BofA could still put Countrywide into bankruptcy, executive says

Mon Jun 10, 2013 6:52pm EDT
 
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By Karen Freifeld

NEW YORK (Reuters) - Bank of America Corp (BAC.N: Quote) could put its Countrywide Financial unit into bankruptcy if it fails to win court approval for an $8.5 billion settlement with mortgage investors, a bank executive said on Monday.

Chief Risk Officer Terrence Laughlin was testifying at a hearing in New York state court on whether to approve the deal, which would settle claims by investors who said Countrywide misrepresented the mortgages underlying bonds they bought.

During negotiations leading up to the June 2011 settlement, Bank of America threatened to put Countrywide, which it had rescued at the height of the financial crisis in 2008, into bankruptcy. That possibility was still on the table, Laughlin said on Monday.

"One of the options that was available to us and continues to be available to us was to put Countrywide into bankruptcy," Laughlin said.

Laughlin represented Bank of America at negotiations with institutional investors, including BlackRock Inc (BLK.N: Quote), MetLife Inc (MET.N: Quote) and Allianz SE's (ALVG.DE: Quote) Pacific Investment Management Co (Pimco).

American International Group Inc (AIG.N: Quote) and a handful of other investors are challenging the deal, saying it offers only pennies on the dollar.

Laughlin said on Monday he wasn't bluffing when he told the investors during negotiations that Bank of America could declare Countrywide bankrupt if liabilities became too great.

"I never bluffed during the course of this negotiation," Laughlin said.   Continued...