During the Occupy Wall Street mania, the general feeling in Washington was that big banks could absorb more legal hits. First-quarter results show lawsuits are taking a worrisome toll. Bank of America shocked Wall Street with a $276 million first-quarter loss attributed in part to a multibillion settlement with the government over subprime loans and a legal set-aside of another $2.4 billion to cover future expenses from additional Justice Department probes. This legal reserve was more than double the amount the bank set aside for bad loans. Analysts say the results were marred by the impact of a $10 billion deal with the Obama administration over subprime mortgages and bonds sold to Fannie Mae and Freddie Mac. The settlement cost the bank about 40 cents a share after taxes. These are the same junk loans the federal government strong-armed the industry to underwrite and sell in the run-up to the financial crisis to carry out its disastrous national homeownership scheme. BofA is in talks with Justice about settling another suit over mortgage-backed securities that could reach several billion dollars. The girth of its reserve suggests management thinks future legal bills will be bigger than previously expected. Shareholders should brace for more costly actions. news.investors/ibd-editorials/042214-697937-massive-legal-bills-take-toll-on-boa-and-jpmorgan.htm
Posted on: Wed, 23 Apr 2014 00:02:36 +0000
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