Editorial Staff
Judge Jed S. Rakoff the wild card entry and a long time foe of Wall Street and Washington issued an unexpected ruling in another of the bank’s case, that hit the last nail in the coffin on the negotiating leverage. Judge Rakoff of Federal District Court in Manhattan ordered the bank cough up almost $1.3 billion for selling 176000 loans, many of which were defective. Bank of America had already lost the case at the jury trail, plus the settlement offer of the bank was also rejected. The lawyers and the executives who were fighting the case on behalf of the bank, in Judge Rakoff’s courtroom, understood it clearly that it would be absolutely useless to fight the decision. It will only lead to more expense. On the other hand the remaining cases would also involve billion of dollars in securities, which will be backed by home loans, would be costing the bank several times more than the penalty.
The bank had to deal with another blow by Attorney General Eric H. Holder Jr, who had earlier rejected requests to meet the bank’s Chief Executive, made a demand to the bank. He said to either raise the offer or be prepared to be sued the very next day. The deadline given to the bank was 8a.m Thursday; a bank lawyer made a call at around 7.50a.m July 31 and made an offer $9 billion in cash and more than $7 billion in soft dollar relief to the customers. It is to be noted that this offer is far more than what JP Morgan Chase and Citigroup paid to settle in similar cases. The deal would bring in a closure to the bank which has paid several billions to pay off private investors in various lawsuits. The now might help the Bank of America’s effort to actually return to the business of becoming a bank rather than a payoff institution.
Zainab Asif
Damodar Kalyan
