Bank of America reaches $16.65 billion settlement with the U.S. government

Bank of America reaches $16.65 billion settlement with the U.S. government
(Image credit: Facebook.com/BankofAmerica)

Bank of America has finally reached a settlement to pay a whopping $16.65 billion to the government for selling badly-designed mortgage-backed securities in the run up to the financial crisis.

Those mortgage-backed securities had been advertised to investors, including public pension funds and federally-insured financial institutions, as safe, strong investments with little risk. But the financial crisis saw those investments lose billions and billions of dollars. Securitization — which was supposed to decrease risk by spreading it out throughout the system, for example by bundling up lots of different mortgages together into mortgage-backed securities, and then selling those securities to investors — in reality turned the minor risk of mortgagees defaulting on their loans into a systemic risk that crashed the economy.

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John Aziz is the economics and business correspondent at TheWeek.com. He is also an associate editor at Pieria.co.uk. Previously his work has appeared on Business Insider, Zero Hedge, and Noahpinion.