Bank Of America Settles With Investors Bank of America will pay $8.5 billion to settle claims by investors who lost money on mortgage-backed securities. The securities at issue were put together and sold by Countrywide, and they became Bank of America's problem when the bank acquired the mortgage giant in 2008.
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Bank Of America Settles With Investors

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Bank Of America Settles With Investors

Bank Of America Settles With Investors

Bank Of America Settles With Investors

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Bank of America will pay $8.5 billion to settle claims by investors who lost money on mortgage-backed securities. The securities at issue were put together and sold by Countrywide, and they became Bank of America's problem when the bank acquired the mortgage giant in 2008.

MELISSA BLOCK, Host:

And as NPR's Jim Zarroli reports, the company's legal troubles aren't over yet.

JIM ZARROLI: When Bank of America bought Countrywide in 2008, it thought it was getting a real deal, a chance to take over one of the giants of the mortgage business. But the purchase has caused the company no end of trouble, says bank analyst Nancy Bush.

BLOCK: Ooh boy, it was one of the great stinkers of banking history.

ZARROLI: Jacob Frankel is a securities lawyer.

BLOCK: These were bundled securities of high-risk mortgages that the various financial institutions had put together, repackaged and sold as investment vehicles to sophisticated investors.

ZARROLI: The investors who filed the suit included some of the biggest and most prominent names on Wall Street, including the bond firm PIMCO and the insurance giant MetLife.

BLOCK: What makes this litigation unique is that you have the major institutions suing other financial institutions.

ZARROLI: Bank of America first vowed to vigorously defend itself against the suit, but Nancy Bush, contributing editor at SNL Financial, says the company ultimately decided it wasn't worth the fight.

BLOCK: This continues to be the major issue that was hanging over that company. So I think they felt that they may have to eat a little bit of crow because of this. But I think they felt it was worthwhile.

ZARROLI: Bush says the decision to settle will be good for the mortgage industry as a whole and, ultimately, even for consumers. Ever since the financial crisis, U.S. banks have been operating under a lot of uncertainty over regulation and legal challenges. Slowly, she says, that's being eliminated. And the settlement announced today is another big step forward.

BLOCK: It gives us just a little piece of clarity. And when you have, you know, sort of taken the sword of Damocles away from the biggest player in the industry, then I think it does help somewhat.

ZARROLI: Jim Zarroli, NPR News, New York.

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