Bank of America's Board of Directors approved what is perhaps the largest settlement in the history of banking on Wednesday, agreeing to pay a group of 22 investors, mostly made up of financial firms, $8.5 billion.
Along with news of the BofA settlement, the bank also announced that it plans to set aside another $12.1 billion to settle similar claims, which stem from the 2008 subprime mortgage crisis.
How will this affect you, the ordinary investor?
To be clear, this BofA settlement, along with those that appear to be in the bank's future, are tied to its 2008 acquisition of Countrywide Financial, which was a big player in the collapse of the financial industry, reports NPR.
The group of 22 investors had written a letter to the bank, accusing it and Countrywide of knowingly failing to inform investors that the mortgages were not of promised quality.
In their request for a full refund ($47 billion), they also alleged that Bank of America failed to foreclose on defaulted mortgages in favor of raking in service fees.
Besides the fact that Bank of America's stock seems to be up in the wake of the announcement, it's not completely clear how this will impact the ordinary person.
Settlement monies may trickle down to individual clients who lost hard-earned pensions or took a hit on their mutual funds.
Or they may not.
At this point, it's all up in the air, meaning that the public will have to wait for the investment companies to signal what they plan to do with the BofA settlement monies.
- BofA to pay $8.5B housing crash settlement (MSNBC)
- BofA in $8.4B Rescue Deal to Help Countrywide Customers (FindLaw's Common Law)
- BofA Overdraft Lawsuit Settles for $410 Million (FindLaw's Decided)