Page 62 - Monocle Quarterly Journal Vol 1 Issue 1 Q4

BANKING
“ e total value of the ne was USD 16.67 billion, over four times the amount Bank of America paid for Countrywide only six years previously.”
An analysis of the 2014 nes levied against Bank of America reveals two major ne events. e rst was a USD 9.3 billion ne levied on the 26th of March 2014 against them for misleading customers under an Act recently penned in 2008 called the Housing and Economic Recovery Act. e Federal Housing Finance Agency (FHFA) successfully prosecuted them under this Act and demanded the ne to be collected by Freddie Mac and Fannie Mae, to settle claims asserted by the FHFA Parties.
e second major ne event which Bank of America su ered occurred on the 21st of August 2014 and was a result of their acquisition of Countrywide Financial Corporation in the teeth of the crisis during 2008 somewhat under duress. Bank of America purchased Countrywide Financial Corporation for an amount of USD 4.1 billion. e ne levied against Bank of America was the result of a joint prosecution against their Countrywide subsidiary by a combination of the Department of Justice, the Securities and Exchange Commission, the Federal Housing Finance Agency, and the Department of Housing and Urban Development.
Once again, the charge was written down to misleading customers during and leading up to the Financial Crisis. e total value of the ne was USD 16.67 billion, over four times the amount Bank of America paid for Countrywide only six years previously. Had Bank of America known that the two pieces of legislation that would be used in 2014 to successfully prosecute them under this enormous civil claim ne – namely the Financial Institutions Reform, Recovery and Enforcement Act of 1989 and the False Claims Act of 1863 – they may well have rethought their investment in the then already failing mortgage broking rm.
In terms of what is most important in banking – namely Tier-1 un- encumbered capital – Bank of America experienced an erosion of their core capital per year on average of 6.73 percent during the past four completed nancial years. In 2014 alone, 16.7 percent of their core capital was extracted from the rm in nes, paid to a range of Federal and State regulators, as well as to ‘a ected customers’.
Fines Levied Against Citigroup and Wells Fargo
Citigroup, another of the big four US lenders, made a more impressive pro t after tax of USD 55.3 billion in the four years from the beginning of 2012. In relative terms they fared reasonably well compared to their peers, being ned only USD 15.2 billion over the same four-year period.
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