Bank of America and the Justice Department have reached an impasse in negotiations over a multibillion-dollar settlement deal, raising the stakes in an investigation into the bank’s role at the center of the mortgage crisis, the New York Times reported today. The talks stalled on Monday after the bank’s latest offer — more than $12 billion to resolve state and federal investigations into its sale of mortgage investments that later imploded — fell far short of prosecutors’ demands. The Justice Department, which had imposed a Monday evening deadline for the bank to deliver its near-final offer, has sought a settlement worth roughly $17 billion, which would be the largest payout by any bank to date. As Bank of America yesterday sought to continue negotiations, the Justice Department moved to put the finishing touches on a civil complaint against the bank. The lawsuit would accuse the bank of selling mortgage investments that led to billions of dollars in losses. A suit, however, is not imminent. Bank of America, which is torn between a desire to put the mortgage crisis behind it and a resistance to paying penalties it considers overly punitive, could still raise its offer to avert a suit. The bank’s resistance to a deal stems partly from a dispute over mortgage securities sold by Merrill Lynch, the investment house Bank of America bought during the depths of the financial crisis. Bank of America has said it felt pressured by the Federal Reserve and Treasury Department to go through with the acquisition in late 2008, though the bank was the one to pursue the purchase.
