Bank of America Corp's 10 Biggest Legal Settlements Since 2008

Before you go, we thought you'd like these...
Before you go close icon

If you're a shareholder in Bank of America , then you've probably heard that the North Carolina-based lender is on the cusp of yet another multibillion-dollar legal settlement with the federal government.

This one involves an investigation by the Justice Department and several state attorneys general into how the bank -- and, more specifically, its ne'er-do-well subsidiary Countrywide Financial -- originated faulty mortgages that were then packaged into mortgage-backed securities and sold to institutional investors such as insurance companies, pension funds, and university endowments.


Bank of America is no stranger to complex legal disputes involving multiple adversaries. Since 2008, it has entered into global settlements on four separate occasions for a combined total of $31.6 billion in various types of relief (click here for a full list of Bank of America's settlements over the last six years). 

But even given this history, the latest deal could be historic. While Bank of America has offered to pay a staggering $12 billion to resolve the controversy, the government has threatened formal legal action unless the company raises its bid by another $5 billion.

That would put the total at $17 billion and make an analogous $13 billion deal between JPMorgan Chase  and the same government agencies seem cheap -- particularly so when you consider that Bank of America has already paid the Federal Housing Finance Administration $9.5 billion.

With this in mind, I thought it would be interesting to see how this would compare to Bank of America's previous large settlements. As you can see in the chart below, it would be without equal.

Given this list -- not to mention the 37 other notable settlements that Bank of America has entered into since the crisis -- it's easy for investors to become desensitized to yet another multibillion-dollar deal. 

However, I would caution you against this for two reasons.

First, every deal matters. Each dollar that is paid to a legal adversary is one that won't make its way to Bank of America's bottom line and thereby eventually to its shareholders via dividends or growth in book value.

The net result is that deals like this diminish the net present value of both the bank itself and each of its individual shares (click here for a division-by-division breakdown of Bank of America's value).

The second reason is all of these settlements are evidence of an organization willing to elevate revenue generation over risk management. This is a mortal sin in banking, and it's one that becomes ingrained in a lender's permanent culture.

The point here is that every settlement matters, and none as much as the massive one coming down the pike now.

These stocks beat the big banks
Here's your chance to pocket big dividends. Over time, dividends can make you significantly richer. And guess what? Bank of America is a big laggard when it comes to paying dividends. So instead of waiting for a cash windfall that may never come, check out these stocks that are paying big dividends to their investors RIGHT NOW. Click here for the exclusive free report.

The article Bank of America Corp's 10 Biggest Legal Settlements Since 2008 originally appeared on Fool.com.

John Maxfield has no position in any stocks mentioned. The Motley Fool recommends Bank of America. The Motley Fool owns shares of Bank of America and JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story

Want more news like this?

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

From Our Partners

A Special Ed Teacher Had All of Her Students in Her Wedding, and the Pictures are A Special Ed Teacher Had All of Her Students in Her Wedding, and the Pictures are
Guest Decides To Test The Hotel's Housekeeping - Then Returns To Find This On His Bed Guest Decides To Test The Hotel's Housekeeping - Then Returns To Find This On His Bed
Rescuer Sees Bumps All Over This Dog's Skin - Then X-Rays Reveal The Tragic Story Rescuer Sees Bumps All Over This Dog's Skin - Then X-Rays Reveal The Tragic Story