Chart: Bank of America's $45 Billion Legal Fiasco

Sometimes all I want is a simple graph. With this in mind, the figure below breaks down the largest legal settlements that Bank of America (NYSE: BAC  ) has racked up since purchasing Countrywide Financial in 2008.

Sources: Government press releases, The Wall Street Journal, Reuters, and Bloomberg News. *The settlement headed up by Bank of New York Mellon is awaiting court approval.

All told, the total amount is in the neighborhood of $45 billion, stemming primarily from the billions of dollars in subprime mortgages originated by Countrywide in the lead-up to the financial crisis.

While this is unquestionably a huge number -- as B of A's CEO Brian Moynihan said: "There aren't many days when I get up and think positively about [that deal]" -- the nation's second largest bank by assets isn't out of the woods yet. As best as I can tell, there remain three considerable hurdles that we presently know of.

The first is the still-pending $8.5 billion settlement overseen by Bank of New York Mellon (NYSE: BNY  ) as trustee for the RMBS trusts -- the underlying investors in the action reads like a Who's Who of financial firms including PIMCO, Blackrock (NYSE: BLK  ) , and MetLife (NYSE: MET  ) , among others. The second is the ongoing case between B of A and monoline insurer MBIA (NYSE: MBI  ) -- MBIA was the largest private-label bond insurer prior to the financial crisis. And the final one concerns a multiparty action, brought by a variety of investors in Countrywide issued mortgage-backed securities, that's making its way through a federal district court in California.

Thus, even though the massive settlements from earlier this week go a long way toward removing the uncertainty surrounding B of A's remaining liability, material outstanding claims remain.

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Read/Post Comments (13) | Recommend This Article (19)

Comments from our Foolish Readers

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  • Report this Comment On January 09, 2013, at 9:42 AM, rayzur9 wrote:

    And NO, I would NEVER subscribe to get constant spam from Motley Fool at the rate of 5 every hour. Been there Done that, NO Thanks....

  • Report this Comment On January 09, 2013, at 10:25 AM, TMFKopp wrote:

    "...that should be hammering down the Countrywide execs, since THEY were the ones at fault. BofA bought a company that went bankrupt due to its bad mortgage decisions. How is ANY of this BofA's culpability? How?"

    FWIW I'll address this since it's an issue I've seen come up on a few occasions. When a company buys another company it gets everything, warts and all.

    Does it really stink for BofA shareholders that they're suffering for the sins of Countrywide? To some extent, yes. But if you're a BofA shareholder and are looking for somebody to shake your finger at, look to Ken Lewis and the deal team at the bank that decided to buy Countrywide -- they're the ones that put shareholders squarely in front of this legal freight train.


  • Report this Comment On January 09, 2013, at 10:44 AM, SkepikI wrote:

    Ken Lewis and his "management" team (I use the term loosely) also decided to buy/merge Merril Lynch, a nearly bankrupt institution at the time. How many other bad decisions have accumulated? BOA ran a bad business in my opinion for decades. They got away with it because they were big to start. They have been SHRINKING and destroying value for nearly a decade now. Reminds me of GM a few years back. BEWARE.

  • Report this Comment On January 09, 2013, at 11:20 AM, xnicholas wrote:

    The article uses an exponential bar graph to represent money???

    bad move!

  • Report this Comment On January 09, 2013, at 11:25 AM, TMFKopp wrote:

    "They got away with it because they were big to start."

    They got away with it because it was an "up and to the right", accommodating environment... until it wasn't.


  • Report this Comment On January 09, 2013, at 11:56 AM, JohnMaxfield37 wrote:

    xnicholas -

    "The article uses an exponential bar graph to represent money??? bad move!"

    I agree that typically a log scale isn't the best for this type of thing. However, because of the large disparity between the biggest settlements and the smallest ones, the latter are hardly even identifiable otherwise. This is the reason I noted the amount of each settlement on the chart itself.


  • Report this Comment On January 09, 2013, at 5:55 PM, xetn wrote:

    What? No recommendation for BAC stock?

  • Report this Comment On January 09, 2013, at 5:57 PM, UgolinoII wrote:

    Its never appropriate at all. A bar chart is one of the most fundamentally simple charts.

    Making it a log scale defeats its whole purpose.

    The chart should obviate the need for values, if you have to add them back in, something is wrong!

  • Report this Comment On January 11, 2013, at 9:33 PM, whyaduck1128 wrote:

    When it comes to my investments, "social" or "ethical" investment concerns are virtually nowhere to be seen. I'll invest in almost anything if I think it will generate above average returns.

    However, even I have standards, and even before they bought Countrywide and Merrill Lynch, I didn't much care for BAC. You can imagine what I think of them now. The nicest things I can call BAC and its management team is "repellent slugs" or "maggots".

    There are lots of terrific investments out there. I see no reason to make BAC, Wells Fargo, Goldman Sachs, and their ilk part of my portfolio.

  • Report this Comment On January 14, 2013, at 10:59 AM, AdamB1978 wrote:

    Have a look at BAC's cost savings programs which are being brought in over the next 2-3 years. Add that to the clean EPS figures from recent quarters of about 30c and you'll get an EPS figure in the $2 - $2.50 range even assuming that the top line doesnt recover at all. Put that EPS on an appropriate PE multiple and you have a share price way in excess of current levels

  • Report this Comment On January 14, 2013, at 12:56 PM, constructive wrote:

    Skepikl, if you examine closely you will discover that ML was a good acquisition for BoA.

  • Report this Comment On January 14, 2013, at 1:01 PM, Thomas10Parker wrote:

    The Financials have risen in double digits since the November 14 lows. Bank of America BAC is up 30%, Morgan Stanley MS up 25%, Goldman Sachs GS is up 20%.

  • Report this Comment On January 18, 2013, at 1:15 AM, gmcleod752 wrote:

    $45 Billion in BofA losses is just one month of the Bernanke Investment in Mortgages. Where is BofA getting that kind of money to pay for these massive losses? I still have a free BofA checking account.

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