Bank of America hit with largest fine in U.S. history, $16.65 billion

Bank of America has agreed to pay the government $16.65 billion, the largest settlement for financial fraud in history, as result of the mortgage practices of its units in the lead up to the financial crisis of 2007.

In a Justice Department Statement, it was announced the settlement will resolve a number of federal and state claims against Bank of America for the actions of two of its subsidiaries. These subsidiaries are Countrywide Financial Services and Merrill Lynch.

Both have been accused of unsavory business practices. These include deliberately giving loans to people the bank could knew could not afford to pay them off, and lending out money with higher interest rates for minorities like blacks and Latinos.

Other offenses include deliberately misrepresenting the safety of investments to investors as well as financial and governmental institutions. 

Of the more than $16 billion, $7 billion will go to mortgage relief and compensating people for the charges and tax liabilities that arise from refinancing or bankruptcy.

While $7 billion will go to homeowner relief, the rest of the money will be divided among various federal agencies and states. $1.8 billion will be used to settle charges of fraud stemming from misrepresenting the loans. Another $1.03 billion will go to the Federal Deposit and Insurance Commission, and $135 million will go to the Securities and Exchange Commission.

For payouts to the states, California and New York will each receive $300 million. Illinois will receive $200 million and Maryland $75 million. Delaware will get $45 million and Kentucky $23 million.

Associate Attorney General West hoped the effort would restore U.S. trust in the banking system, which has yet to recover from the financial crisis. He said, "The significance of this settlement lies not just in its size; this agreement is notable because it achieves real accountability for the American people and helps to rectify the harm caused by Bank of America's conduct through a $7 billion consumer relief package that could benefit hundreds of thousands of Americans still struggling to pull themselves out from under the weight of the financial crisis."