DOJ Emerges as Dominant Force in Big Bank Deals

Nossaman Partner Patrick Richard was quoted in the Law360 article, "DOJ Emerges as Dominant Force in Big Bank Deals," regarding the role of the U.S. Department of Justice in securing large payouts from financial institutions connected to selling toxic mortgage-backed securities leading up to the financial crisis.

A recent $17 billion settlement between Bank of America Corp. and the government is the largest related to the 2008 financial crisis, resolving claims related to subprime mortgage practices.  According to the article, critics of the settlement argue that it was done entirely outside of court to avoid embarrassing discovery and shareholders and taxpayers could bear the brunt of the payments.

"The DOJ has been leading the way on large institutional settlements, as well as obtaining restitution, which should help distressed homeowners if properly administered," said Patrick Richard. "But Bank of America was able to structure some of the penalties as restitution, which could shift the ultimate expense to taxpayers and shareholders."

The article stated that the true test of the DOJ's enforcement will be whether it ends up launching cases against bank executives.

"This settlement, standing alone, has no deterrent effect against other executives going forward," said Mr. Richard. "If that's part of the DOJ's mission, and I believe it is, I would not be surprised if it is looking at compelling cases against executives."