Seven point two billion dollars. That's the price Doutsche Bank will pay the US Justice Department to settle the case over its handling of mortgage backed securities before two thousand and eight. The mortgage investigation was among the bank's biggest litigation risks. Justice initially wanted fourteen billion from Deutsche. The bank also agreed to hire an outside monitor to review
its compliance with its pledge to provide consumer relief. If you're counting, that brings the number of monitors that Deutsche has to five the other supervised swaps, currencies, interest rates, and sanctions. Our guest is Peter Handing, a professor at Wayne State University. Peter Deutsche Bank admitted to making false representations and omitting material information from disclosures to investors. Financial institutions don't usually admit wrongdoing in these settlements. Could this
lead to other claims against Deutsche Bank. Well, certainly there is going to be at least some risk for the bank that these types of disclosures or these types of statements that they have admitted to UH, and there's some emails that are in there that as typically do embarrass the bank. That could lead to some additional litigation risk, but certainly not at the billion dollar level like it was facing. And of course as a German bank, it doesn't face the risk from a shareholder lawsuit that a
bank that is charted in the United States would face. So, um, it's an embarrassment certainly for Deutsche Bank, and they have admitted that they acted wrongfully, but I think that the major blow here is behind them when they pay the about three point one billion as the penalty and then the rest as consumer relief. So, Peter, you know, we tend to focus a lot on what you know, this is the the Obama administration getting a lot of these done towards the end. But this is really for dot
to bank a very good outcome, isn't it. Well, certainly it's a good outcome in that it puts it behind the bank. Can now put this in the rear view mirror And also to the real hit the bank took at least on the markets, was when that fourteen billion dollar figure first came out. Um, that that's what the Justice Department was asking for demanding as kind of its opening salvo in the negotiations that drove down Deutsch's stock significantly. And so really now the bank can say we have
this behind us. UM. You know, as June mentioned that they have their fifth monitor. Uh. You know, at some point they're going to have to emerge from this. One would hope and be able to say that the costs that are associated with these legacy cases is really over with,
so that they can try to move forward, Peter. In the last few years, we've seen all the big banks basically settle except for Barkleys and most Bank of America, JP, Morgan Chase, City Group, Goldman Sachs, Morgan's, Downley Credit Suite, and Deutsche Bank. Now why is Barkley's holding out? Do you have any insight? Well, one reason maybe that the
Department of Justice's demand was too high. Given how much Barclay's participated in the residential mortgage backed securities market UM, the Justice Department has very much focused on UM any type of resolution in the billions UM that would include both consumer relief and a penalty. So I think there was a concern on Barclay's part that the Department was demanding too much, and the collateral consequences for Barclay's really aren't all that significant. Barkley's took a big hit back
when it was the first one to settle the libor litigation. Uh, it has really put almost all of this behind it. And my guess is that at some point they just decided to draw a line in the sand and say, let's see what the Justice Department will do, especially under a new administration. Will the new administration be as committed
to pursuing this case? Well, Peter, that's exactly what I was going to ask you, you know, going with the things that are unsettled and about we've got about thirty seconds left, what do you expect the new administration is going to do in regard to this sort of thing? Well,
I don't think. Well, I don't think we'll see anything quickly because they've got to get settled in But a few months out from now, I could certainly see settlement talks where there will be a lower number, perhaps in the millions rather than billions.