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Bank of America Corp. swayed a judge to rethink his tentative opinion that a U.S. Securities and Exchange Commission lawsuit over the issuance of $850 million in mortgage-backed securities should go forward, Bloomberg News reported yesterday. The SEC claims that the lender failed to file documents with the regulator that it gave potential investors in the securities, which later plummeted in value, obscuring the fact the buyers got false information. At a hearing yesterday in federal court in Asheville, North Carolina, lawyers for the bank argued that SEC rules governing such disclosures were unclear. The bank “certainly made some points,” said U.S. District Judge Max O. Cogburn Jr. Cogburn told the lawyers that before the hearing he’d “been leaning toward” adopting a magistrate judge’s recommendation that the SEC’s case go forward, but that now he’d take “a look back.” The SEC suit and a parallel case by the U.S. Justice Department over the same securities are part of a government bid to punish companies for actions the U.S. says helped trigger the financial collapse. The hearing comes as the Justice Department broke off negotiations with Bank of America earlier this week because it was dissatisfied with the lender’s offer to pay more than $12 billion to resolve separate government probes of the lender’s sale of mortgage-backed bonds before the crisis.

Wells Fargo & Co. yesterday lost an appeal made to the U.S. Court of Appeals in Washington, D.C. that aimed to bar the government from suing it for “reckless” lending and leaving a federal insurance program to pick up the tab, the Wall Street Journal reported today. The U.S. government in October 2012 sued Wells Fargo, seeking “hundreds of millions of dollars” in damages on behalf of the Federal Housing Administration, a government agency that doesn’t make loans but insures those made by lenders that meet its standards. That complaint alleged nearly a decade of misconduct dating back to May 2001 and contended that Wells engaged in the “regular practice of reckless origination and underwriting” of government-backed loans. Wells in turn had said it acted in good faith and denied the allegations. While several other big banks have settled with the FHA, Wells Fargo has argued that it should not be sued on this matter as it is protected by a previous settlement. The bank — along with four other large banks — had struck a deal in March 2012 with federal agencies and 49 state attorneys general agreeing to settle certain foreclosure processing abuses.

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.

The U.S. regulator responsible for making sure banks aren’t too-big-to-fail is examining whether the biggest firms are shifting trades overseas in a way that may undermine rules designed to prevent a repeat of the 2008 financial crisis, Bloomberg News reported today. In recent months, large banks have restructured their overseas transactions in an effort to trade swaps — contracts blamed for exacerbating the crisis — outside of rules required by the 2010 Dodd-Frank Act. That law also gave the Federal Deposit Insurance Corp. the power to take over and dismantle large, failing banks, a job that Vice Chairman Thomas Hoenig said Wall Street may be making tougher by the overseas dodge. “The risks are pretty enormous,” Hoenig said in an interview, adding that the practice could grow and become a bigger threat. “We have a right to be concerned and should be.” The FDIC has joined the Commodity Futures Trading Commission in “actively monitoring developments” in the banks’ overseas affiliates and watching for any impacts, Andrew Gray, an FDIC spokesman, said in an e-mail.

Bank of America Corp. is in talks to pay at least $12 billion to settle civil probes by the Justice Department and a number of states into the bank's alleged handling of shoddy mortgages, an amount that could raise the government tab for the bank's pre-crisis conduct to more than $18 billion, the Wall Street Journal reported today. At least $5 billion of that amount is expected to go toward consumer relief — consisting of help for homeowners in reducing principal amounts, reducing monthly payments and paying for blight removal in struggling neighborhoods. As the negotiations with the government heat up, the bank is being pressed to pay billions more than the $12 billion it is offering. The North Carolina bank's total tab to end government probes and lawsuits related to its conduct in the runup to the financial crisis is increasingly likely to surpass the record $13 billion that JPMorgan Chase & Co. paid last year to settle similar allegations. Bank of America has already struck a $6 billion settlement, by the Justice Department's measure, with the Federal Housing Finance Agency.

BNP Paribas SA’s settlement talks with the U.S. over sanctions violations have reached unprecedented levels compared with previous punishments levied by the Obama administration in such cases, Bloomberg News reported yesterday. The U.S. has been said to seek more than $5 billion or even $10 billion during talks in the past month — a penalty higher than the combined $4.9 billion levied against 21 other banks for transactions tied to sanctioned countries since President Barack Obama took office. An accord of such a magnitude would eclipse BP Plc’s (BP/) record $4 billion settlement of criminal allegations last year. Prosecutors are pressuring the BNP Paribas parent company to plead guilty to moving funds for clients in violation of sanctions against Sudan, Iran and Cuba.

Citigroup Inc.’s $285 million mortgage-securities pact with the U.S. Securities and Exchange Commission was revived as an appeals court assailed a judge’s demand for more evidence backing up the regulator’s claims, Bloomberg News reported yesterday. The bank challenged U.S. District Judge Jed Rakoff’s refusal in 2011 to approve the accord, which would resolve SEC claims the bank misled investors in a $1 billion financial product linked to risky mortgages, costing investors more than $600 million. Judge Rakoff, who has also criticized the agency practice of not requiring an admission of wrongdoing in settlements, said that the parties didn’t give him “any proven or admitted facts” he could use to gauge the deal’s fairness. The court yesterday cited the SEC’s purview to tailor settlements as it sees fit, saying Rakoff abused his discretion by requiring it first establish the “truth” of the allegations against the bank.

General Motors Financial Co. yesterday priced its largest bond backed by subprime auto loans since 2007, garnering the lowest yields in more than a year, relative to an interest rate benchmark, the Wall Street Journal reported today. The consumer lending unit of General Motors Co. increased the size of its offering by $200 million to $1.4 billion, just shy of its $1.5 billion issue it sold in July 2007. Earlier yesterday, GM said its May sales jumped 13 percent to 284,694, easily topping expectations as the company contends with the fallout from a steady flow of recalls over safety concerns.

McGraw Hill Financial Inc.’s Standard & Poor’s unit lost its bid to consolidate state claims that it lied about the objectivity of its ratings in the run-up to the 2008 financial crisis, forcing it to fight lawsuits in 18 state courts, Bloomberg News reported today. U.S. District Judge Jesse Furman in Manhattan ruled the suits were properly filed in state courts under local consumer-protection laws. S&P argued federal laws should govern the claims. Most of the state lawsuits were filed last year, after the U.S. Justice Department sued New York-based S&P for allegedly defrauding investors that relied on its ratings of residential mortgage-backed securities and collateralized debt obligations. The U.S. has said that it may seek as much as $5 billion.

Maurice “Hank” Greenberg, the former chairman of American International Group Inc., lost a bid to throw out the New York attorney general’s 2005 lawsuit over alleged sham transactions intended to inflate the insurer’s financial health, Bloomberg News reported yesterday. The state claims Greenberg and former AIG Chief Financial Officer Howard Smith bear responsibility for sham transactions with General Reinsurance Corp. in 2000 and 2001 that inflated AIG’s loss reserves by $500 million. Former Attorney General Eliot Spitzer’s pursuit of the case forced Greenberg to step down from AIG in 2005 after he spent four decades building the company into the world’s largest insurer. Manhattan Supreme Court Justice Charles Ramos ruled yesterday that the case can proceed to trial.