The Bank of America deal has been telegraphed for weeks now.
And it didn’t take long for the critics to rip it as soon as it was unveiled this morning.
Attorney General Eric Holder and Associate Attorney General Tony West and a gaggle of other law enforcement officials announced the $16.65 billion settlement with Bank of America – what Holder called “the largest civil settlement with a single entity in American history” — to resolve federal and state claims against Bank of America and its former and current subsidiaries, including Countrywide Financial Corporation and Merrill Lynch.
The bank will pay $5 billion penalty under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) – the largest FIRREA penalty ever – and provide billions of dollars of relief to struggling homeowners, including funds that will help defray tax liability as a result of mortgage modification, forbearance or forgiveness.
Holder said that the settlement does not release individuals from civil charges, nor does it absolve Bank of America, its current or former subsidiaries and affiliates or any individuals from potential criminal prosecution.
Not a non prosecution agreement. But no criminal prosecution nonetheless.
“This historic resolution — the largest such settlement on record — goes far beyond ‘the cost of doing business,’” Holder said. “Under the terms of this settlement, the bank has agreed to pay $7 billion in relief to struggling homeowners, borrowers and communities affected by the bank’s conduct. This is appropriate given the size and scope of the wrongdoing at issue.”
“At nearly $17 billion, today’s resolution with Bank of America is the largest the department has ever reached with a single entity in American history,” said West. “But the significance of this settlement lies not just in its size — this agreement is notable because it achieves real accountability for the American people and helps to rectify the harm caused by Bank of America’s conduct through a $7 billion consumer relief package that could benefit hundreds of thousands of Americans still struggling to pull themselves out from under the weight of the financial crisis.”
All the talk of the size of the settlement didn’t impress Holder’s critics.
Dennis Kelleher of Better Markets said that the Bank of America deal was “slightly better” than the deals the Department cut with the previous two big banks because it “provides additional information in the so-called ‘statement of facts,’ – which have not been admitted.”
“But it still conceals the key facts from the American people,” Kelleher said. “For example, how many tens of billions of dollars did Bank of America’s customers, clients, investors and others lose due to years of knowing, systemic fraud?”
“How much did Bank of America make from its illegal actions? How many Bank of America employees, supervisors and executives were involved in or aware of the fraudulent conduct? How many still work at the bank? How much of the tens of billions in bonuses paid to those individuals was the result of the illegal conduct? Without this key information it is impossible for anyone to intelligently scrutinize or evaluate the settlement or determine if Bank of America is being punished for its crimes.”
“As important, banks do not commit crimes; bankers do,” Kelleher said.
“Until those individuals, including executives, are held personally and meaningfully accountable, everyone should expect more crime from Wall Street.”
“The Department of Justice is allowing banks to use shareholders’ money that is tax deductible while concealing illegal conduct and individual involvement is not punishing or deterring crime. In fact, it rewards past crime and incentivizes future crimes. Trying to trick the American people into thinking they are tough on crime while Wall Street laughs all the way to the bank is not justice. It creates an indefensible double standard of justice: one for Wall Street and one for everyone else.”
“Tens of millions of American families have suffered through unemployment, lost health care, plummeting retirement accounts, vanished savings, foreclosures, underwater homes and, too often, the loss of faith in the American justice system and the American dream. Many are still suffering today from the economic wreckage inflicted on this country by Wall Street. They deserve better from their Department of Justice. That is why Better Markets is suing the Department of Justice to require an independent court review of such settlements. The American people deserve transparency, accountability and oversight.”
Rob Weissman, president of Public Citizen agreed.
“The public wants to know — will anyone go to jail for crashing the economy?” Weissman asked. “Will any executives or Wall Street goliaths be held criminally liable for their misdeeds? Sadly, shamefully, it appears the answer to these questions is no.”
Public Citizen’s Bart Naylor said that the settlement “thickens the list of private deals between government litigators and the largest financial institutions.”
“As Public Citizen’s recent report demonstrates, the Department of Justice has largely shied away from aggressively prosecuting Wall Street banks and opted instead for fines and settlements,” Naylor said. “Fair justice calls for transparent use of the courts where the public can understand the evidence and the adequacy of remedies. Bank of America managers are at the center of the mortgage fraud, but the Justice Department penalty will essentially fall on shareholders who certainly were not conspirators. The corrupt culture of Wall Street won’t be reformed until perpetrators are held accountable.”
“This looks like yet another massive omnibus civil settlement with a bank not filed in court and not subject to any judicial oversight,” said University of Virginia School of Law Professor Brandon Garrett.
The settlement was driven in part by four whistleblower lawsuits and might result in the largest whistleblower award to a single relator in the history of the False Claims Act.
The largest relator share to date is $95 million in the GlaxoSmithKline case.
According to Patrick Burns of Taxpayers Against Fraud, that case involved four whistleblowers cutting up a $1.5 billion civil settlement.
The Bank of America case involves four whistleblower lawsuits dividing a $5 billion civil settlement — with perhaps multiple whistleblowers in each case.
In cases of rampant fraud, like the Bank of America case, Burns wants executives excluded from the business.
Exclusion happens thousands of times a year — in defense procurement fraud cases, in health care fraud cases and in government contracting cases.
But it doesn’t happen when large corporations are involved.
“The big corporations pay the big money to avoid exclusion — they are paying money to avoid personal responsibility,” Burns said. “If the fraud is not caught, nameless faceless taxpayers pay. If the fraud is caught, nameless faceless shareholders pay.”
“But whatever the deal, it must not have any impact inside the building where the fraud was designed and managed,” Burns said.
Dean Starkman, author of The Watchdog That Didn’t Bark: The Financial Crisis and the Disappearance of Investigative Journalism, says that Wall Street should be thrilled with the Bank of America style multi-billion dollar settlements.
“It’s a disgrace that the Justice Department has failed to bring a single criminal charge against any Wall Street or mortgage executive of consequence for their roles in wrecking the economy, despite having managed to make arrests in the comparatively piddling schemes of Enron and the Savings & Loan flimflam,” Starkman wrote in the current issue of The New Republic.
‘Not only has the Department of Justicefailed to build any criminal cases for financial-crisis misdeeds, but it’s also now settling with these banks without even filing civil complaints,” Starkman wrote. “A complaint is the cornerstone of civil litigation, the foundation for even routine lawsuits. One of its primary benefits — and of adversarial legal proceedings generally—is that a complaint can bring huge amounts of previously undisclosed information into the public record. In these mortgage securities cases, the Justice Department had not only an obligation but an opportunity: to show the country what it found, to deter future misconduct, to complete the story of the financial crisis in humanizing, clarifying, searing detail. And to do all that, the department didn’t need to do anything special. Just what lawyers normally do. Instead, by imposing a fine without documenting the underlying abuses, the Justice Department has permitted the banks, for a price, to bury their sins.”