1 00:00:01,880 --> 00:00:05,279 Speaker 1: Global business news twenty four hours a day. If Bloomberg 2 00:00:05,320 --> 00:00:08,400 Speaker 1: dot Com, the radio plus mobile act and on your radio. 3 00:00:08,680 --> 00:00:12,719 Speaker 1: This is a Bloomberg Business Flash from Bloomberg World Handquarters. 4 00:00:12,720 --> 00:00:16,279 Speaker 1: I'm Charlie Pellett. European Union President Donald Tusk says UK 5 00:00:16,400 --> 00:00:19,720 Speaker 1: Prime Minister Theresa May told him that Article fifty will 6 00:00:19,800 --> 00:00:24,200 Speaker 1: likely be triggered in January or February. Article fifty would 7 00:00:24,280 --> 00:00:27,800 Speaker 1: lead to the UK exiting the EU within two years. 8 00:00:28,280 --> 00:00:31,280 Speaker 1: Stocks lawer with the SMP five hundred index down twelve 9 00:00:31,320 --> 00:00:33,960 Speaker 1: now to one thirty four. Drop there of six tents 10 00:00:34,000 --> 00:00:37,560 Speaker 1: of one percent down, Industrials down one o seven. Also 11 00:00:37,640 --> 00:00:40,200 Speaker 1: a drop of six tents of one percent, as stacks 12 00:00:40,200 --> 00:00:43,280 Speaker 1: slumping seventeen, a drop of three tents of one percent, 13 00:00:43,680 --> 00:00:46,520 Speaker 1: Gold lower by seven dollars, the ounce down five tents 14 00:00:46,520 --> 00:00:48,920 Speaker 1: of one percent, the tenure down to thirty seconds, the 15 00:00:48,960 --> 00:00:53,000 Speaker 1: yield one point seven percent, and crude oil West Texas 16 00:00:53,040 --> 00:00:56,000 Speaker 1: Intermediate down two point three percent, slumping a dollar two 17 00:00:56,000 --> 00:00:59,080 Speaker 1: of barrel w t I now at forty two ninety. 18 00:00:59,240 --> 00:01:03,640 Speaker 1: I'm Charlie. That's the Bloomberg business flash you're listening to. 19 00:01:03,800 --> 00:01:07,559 Speaker 1: Taking stock with Kathleen Hay and Pim Box on Bloomberg Radio. 20 00:01:08,560 --> 00:01:12,479 Speaker 1: The lawsuits they just keep coming. Shares of Deutsche Bank 21 00:01:12,520 --> 00:01:17,280 Speaker 1: today down more than eight percent. The US Justice Department 22 00:01:17,360 --> 00:01:21,360 Speaker 1: and demanding fourteen billion dollars as part of a settlement 23 00:01:21,400 --> 00:01:24,720 Speaker 1: having to do with the residential mortgage backed securities. It's 24 00:01:24,800 --> 00:01:27,520 Speaker 1: just adds to the woes at Deutsche Bank and many 25 00:01:27,560 --> 00:01:32,520 Speaker 1: other banks. The bank has previously been sued by various 26 00:01:32,640 --> 00:01:37,199 Speaker 1: entities for foreign exchange rates, interest rate swaps, liebor ss 27 00:01:37,319 --> 00:01:41,560 Speaker 1: A bonds as well as treasuries. They're being investigated for 28 00:01:41,560 --> 00:01:44,840 Speaker 1: for x for metals trading, as well as sanctioned breaches. 29 00:01:45,240 --> 00:01:47,760 Speaker 1: The list goes on here to tell us what's important 30 00:01:47,800 --> 00:01:50,240 Speaker 1: and what's not. As Elliot Stein, he is senior litigation 31 00:01:50,240 --> 00:01:54,120 Speaker 1: analyst for Bloomberg Intelligence, Elliott Boy, this has got to 32 00:01:54,200 --> 00:01:57,120 Speaker 1: keep the lawyers busy for quite a long time. It 33 00:01:58,400 --> 00:02:01,520 Speaker 1: has been for years, um, and it will continue to 34 00:02:01,600 --> 00:02:06,520 Speaker 1: keep lawyers gainfully employed for a while. UM. You know this, this, uh, 35 00:02:06,560 --> 00:02:10,680 Speaker 1: this settlement, potential settlement, settlement, anticipated settlement. Is not a 36 