Won’t pay! Can’t pay?

BILLS for pre-crisis buccaneering are still coming in. Deutsche Bank, Germany’s biggest lender, confirmed on September 15th that America’s Department of Justice (DoJ) had asked for $14 billion to settle possible claims connected with the underwriting and sale of residential mortgage-backed securities (RMBSs) between 2005 and 2007. The next day Deutsche’s share price, already reeling after a wretched year, plunged by 8%. It was groggier still after the weekend, closing on September 20th at a 30-year low (see chart).

American banks have settled with the DoJ for amounts between $3.2 billion (Morgan Stanley) and $16.7 billion (Bank of America), as well as agreeing on smaller sums with the Federal Housing Finance Agency (FHFA), another regulator. Deutsche, which settled with the FHFA for $1.9 billion in 2013, insists that it will not pay anything near to what the DoJ has asked for, and it surely won’t. Citigroup, which reached an RMBS deal with…Continue reading

This post was originally published in the Economist.

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Won’t pay! Can’t pay?

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