Bank of America Corp. reiterated an offer to pay about $13 billion to settle federal and state probes of mortgage-backed bond sales, a deal prosecutors had previously rejected, a person with knowledge of the matter said.
The offer, made in a meeting yesterday with the Justice Department's Associate Attorney General Tony West, was viewed by the government as a step backward in the negotiations, said the person, who asked not to be named because the deliberations aren't public.
The Justice Department broke off talks with Bank of America in June and began preparing a civil lawsuit because it was dissatisfied with the lender's offer, which included at least $5 billion in consumer relief, another person familiar with the situation has said. The U.S. has told the bank it should pay about $17 billion to resolve the case, the person said.
The Justice Department is taking a tougher approach following criticism that it hadn't done enough to punish large institutions for their role in the collapse of home prices and ensuing financial-market turmoil. Prosecutors have demanded multibillion-dollar penalties from banks for wrongdoing including sanctions violations and aiding clients' tax evasion.
Lawrence Grayson, a spokesman for Bank of America, declined to comment.
The July 15 meeting with Bank of America came one day after Citigroup Inc. agreed to pay $7 billion over claims that it misrepresented the quality of mortgage-backed bonds that it sold in 2006 and 2007 as home prices plummeted. JPMorgan Chase & Co. agreed to pay $13 billion in November over similar claims.
Bank of America, based in Charlotte, North Carolina, said today that second-quarter profit declined 43 percent as it spent $4 billion on legal expenses, including mortgage-related litigation. The lender and firms it acquired issued about $965 billion between 2004 and 2008, while JPMorgan and companies it bought issued $450 billion, according to analysts at Sanford C. Bernstein & Co.
Yesterday's meeting was reported earlier by the Wall Street Journal.