Bank of America faces a US$6 billion compensation demand from the FHFA
Bank of America is coming under pressure to settle a US $6 billion compensation demand from the Federal Housing Finance Agency after JP Morgan agreed to pay a record US $4 billion to the regulator.
In total 17 banks are being pursued by the agency which appears to have taken heart from its deal with JP Morgan. The Financial Times says that 'some people' believe other banks will also find themselves paying large amounts in compensation to the agency. The size of the JP Morgan deal will make it harder, says the newspaper, for them to 'get a cheaper deal'. It will leave them 'the choice between paying billions of dollars upfront or risk a potentially expensive battle in the courts'. Banks involved include Credit Suisse, Goldman Sachs, Royal Bank of Scotland and Barclays. The claims are related to mortgage-backed securities sold by the banks which then turned out to be worth much less than the price they had been sold for. The crisis caused by the sales was a major part of the trigger for the overall financial crisis that started in 2007/08.
The JP Morgan deal is part of a larger US $13b agreement which the bank has agreed to pay in a compensation package to various US state and federal agencies.