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Bank of America Pays Record $17B for Toxic Mortgages

Stocks in this article: BAC

WASHINGTON (The Deal) -- Bank of America  (BAC) reached a settlement Thursday with state and federal regulators for a record $16.65 billion over toxic mortgage securities issued by the bank and the two financial institutions it acquired in the runup to the financial crisis.

The settlement is the largest ever reached between U.S. regulators and a single company. It's also the latest in a string of crisis-related deals the largest U.S. banks have struck with regulators in the wake of the 2008 financial crisis. The total cost of crisis-related settlements to the largest banks reportedly has reached over $100 billion.

The Bank of America settlement had been delayed in recent months due to disagreements because the Charlotte, N.C.-based bank and regulators were disputing whether it should be held liable for toxic mortgages originated by two institutions it had acquired--Merrill Lynch and Countrywide Financial.

Bank of America completed its acquisition of Countrywide in July 2008 and Merrill Lynch in January 2009, which by then was under financial duress as the financial crisis worsened. Bank of America, like some other big banks, has argued that federal regulators pressured it during the crisis to buy troubled institutions to help stem the crisis and that they are being unfairly punished for crimes they did not commit.

Federal regulations allow the government to hold the acquiring company responsible for misconduct that occurred at the businesses they acquired. Nevertheless, Robert Khuzami, chief of the SEC's enforcement unit between 2009 and 2012, said in a previous interview that just because the law and regulations permit such an action, doesn't mean that the government should automatically do so.

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