In what is likely the biggest settlement tied to the subprime mortgage boom and bust, Bank of America on Wednesday agreed to pay $8.5 billion to settle claims by investors who purchased mortgage securities that deflated in the 2008 financial crisis.
The settlement will eliminate all of the company’s earnings in the first half of this year in order to pay a group of more than 20 investors including asset managers Pimco, Metropolitan Life, and BlackRock as well as the Federal Reserve Bank of New York, The New York Times reports. The deal could also pave the way for similar deals with other big banks facing comparable claims.
"I think this is huge," Michael Mayo, a bank analyst with Crédit Agricole in New York, told the Times. “It’s about time the industry resolves issues from the financial crisis and focuses more on righting their companies and improving the economy. This is the most significant step since the financial crisis that helps do that.”