00:02:10,680 --> 00:02:12,480 Speaker 1: surprise when new Deutsche Bank was going to be one 37 00:02:12,480 --> 00:02:15,040 Speaker 1: of the next big banks to settle with the Department 38 00:02:15,040 --> 00:02:17,640 Speaker 1: of Justice. Um, but I think the number the fourteen 39 00:02:17,680 --> 00:02:20,720 Speaker 1: billion dollar figure. It took a lot of people by surprise. UM. 40 00:02:20,760 --> 00:02:24,480 Speaker 1: Our Bloomberg intelligence estimate UH for a settlement was about 41 00:02:24,480 --> 00:02:27,320 Speaker 1: four billion to eight billion dollars, which leads us to 42 00:02:27,320 --> 00:02:30,240 Speaker 1: believe that, you know, it'll probably wind up being untilds 43 00:02:30,240 --> 00:02:32,040 Speaker 1: the high end of that range. Okay, I just want 44 00:02:32,080 --> 00:02:35,240 Speaker 1: to play a clip from Catherine Nixon, the chief investment 45 00:02:35,240 --> 00:02:38,839 Speaker 1: officer at Northern Trust. She was speaking earlier on Bloomberg 46 00:02:39,320 --> 00:02:43,480 Speaker 1: and then get your reaction, gentlemen, to this. It's it's 47 00:02:43,639 --> 00:02:46,560 Speaker 1: just keeps coming back. It's you know, like Jason from Friday, 48 00:02:47,280 --> 00:02:49,480 Speaker 1: and it's very hard for us to get away from this. 49 00:02:49,639 --> 00:02:51,480 Speaker 1: And you know, when you think about what it what 50 00:02:51,600 --> 00:02:53,880 Speaker 1: it does for the macro outlook in Europe. And you know, 51 00:02:53,919 --> 00:02:57,440 Speaker 1: we've been talking previously about how the European banking system 52 00:02:57,520 --> 00:03:00,280 Speaker 1: was facing an income statement issue, not a balance sheet 53 00:03:00,320 --> 00:03:02,720 Speaker 1: issue with with low and negative interest rates, and now 54 00:03:02,760 --> 00:03:05,240 Speaker 1: it's become a balance sheet issue again. So it's not 55 00:03:05,320 --> 00:03:08,639 Speaker 1: just Georgia Bank. We have UBS, RBS credit Suite who 56 00:03:08,639 --> 00:03:11,000 Speaker 1: are going to soon be dealing with the same thing. 57 00:03:11,480 --> 00:03:14,800 Speaker 1: Um and it just keeps on going. That was Catherine Nixon, 58 00:03:14,840 --> 00:03:18,799 Speaker 1: chief Investment Officer at Northern Trust, speaking earlier on Bloomberg. So, 59 00:03:19,160 --> 00:03:21,000 Speaker 1: Elliott Stein, what do you make of this is it's 60 00:03:21,040 --> 00:03:23,400 Speaker 1: just gonna be just the beginning of what is going 61 00:03:23,440 --> 00:03:27,720 Speaker 1: to be a continuous litigation process. Well, it is for 62 00:03:27,760 --> 00:03:30,639 Speaker 1: a lot of European banks. So you know, as most 63 00:03:30,680 --> 00:03:33,840 Speaker 1: people will recall, Um, the Department of Justice did settle 64 00:03:34,400 --> 00:03:37,280 Speaker 1: some of its larger r MBS probes with US banks 65 00:03:37,600 --> 00:03:41,800 Speaker 1: via a city JP Morgan Goldman, Morgan Stanley. Um, but 66 00:03:41,920 --> 00:03:45,680 Speaker 1: it still is investigating several European banks, just like that 67 00:03:45,760 --> 00:03:48,400 Speaker 1: clip showed. Um. So in addition to Deutsche Bank, you 68 00:03:48,400 --> 00:03:54,160 Speaker 1: have Barkley's credit Suites, HSBC, RBS UBS. They're all being 69 00:03:54,200 --> 00:03:57,160 Speaker 1: investigated by the Department of Justice over r MBS practices 70 00:03:57,320 --> 00:04:01,280 Speaker 1: from almost ten years ago. Um. And so we anticipate 71 00:04:01,320 --> 00:04:03,680 Speaker 1: more settlements with those banks as well. And you know 72 00:04:03,760 --> 00:04:07,720 Speaker 1: this anticipated settlement with Deutsche Bank. Um, is you know 73 00:04:07,720 --> 00:04:09,520 Speaker 1: going to tell us a little bit about where those 74 00:04:09,520 --> 00:04:11,800 Speaker 1: settlements are gonna wind up? Well, I mean, what did 75 00:04:12,040 --> 00:04:15,680 Speaker 1: Bank America got a seventeen billion dollars settlement? Right? So 76 00:04:16,160 --> 00:04:19,560 Speaker 1: is Deutsche Bank almost as guilty of this is Bank America. 