Bank of America Reaches Record Settlement with Justice Department, and Taxpayers Cover the Costs
Over the past year, the Justice Department has reached multiple settlements with the country’s largest financial institutions regarding their involvement in the 2008 financial crisis. JP Morgan Chase forked over $13 billion this past November, Citigroup settled for $7 billion this July, and now Bank of America will pay a record $16.65 to the DOJ. While all of these settlements involved the sale of toxic mortgage-backed securities to unknowing investors, the recent case is different. Under the guise of providing relief to homeowners who have lost their houses, BofA will actually stick the taxpayer with a bill of up to $5.8 billion for their wrongdoings.
The settlement, reached last Thursday, is unique in that it actually allows Bank of America to write-off most of the cost as a tax deduction. Previous settlements with similar large banks contained more restrictions on this practice, but BofA will be able to treat the payment as if it were just another operating cost, for tax purposes.
Approximately $5 billion of the grand total is considered a “civil penalty.” Typically, money paid to resolve a civil penalty cannot be written off as a business expense, but a tenth circuit court ruled earlier this month that businesses may write off penalties such as these as a “compensatory cost.” If Bank of America doesn’t try to write off these $5 billion of civil penalties, the other $11.63 billion portion of the settlement will still stick the taxpayer with a $4 billion tab. If they succeed in writing off the civil penalties, the taxpayer will be on the hook for $5.8 billion.
This latest settlement seems particularly egregious due to the facts that there were no individuals prosecuted in the case, and the assistance programs set up to pay back defrauded homeowners are extremely difficult to qualify for. Even if we look past the fact that no single company in the history of the United States has paid this much money for a single case, the underlying problem still exists. The banks were able to get away with unlawfully ripping off millions of people who didn’t know any better, and there were no real consequences. Without consequences, there is no real deterrent for behavior like this to occur again in the future.
If you’re tired of supporting these behemoth institutions that let struggling Americans foot the bill for their deceitful practices, there is still a way to receive the financial services you need. By banking with a community development financial institution you can be sure that your account supports something positive. No longer will you contribute to a banking industry that continues to get away with financial crimes.
Green America’s responsible finance programs have the resources to help you ditch your megabank and take charge of your own money. Check them out today and start putting your money where it belongs: back in your own community.
Categories: Break Up With Your Mega-Bank