Deutsche Bank hit with $7.2 billion fine in mortgage settlement

by Anna Sobrevinas19 Jan 2017
The 2008 economic recession is still haunting Deutsche Bank. On Tuesday, the German banking giant finalized a $7.2 billion settlement over allegations it contributed to the 2008 financial crisis by misleading investors about the quality of shoddy mortgage-backed securities.

Federal investigators said the bank will pay a $3.1 billion civil penalty and provide $4.1 billion in consumer relief, according to a USA Today report.

The federal fine is the highest for a single body associated in dealing with residential mortgage-backed securities – deals that turned out to be more dangerous than Deutsche Bank investors thought.

"Deutsche Bank did not merely mislead investors: it contributed directly to an international financial crisis," Attorney General Loretta Lynch said in a statement.

Meanwhile, the bank’s chief executive, John Cryan, said Deutsche’s mismanagement of “mortgage securities marketing and sales between 2005 and 2007” was “unacceptable,” but had been rectified.

As part of the settlement, Deutsche Bank admitted that it had “bought and securitized mortgage loans with substantial risk in order to provide ‘flexibility’ to mortgage originators the bank relied on for a continued supply of loans.”

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