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Bank of America in $8.5B mortgage settlement

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NEW YORK, NY (AP) -- Bank of America and its Countrywide unit will pay $8.5 billion to settle claims that the lenders sold poor-quality mortgage-backed securities that went sour when the housing market collapsed.

The Charlotte-based bank says the settlement with 22 investors is subject to court approval and covers 530 trusts with original principal balance of $424 billion.

As a result of the settlement, Bank of America put its second-quarter loss at $8.6 billion to $9.1 billion. Excluding the settlement and other charges, the bank expects to post a quarterly loss of $3.2 billion to $3.7 billion.

Shares of Bank of America Corp. jumped 4 percent before the market opened, with investors happy that the bank can put very big uncertainty behind it.

(Copyright 2011 by The Associated Press. All Rights Reserved.)

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and

if you noticed, B of A stock rose on the report this sword of damacles was being removed.

I'm sincerely hoping....

...that after Fastow at Enron and the tranches and stripped interest paper that were the hallmark of this MBS nightmare, CEOs and CFOs get smart and SHOOT the next guy who walks in saying, "I've thought of a new product that GAAP has never even touched on, and the SEC doesn't regulate"

Common

sadly, history can repeat itself.

The limit of exposure has been defined. It was not as bad as some had thought it might be; now it is time for the Bank to wheel and deal to regain its loss.

Let's hope the House and Senate can avoid a repeat of the Chris Dodd/Barney Frank fiasco in which mortgage companies and banks were told not to worry about borrower qualifications; that everyone is entitled to own a house whether they can afford it or not.

Tom, if you've read any of the Dodd-Fwank....

...Wall Street Reform and Consumer Protection Act of 2010, you will find that they never really got to the heart of that delicate (for Democrats) issue.

What they did do is create a whole new library-load of regulations and restrictions on banks, thus encouraging their "creative" people to dream up new ways to produce revenue. One of the most common ones already taking off is convincing individual credit card holders to "move up" to a commercial credit card instead of an individual credit card.

Why in the world would an aging grandmother need a commercial credit card?

Because commercial credit cards aren't regulated under the Dodd-Fwank Act!

Every time the government sets out to "fix things," thousands of people immediately set out to find ways around it. They usually succeed.....because they're a LOT smarter than people like Dodd or Fwank

Let's hope this is only the first

It's no secret that the major investment banks were packaging pure crap and marketing it as investment grade paper. Many of us knew it and avoided disaster. Many others who had relied upon the honesty and reputation of these banks for years got burned severely.

Since the cases are so convoluted and the law at the time non-existent when it came to structuring derivatives, the SEC can do little. This is one situation where I'm cheering for the trial lawyers. Time to go after GS, MS, JPM, CS, DB, and the rest of them. Don't forget S&P and Moody's, the co-conspirators/enablers.