The Real Deal New York

US reaches $7.2B settlement with Deutsche Bank

Separately, Justice Department sues Barclays over pre-crisis mortgage bonds
December 23, 2016 08:30AM

Deutsche Bank’s John Cryan and the DOJ’s Loretta Lynch

The U.S. Justice Department and Deutsche Bank reached a $7.2 billion settlement over the bank’s role in the pre-crisis sale of mortgage securities.

The authorities had initially sought $14 billion, but were apparently eager to settle the matter before the Trump administration takes over in January. Deutsche Bank will pay the government $3.1 billion in cash immediately, and contribute the remaining $4.1 billion over time to a so-called consumer relief fund.

The settlement removes one potential conflict of interest for Trump, who owes around $300 million to Deutsche Bank’s private banking arm on four real estate loans. However, Bloomberg noted Thursday the the U.S. Attorney General is still investigating the bank over stock trades for wealthy Russians.

The Frankfurt-based bank is one of New York’s most active commercial real estate lenders, issuing $13 billion in loans between 2011 and 2015 alone. But it has been struggling with its own high debts and executive shake-ups in recent years, raising concerns over its future.

Separately, the Justice Department on Thursday sued British lender Barclays over $30 billion in pre-crisis bond sales, seeking unspecified damages. The complaint alleges Barclays “engaged in a fraudulent scheme to sell tens of billions of dollars of residential mortgage-backed securities (RMBS), in which it repeatedly deceived investors about the characteristics of the loans backing those trusts.”

Prior to the suit, Barclays and the Justice Department had failed to agree on the kind of settlement just reached with Deutsche, the Wall Street Journal reports. In a statement, Barclays called the allegations “disconnected from the facts.” [WSJ] — Konrad Putzier