A trio of legal actions by the government are related to toxic residential mortgage-backed securities and include two settlements for more than $12 billion.
The actions were taken by the Department of Justice
against three European financial institutions over their alleged roles in the issuance and sale of RMBS.
They are likely the last major RMBS actions to be taken as part of the Obama administration’s aggressive prosecution of banks blamed for the financial crisis.
An announcement Thursday from the Department of Justice indicates that it has filed a complaint in U.S. District Court for the Eastern District of New York against
Barclays Bank PLC and several of its U.S. affiliates. Also named as defendants are Paul K. Menefee, who served as head banker on subprime securitizations, and John T. Carroll, who was head trader for subprime loan acquisitions. Both men no longer work at Barclays.
According to the government, the London-based organization engaged in a fraudulent scheme to sell RMBS supported by defective and misrepresented loans from 2005 through 2007. At least 36 transactions with more than $31 billion of subprime and Alt-A loans were involved.
“Barclays personnel repeatedly misrepresented the characteristics of the loans backing securities they sold to investors throughout the world, who incurred billions of dollars in losses as a result of the fraudulent scheme,” the Justice Department said.
Barclays allegedly violated
the Financial Institutions Reform, Recovery, and Enforcement Act of 1989.
On Friday, Credit Suisse disclosed that it reached a settlement with the Justice Department tied to its legacy RMBS business that operated until 2007.
The settlement, which is subject to approval by Credit Suisse’s board of directors, includes a $2.48 billion civil penalty and $2.8 billion in consumer relief over five years.
Zürich-based Credit Suisse said the settlement will release it from potential civil claims by the Justice Department related to its securitization, underwriting and issuance of RMBS.
Also on Friday,
Deutsche Bank AG disclosed an RMBS settlement reached with the Justice Department.
The Frankfurt, Germany-based institution
said the settlement includes a $3.1 billion civil penalty and $4.1 billion in consumer relief over five years.
“The settlement is subject to the negotiation of definitive documentation, and there can be no assurance that the U.S. Department of Justice and the bank will agree on the final documentation,” the statement said.
