levied against the largest banks by the US government.
BNP Paribas’ $9 billion fine for helping terrorist states launder money was equal to 140 percent of 2013 profits.
The part of the fine for consumer relief would, in part, go to help underwater homeowners pay off their debt.
BofA has paid over $60 billion in fines related to subprime mortgages created and sold by the bank, Countrywide and the brokerage Merrill Lynch, which it also bought in the midst of the financial crisis.
Those three entities are responsible for $245 billion in loans that have defaulted or become delinquent. While about 75 percent of those were from Countrywide, about 4 percent of the rest came from pre-merger BofA.
Lawrence Grayson, a spokesman for BofA, declined to comment. Messages left with the DOJ spokespeople weren’t returned.