Well it’s been nearly 10 years since the financial crisis of 2007/2008 resulted in the collapse of the global financial system. And it’s only now that some of the companies involved in selling the products that caused such widespread chaos are being held accountable.
Germany’s Deutsche Bank has agreed to pay $7.2 billion dollars to the US Department of Justice, relating to an investigation into mortgage-backed securities within deals made during 2005–2007. Several banks including Deutsche Bank were, and continue to be, scrutinised for providing mortgages to those who could never afford them, repackaging the loans as ‘safe’ investments and selling their risk on to others.
The original fine due to be imposed on Deutsche Bank was in the region of $14 billion, so you could say that they got off lightly, having to pay just $7.2 billion. And, considering that they only have to pay $3.1 billion of that in actual cash, the other portion being made up in ‘consumer relief’ over a number of years, I think they were very lucky indeed. Deutsche Bank are said to be relieved at the outcome, acknowledging that it could have been worse. Perhaps the lenient sentence should have been tougher, to hit the bank much harder and encourage more of a sense of remorse than we are seeing? But they are banks at the end of the day; my expectations may be a little high!
Deutsche Bank is not alone – far from it! Credit Suisse has agreed to pay $5.28 billion in a separate, but not dissimilar, dispute with the US authorities; of this amount only $2.5 billion will be payable in cash. The USA now has Barclays in its sights for alleged mortgage securities fraud and will be bringing a lawsuit against the bank shortly, also in relation to the financial crisis of 2007/2008.
There are still more! Citigroup had their $12 billion fine reduced to $7 billion. Back in 2013 JP Morgan Chase was fined $13 billion, and the Bank of America paid $16.7 billion in the same year. Goldman Sachs also agreed a settlement of $5.1 billion in January 2016. I am sure more settlements were made in the past and there are no doubt others to be made in the future. Whilst we hope that this action will go a long way to preventing such a crisis reoccurring in the future, I would rather not bet my life savings on it and I would suggest you don’t either!