77 00:04:19,680 --> 00:04:22,560 Speaker 1: They do just as much wrong in the same scale 78 00:04:22,720 --> 00:04:25,800 Speaker 1: as Bank America. Right, So you know, first of all, 79 00:04:25,839 --> 00:04:29,320 Speaker 1: these are civil fine, so guilty and innocence doesn't you know, 80 00:04:29,360 --> 00:04:31,560 Speaker 1: guilt and innocence doesn't come into it then not know, 81 00:04:31,680 --> 00:04:34,240 Speaker 1: I know what you mean. It is civil fraud. The 82 00:04:34,320 --> 00:04:38,360 Speaker 1: charges are civil frauds so um or the allegations are 83 00:04:38,760 --> 00:04:42,480 Speaker 1: potentially gonna be civil fraud charges. Um. Look, I think 84 00:04:42,480 --> 00:04:44,760 Speaker 1: the number is gonna be lower than fourteen billion dollars. 85 00:04:44,839 --> 00:04:47,040 Speaker 1: I think it's gonna wind up being a little north 86 00:04:47,080 --> 00:04:49,840 Speaker 1: of eight billion dollars UM, which is a little higher 87 00:04:49,839 --> 00:04:52,559 Speaker 1: than the range we had. Uh. You know, it just means, 88 00:04:52,720 --> 00:04:55,200 Speaker 1: you know, the Department of Justice has taken several factors 89 00:04:55,200 --> 00:05:00,000 Speaker 1: into account, the amount of evidence of fraud in documents 90 00:05:00,040 --> 00:05:02,960 Speaker 1: and and um and that they get from other testimony. 91 00:05:03,000 --> 00:05:04,880 Speaker 1: But then also the amount of securities that were sold 92 00:05:04,960 --> 00:05:07,560 Speaker 1: during the relevant time period, the amount of losses that 93 00:05:07,640 --> 00:05:10,920 Speaker 1: investors have incurred, and games that the bank's got um 94 00:05:11,080 --> 00:05:13,279 Speaker 1: and you know, be of a because the countrywide was 95 00:05:13,279 --> 00:05:15,200 Speaker 1: a much bigger player in the R and B S 96 00:05:15,240 --> 00:05:17,760 Speaker 1: markets during the relevant time That's why it's fine was 97 00:05:17,800 --> 00:05:20,080 Speaker 1: so large. That's my point. But this fine is almost 98 00:05:20,120 --> 00:05:23,480 Speaker 1: as much as that. So what did d O J expect. No, 99 00:05:23,720 --> 00:05:25,680 Speaker 1: it's gonna be it's gonna end up being lower than 100 00:05:25,720 --> 00:05:29,240 Speaker 1: seventeen billion dollars. Um, you know JP JP Morgan paid 101 00:05:29,279 --> 00:05:31,479 Speaker 1: thirteen billion dollars. I think it'll probably be a little 102 00:05:31,560 --> 00:05:34,760 Speaker 1: south of that. Is there any possibility that this will 103 00:05:34,760 --> 00:05:39,840 Speaker 1: sink Deutsche Bank? Uh? Well, like they have six billions 104 00:05:39,880 --> 00:05:43,680 Speaker 1: stock is you know, the stockholders can't be happy about this, look, 105 00:05:43,720 --> 00:05:47,320 Speaker 1: and I think that's um. You know, the Department of 106 00:05:47,360 --> 00:05:50,120 Speaker 1: Justice is not in the business of putting banks out 107 00:05:50,120 --> 00:05:53,920 Speaker 1: of business. Um, So you know, if it comes to that, 108 00:05:54,040 --> 