Ongoing settlement negotiations between Bank of America and the Justice Department to resolve an investigation into the bank's role in the mortgage crisis reached a stalemate Monday as the government reportedly rejected the bank's earlier $12 billion offer.
Citing "people briefed on the matter," the New York Times reported late Tuesday that the offer fell far short of the record $17 billion that prosecutors are seeking to resolve the state and federal investigations. Bank of America is seeking to continue negotiations while the government finishes readying its petition to file in federal court.
The record settlement sought could signal a more aggressive stance from the Justice Department in resolving investigations into the events leading up to the mortgage crisis. The current record holder, JPMorgan Chase, reached a deal with prosecutors in 2013 for $13 billion, though the bank reportedly issued fewer securities in the run-up to the crash than BofA.
According to the report, the deadlock seems to be centered upon two crucial issues: the amount of the settlement and the method of payment. BofA would like to minimize the cash penalty that is paid out and instead put the money towards consumer relief. While consumer relief will be a part of the settlement, the government is pushing for a larger cash payment that will be a meaningful deterrent rather than just the cost of doing business.
For its part, BofA is torn between the competing interests in putting the mortgage crisis behind it and resisting penalties that it feels are overly punitive. The bank is resisting partly because of the pressure it says it felt from the Federal Reserve to go through with the purchase of Merrill Lynch in late 2008.
Still, prosecutors contend that it is unclear if the bank would have been able to legally back out of the acquisition.
Representatives for both the Justice Department and BofA did not immediately return requests for comment.