The offer, similar to one the government rejected in June, was made in a meeting yesterday with Justice Department Associate Attorney General Tony West, said the people, who asked not to be named because the deliberations aren’t public. The government viewed it as a step backward in the negotiations, the people said.
The Justice Department broke off talks with Bank of America last month and began preparing a civil lawsuit because it was dissatisfied with the lender’s offer, which included at least $5 billion in consumer relief, one of the people has said. The U.S. has told the bank it should pay about $17 billion to resolve the case, the person said.
West, in a speech today in Washington, signaled the government is prepared to sue if an agreement isn’t reached.
“If an institution is unwilling to admit its wrongful conduct in a statement of facts; or balks at paying a substantial penalty that reflects that conduct; or refuses to do right by those affected, then we will not shrink from litigation,” West said without naming any company.
Lawrence Grayson, a spokesman for Bank of America, and Emily Pierce, a Justice Department spokeswoman, declined to comment.
The Justice Department is taking a tougher approach following criticism that it hadn’t done enough to punish large institutions for their role in the collapse of home prices and ensuing financial-market turmoil. Prosecutors have demanded multibillion-dollar penalties from banks for wrongdoing including sanctions violations and aiding clients’ tax evasion.
The July 15 meeting with Bank of America came one day after Citigroup Inc. agreed to pay $7 billion over claims that it misrepresented the quality of mortgage-backed bonds that it sold in 2006 and 2007 as home prices plummeted. JPMorgan Chase agreed to pay $13 billion in November over similar claims.
Bank of America, based in Charlotte, North Carolina, said today that second-quarter profit declined 43 percent as it spent $4 billion on legal expenses, including mortgage-related litigation. The lender and firms it acquired issued about $965 billion between 2004 and 2008, while JPMorgan and companies it bought issued $450 billion, according to analysts at Sanford C. Bernstein & Co.
Yesterday’s meeting was reported earlier by the Wall Street Journal.
Last month, West rebuffed Bank of America’s request for a meeting between Chief Executive Officer Brian Moynihan and Attorney General Eric Holder to discuss the case, one of the people has said. The Justice Department viewed the talks to be too far from a resolution to warrant the meeting, according to the person.
“Resolving these cases will require more than simply seeking a meeting with the attorney general,” West said today in his remarks at the Exchequer Club. “It will require taking true responsibility for misconduct that contributed to the Great Recession.”