00:05:56,320 Speaker 1: I think that's a selling point that Deutsche Bank has 109 00:05:56,320 --> 00:05:58,960 Speaker 1: in its pocket. They're gonna need some help from the 110 00:05:58,960 --> 00:06:03,919 Speaker 1: German government. I can't comment on you smiling about that one. 111 00:06:03,960 --> 00:06:06,719 Speaker 1: So I imagine there must be conversations. I mean, is 112 00:06:06,760 --> 00:06:10,840 Speaker 1: that typical? Would there be government conversations? But Frow Miracle 113 00:06:10,960 --> 00:06:14,000 Speaker 1: was asked about this in Bratislava today. She declined to 114 00:06:14,040 --> 00:06:17,400 Speaker 1: common as well. But she certainly can't be happy now 115 00:06:17,440 --> 00:06:20,520 Speaker 1: with the US government just piling fines onto all of 116 00:06:20,560 --> 00:06:26,679 Speaker 1: these big German benchmark companies. I mean, um, you know, Bosh, 117 00:06:26,760 --> 00:06:29,280 Speaker 1: I understand it is also being investigated, but that's a 118 00:06:29,320 --> 00:06:32,880 Speaker 1: company exactly, and Volkswagen had fifteen more than sixteen billion 119 00:06:32,920 --> 00:06:36,160 Speaker 1: dollars in fines, and now Deutsche Bank, I mean, the 120 00:06:36,279 --> 00:06:40,839 Speaker 1: US Justice Department is just attacking German national companies. Well, look, 121 00:06:40,880 --> 00:06:43,640 Speaker 1: it's not just the German companies. I mean, they're investigating 122 00:06:44,160 --> 00:06:47,520 Speaker 1: you know, hey, they've find several US banks and now 123 00:06:47,680 --> 00:06:49,640 Speaker 1: they've moved on to the European banks who were all 124 00:06:49,720 --> 00:06:53,720 Speaker 1: involved in in selling rnbs during the relevant time. Um 125 00:06:53,800 --> 00:06:56,920 Speaker 1: So I don't think they're you know, picking out any 126 00:06:56,960 --> 00:07:01,880 Speaker 1: particular bank, any particular country. This was an industry wide phenomenon, 127 00:07:01,920 --> 00:07:05,880 Speaker 1: and they're going after the players that they thought acted wrongfully. 128 00:07:06,160 --> 00:07:09,000 Speaker 1: I wonder if it begs the question did any of 129 00:07:09,080 --> 00:07:12,760 Speaker 1: the banks do things that were legal? Now otherways, I 130 00:07:12,960 --> 00:07:14,920 Speaker 1: understand all the ones that they have now being sued, 131 00:07:14,920 --> 00:07:18,440 Speaker 1: but did anyone not do something that was well, you know, 132 00:07:18,480 --> 00:07:20,720 Speaker 1: the government doesn't stand up and write a thank you 133 00:07:20,720 --> 00:07:24,480 Speaker 1: writer when clearly thank you very much for spending time 134 00:07:24,520 --> 00:07:27,320 Speaker 1: with us. That Elliot Stein is our senior litigation analysts 135 00:07:27,600 --> 00:07:32,120 Speaker 1: for Bloomberg Intelligence. Speaking about Deutsche Bank and the US 136 00:07:32,200 --> 00:07:37,000 Speaker 1: Justice Department seeking fourteen billion dollars worth of fines, you're 137 00:07:37,000 --> 00:07:39,400 Speaker 1: listening to taking stock I'm pim Fox. My co host 138 00:07:39,480 --> 00:07:47,000 Speaker 1: today is Matt Miller. This is Bloomberg. Coming up on 139 00:07:47,080 --> 00:07:49,640 Speaker 1: taking Stock, will be speaking with Mark Vitner. He is 140 00:07:49,720 --> 00:07:53,360 Speaker 1: senior economist at Wells Fargo Securities. Will give us his 141 00:07:53,440 --> 00:07:56,520 Speaker 1: take on consumer prices, the Federal Reserve, and the health 142 00:07:56,520 --> 00:07:58,160 Speaker 1: of the U. S. Economy.