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Illinois gets $300M in BofA settlement

Illinois Attorney General LisMadigan speaks during news conference Thursday Aug. 21 2014 Chicago. Madigan says one-third state's $300 millishare $16.65

Illinois Attorney General Lisa Madigan speaks during a news conference Thursday, Aug. 21, 2014, in Chicago. Madigan says one-third of the state's $300 million share of a $16.65 billion national settlement with Bank of America will go toward consumer relief. (AP Photo/M. Spencer Green)

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Updated: August 21, 2014 8:04PM



Though only one top banker has gone to jail for this country’s financial and housing crisis, the nation’s attorneys general are negotiating settlements with banks over their roles in the meltdown. On Thursday, Illinois announced it will collect $300 million from Bank of America to help struggling homeowners and snookered investors win justice from the debacle.

Illinois Attorney General Lisa Madigan announced at a news conference that the state will receive $300 million from the settlement as part of a record $16.65 billion deal that the U.S. Justice Department announced it has reached with Bank of America over its role in the sale of mortgage-backed securities in the run-up to the financial crisis.

The federal government’s settlement of nearly $17 billion is the largest the Justice Department has ever reached with a single entity in American history, said Associate U.S. Attorney General Tony West.

Of the $300 million for Illinois, $100 million will go toward consumer relief and $200 million will fully recover losses that the state’s pension systems incurred. The pension systems invested in mortgage-backed securities that were, unbeknownst to them, based on high-risk loans that ultimately lost their value in the housing bubble. Of the $200 million, the Illinois Teachers Retirement System will receive $154.2 million; the State Universities Retirement System will get $2.6 million, and the Illinois State Board of Investment will be paid $43.2 million, Madigan said.

Madigan said the settlement — her fourth and largest enforcement action against Bank of America — was rooted in discriminatory mortgage lending. She said both Bank of America and Countrywide Financial Corp., which Bank of America acquired in 2008, “were major players in virtually every aspect of the market that caused the crisis, from shoddy loan originations and discriminatory lending to African-Americans and Latinos, to fraudulent marketing of mortgage-backed securities.”

The banks do not admit guilt when they make such settlements, but Madigan said “nobody pays $17 billion when they don’t think there’s some liability.”

Bank of America CEO Brian Moynihan said in a statement that the settlement was in the best interests of shareholders and enables the bank to focus on the future.

Critics complain that the settlement does nothing to stop Bank of America from writing off much of the amount as a tax break.

That means taxpayers will shoulder anywhere from $4 billion to $5.8 billion of the $16.65 billion settlement, said Abe Scarr, director of the Illinois Public Interest Research Group (PIRG).

Madigan said she continues to investigate further banking misconduct and has a lawsuit outstanding against Standard & Poor’s, and expects to collect more settlements, but she could not reveal details.

“For people who lost their homes, it’s never going to be enough, but we are holding these banks accountable for what they did to our economy,” Madigan said.

Struggling homeowners won’t get cash. Instead, the settlement calls for Bank of America to receive credit for modifying and refinancing victims’ mortgages and for investing in blighted neighborhoods hit hard by foreclosures. An independent monitor will work with the bank to distribute the relief. People can call the attorney general’s homeowner helpline at 866-544-7151 if they have questions.

Contributing: The Associated Press

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