By Peter Schroeder - 08/21/14 09:54 AM EDT
The Justice Department has reached a $16.6 billion settlement with Bank of America for its role in the financial crisis, the largest civil deal the government has ever reached with a single entity.
“These financial institutions knowingly and fraudulently marketed and sold these loans as sound investments,” he said.
The record-setting deal includes $7 billion in relief for those affected by the financial collapse, including struggling homeowners and communities. The bank will pay the remaining amount as a penalty.
Bank of America said in a statement that most of the settlement covered actions by Merrill and Countrywide, before the bank acquired them during the crisis.
“We believe this settlement, which resolves significant remaining mortgage-related exposures, is in the best interests of our shareholders, and allows us to continue to focus on the future,” said CEO Brian Moynihan in a statement.
The settlement marks the latest, and the largest, deal the government has reached with a financial institution over its role in the financial crisis. In July, the Justice Department struck a $7 billion settlement with Citigroup over similar charges, and in November, JPMorgan agreed to a $13 billion deal that was once the highest settlement ever against a single institution.
The civil settlement includes admissions of wrongdoing by Bank of America, and Holder said the deal does not rule out potential criminal charges against the bank or its employees going forward.
Holder also said it was not a foregone conclusion that the Justice Department would eventually settle with the bank, suggesting the government was prepared to take Bank of America to court had it not agreed to the deal.
Holder also used the opportunity to prod Congress to reestablish a crisis-era tax break aimed at helping homeowners receiving relief from facing a hefty tax bill. In 2007, Congress enacted a law that exempts homeowners from having to pay taxes on forgiven mortgage debt — under normal tax law, any forgiven debt is considered income and therefore taxable.
Lawmakers allowed that law to lapse at the end of 2013, which means that any homeowners that receive mortgage relief under this settlement could end up paying a higher tax bill as a result.
“Today, I also call upon Congress to extend tax relief coverage,” he said. “Until Congress acts, the hundreds of thousands of consumers we have sought to help … may see a significant tax bill just as they are beginning to see the light at the end of a dark financial tunnel.”
—Vicki Needham contributed to this article.