The U.S. Department of Justice announced a $16.6 billion settlement between six states’ attorneys general and Bank of America Thursday over fraudulent mortgage-backed securities that fueled the 2008 financial crash. The settlement includes $23 million for investments made by the Kentucky Retirement System.
Kentucky Attorney General Jack Conway announced the details of Kentucky's share of the settlement in a conference call from Washington.
He said the state will recoup $23 million toward $21.6 million in losses incurred by KRS over fraudulent securities that the pension's investment team purchased from BofA and its subsidiaries.
"Classic securities fraud 101. In essence, that Bank of America entities knew that they were packaging subprime mortgages into the securities that they were marketing yet were not informing investors about the risk inherent in the securities they were selling," said Conway.
Bill Thielen is executive director of KRS. He says the settlement is welcome, but it won’t do much to shore up the pension’s $17.6 billion liability.
“Twenty-three million doesn't really move the needle. Although it's welcomed, certainly, any influx of additional moneys is welcomed, and the return of any additional moneys we lost is welcomed, as well."
As part of the agreement, Kentucky will split $150 million in consumer relief with Delaware and Maryland to help provide loans to distressed communities.