Posted on 03 Apr 2013 by Neilson
Bank of America Corp. has reached a $165 million agreement with a federal credit union regulator, settling allegations that the bank downplayed the risks of poor-quality mortgages packaged into securities.
The announcement Tuesday by the National Credit Union Administration makes Bank of America the fourth financial firm to reach a settlement with the credit union regulator over ill-fated investments held by wholesale, or corporate, credit unions. Five of those institutions, which provide back-office services for retail credit unions, failed in the wake of the housing bust and recession after investing in soured mortgage securities.
So far, the regulator has recovered more than $335 million in four settlements. It had previously reached settlements with Citigroup Inc., Deutsche Bank AG, and HSBC Holdings PLC. The proceeds will be used to reduce the amount of money credit unions are being charged to pay for the losses incurred as a result of the corporate credit unions' collapse.
A Bank of America spokesman didn't comment on the settlement. The Charlotte, N.C.-based bank previously said in a February filing with the Securities and Exchange Commission that it had reached a preliminary settlement with the NCUA in January. The bank said the cost of the settlement would be covered by existing reserves.
The regulator has outstanding suits against J.P. Morgan Chase & Co., Barclays PLC, Credit Suisse Group AG, Goldman Sachs Group Inc. and other banks.
"We have a statutory obligation to secure recoveries for credit unions and ensure that consumers remain protected," Debbie Matz, the regulator's chairman, said in a statement. "We will continue to expend every possible effort to fulfill that important responsibility."