|Patricia Villaceran |||Aug 07, 2014 07:02 AM EDT|
(Photo : REUTERS/MIKE BLAKE/FILES)
The Bank of America and the Department of Justice finally agreed to settle after lowballing offers for months.
The settlement, which would cost less than US$17 million, is considered to be the largest settlement made in the corporate history of America.
The deal took shape last week when the court rejected another offer from the bank. Then, Judge Jed S. Rakoff entered a wild card that changed Bank of America's stance and led the bank to provide a quick decision in merely 24 hours.
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Rakoff issued a ruling in a different case for Bank of America that left them without any leverage. Rakoff, from the Federal District Court in Manhattan, mandated the bank to pay approximately US$1.3 billion for its previous case of selling 17,600 defective loans.
The bank's elite lawyers made a prompt decision to settle rather than pursue the case on court. They acknowledged the fact that the legal battle itself could cost them more than Rakoff's penalty. They also said that the bank's remaining cases would also cost them billions of dollars, perhaps even more than the proposed settlement.
Another move from the Department of Justice made the bank cringe even more.
Attorney General Eric Holder finally decided to open the line after initially refusing to talk to anyone from the bank.
In a phone call at the night of July 30, Holder and Bank of America CEO Brian Moynihan talked briefly.
During their discussion, Holder offered a simple resolution -- either the bank raises it settlement offer of be sued the next day. Holder gave Moynihan an 8 a.m. deadline for July 31.
Ten minutes before the deadline, the bank's lawyer called in and offered a US$9 billion settlement in cash and the remaining US$7 billion would go to the consumers.
The offer was closed the same day.
The multi-billion dollar settlement exceeded the offers closed by the banks Citigroup and JPMorgan Chase in the past two years.
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