Deutsche Bank AG, Germany’s largest lender with over $1.7 trillion in assets, agreed to a $7.2 bln settlement with the United States government this past week for allegations of loan modifications. Swiss-based Credit Suisse also agreed to a penalty of $5.28 bln for virulent mortgage-based securities.
In total, the two major financial institutions have agreed to a $12 bln settlement, an amount far less than the initial proposal of $14 bln for Deutsche Bank and $7 bln for Credit Suisse.
In an official statement, Deutsche Bank stated:
“The financial consequences, if any, of the consumer relief, are subject to the final terms of the settlement, and are not currently expected to have a material impact on 2016 financial results.”
Barclays’ fraudulent sale of loans
Barclays, a $46 bln British bank, is likely to also receive a lawsuit from the Justice Department of the United States over fraudulent sales of securities and mortgage loans. The Barclays group led by two of its former executives allegedly engaged in the sale of bln of dollars worth of misrepresented mortgage loans for over two years from 2005 to 2007.
Based on the statement of Attorney General Loretta Lynch and the settlements of Deutsche Bank and Credit Suisse, the three major banks evidently capitalized against its consumers and clients amid economic troubles and financial instability. Barclays, in particular, took advantage of the low-interest rates and rising house prices to sell fraudulent securities.
Lynch said:
“Barclays jeopardized bln of dollars of wealth through practices that were plainly irresponsible and dishonest.”
Corruption in banks and the financial industry
The unraveling of corruption within the conventional financial industry and multi-bln dollar financial institutions have explicitly demonstrated various fraudulent and deceitful operations that have played as the core of banking services over the past decade.
Banks and financial institutions were at the helm of criminal financing and engagement of illicit activities ultimately resulting in bln of dollars in settlement.
However, under the consideration of losses the consumers of these banks have dealt in the past, it is difficult to justify if the amount agreed by the United States government and the banks are sufficient to penalize the unlawful actions of banks.
Bill Baer, a lawyer in the United States and the assistant Attorney General for the Department of Justice, described the corruption and fraud present in the financial industry today in a statement.
He said:
“The widespread fraud that investment banks like Barclays committed in the packaging and sale of residential mortgage-backed securities injured tens of thousands of investors and significantly contributed to the financial crisis of 2008. Million of homeowners were left with homes they could not afford, leaving entire neighborhoods devastated."