Bank of America and the Justice Department have reached an impasse in negotiations over a multibillion-dollar settlement deal, raising the stakes in an investigation into the bank’s role at the centre of the mortgage crisis.
The New York Times reports that the talks stalled on Monday after the bank’s latest offer — more than $12bn to resolve state and federal investigations into its sale of mortgage investments that later imploded — fell far short of prosecutors’ demands, according to people briefed on the matter.
The Justice Department, which had imposed a Monday evening deadline for the bank to deliver its near-final offer, has sought a settlement worth roughly $17bn, which would be the largest payout by any bank to date.
On Tuesday, as Bank of America sought to continue negotiations, the Justice Department moved to put the finishing touches on a civil complaint against the bank, said the people briefed on the matter, who spoke on the condition of anonymity. The lawsuit, one of the people said, would accuse the bank of selling mortgage investments that led to billions of dollars in losses.
A suit, however, is not imminent. Bank of America, which is torn between a desire to put the mortgage crisis behind it and a resistance to paying penalties it considers overly punitive, could still raise its offer to avert a suit.
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