Bank of America

FILE – In this Jan. 14, 2014, file photo, a Bank of America sign is photographed in Philadelphia. A person familiar with the matter says Bank of America has agreed to pay between $16 billion and $17 billion to settle an investigation into its sale of mortgage-backed securities before the financial crisis. (AP Photo/Matt Rourke, File)

By Kevin Smith, San Gabriel Valley Tribune

Posted: 08/06/14, 7:20 PM PDT | Updated: 1 min ago

Bank of America has tentatively agreed to pay up to $17 billion to settle an investigation into its sale of toxic mortgage-backed securities leading up to the nation’s financial crisis, an insider said Wednesday.

The deal must still be finalized. But if approved, it would be the largest Justice Department settlement arising from the meltdown — a financial collapse that saw millions of Americans lose their homes to foreclosure.

“That’s definitely a big number, but Bank of America is a big institution,” said economist Jordan Levine, director of economic research with Beacon Economics in Los Angeles. “Even with a penalty like that they will keep trucking.”

The Bank of America settlement comes on the heels of a $7 billion settlement announced last month with Citigroup and another $13 billion settlement the Justice Department forged last year with JPMorgan Chase & Co.

The person who revealed the tentative deal and spoke on condition of anonymity said the two sides reached an agreement in principle following a conversation last week between Attorney General Eric Holder and Bank of America CEO Brian Moynihan.

The tentative deal, they said, calls for the bank to pay roughly $9 billion in cash and for the remaining sum to go toward consumer relief.

The settlements stem from the sale of toxic securities made up of subprime mortgages. Banks played down the risks of subprime mortgages when packaging and selling the securities to mutual funds, investment trusts and pensions, as well as other banks and investors.

The securities contained residential mortgages from borrowers who were unlikely to be able to repay their loans, yet were publicly promoted as relatively safe investments until the housing market collapsed and investors suffered billions of dollars in losses. Those losses triggered a financial crisis that pushed the economy into the worst recession since the 1930s.

Critics say the government’s actions have been soft on the banks because no top executives from any of the firms are facing criminal charges for their companies’ actions or for an apparent lack of transparency.

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