What Caused Bank of America's Scandals?

What Caused Bank of America's Scandals?

Bank of America, one of the largest banks in the United States, has been involved in several scandals over the years. From themortgage crisisto the recentfake account scandal, the bank has faced numerous lawsuits and regulatory fines. So, what caused these scandals? Let's take a closer look.

Mortgage Crisis

One of the biggest scandals involving Bank of America was the mortgage crisis of 2008. The bank, along with other major financial institutions, was accused of selling risky mortgages to investors without disclosing the true risks involved. As a result, many borrowers defaulted on their loans, leading to the collapse of the housing market and the global financial crisis.

The bank was sued by the U.S. government and several states for its role in the crisis. In 2014, Bank of America agreed to pay $16.65 billion in a settlement with the U.S. Department of Justice, the largest settlement ever paid by a single company.

Fake Account Scandal

In 2016, Bank of America was involved in another scandal when it was revealed that employees had opened millions of fake accounts without customers' consent. This was similar to the scandal that rocked Wells Fargo, another major U.S. bank.

The scandal led to the resignation of several top executives at Bank of America and the bank was fined $185 million by the Consumer Financial Protection Bureau. The bank also had to pay $110 million to settle a class-action lawsuit filed by its customers.

Culture of Sales

One of the underlying causes of the fake account scandal was the bank'sculture of sales. Bank of America, like many other banks, had a sales-driven culture where employees were incentivized to meet sales targets. This led to unethical behavior as employees opened fake accounts to meet their targets and earn bonuses.

In response to the scandal, the bank has made changes to its sales practices and has increased its focus on customer service. It has also implemented a new performance management system that is designed to encourage ethical behavior.

Investment Banking

Bank of America's investment banking division has also been involved in several scandals over the years. In 2018, the bank was fined $42 million by the U.S. Federal Reserve for failing to fix deficiencies in itsrisk managementpractices.

In 2019, the bank was sued by the U.S. Securities and Exchange Commission for allegedly misleading investors about the risks involved in its residential mortgage-backed securities. The bank agreed to pay $26.5 million to settle the case.

Conclusion

In conclusion, Bank of America has been involved in several scandals over the years, ranging from the mortgage crisis to the fake account scandal. These scandals were caused by a variety of factors, including a culture of sales, unethical behavior by employees, and deficiencies in risk management practices. The bank has taken steps to address these issues and has implemented changes to its sales practices and risk management practices. However, it remains to be seen whether these changes will be enough to prevent future scandals and maintain the trust of its customers and investors.