1 00:00:00,200 --> 00:00:03,720 Speaker 1: Seven point two billion dollars. That's the price Doutsche Bank 2 00:00:03,760 --> 00:00:06,600 Speaker 1: will pay the US Justice Department to settle the case 3 00:00:06,680 --> 00:00:10,000 Speaker 1: over its handling of mortgage backed securities before two thousand 4 00:00:10,039 --> 00:00:13,520 Speaker 1: and eight. The mortgage investigation was among the bank's biggest 5 00:00:13,560 --> 00:00:18,720 Speaker 1: litigation risks. Justice initially wanted fourteen billion from Deutsche. The 6 00:00:18,760 --> 00:00:22,000 Speaker 1: bank also agreed to hire an outside monitor to review 7 00:00:22,040 --> 00:00:25,520 Speaker 1: its compliance with its pledge to provide consumer relief. If 8 00:00:25,520 --> 00:00:28,320 Speaker 1: you're counting, that brings the number of monitors that Deutsche 9 00:00:28,400 --> 00:00:32,920 Speaker 1: has to five the other supervised swaps, currencies, interest rates, 10 00:00:32,920 --> 00:00:36,279 Speaker 1: and sanctions. Our guest is Peter Handing, a professor at 11 00:00:36,320 --> 00:00:41,440 Speaker 1: Wayne State University. Peter Deutsche Bank admitted to making false 12 00:00:41,479 --> 00:00:48,080 Speaker 1: representations and omitting material information from disclosures to investors. Financial 13 00:00:48,120 --> 00:00:53,479 Speaker 1: institutions don't usually admit wrongdoing in these settlements. Could this 14 00:00:53,680 --> 00:00:57,800 Speaker 1: lead to other claims against Deutsche Bank. Well, certainly there 15 00:00:57,880 --> 00:01:00,480 Speaker 1: is going to be at least some risk for the 16 00:01:00,520 --> 00:01:06,039 Speaker 1: bank that these types of disclosures or these types of 17 00:01:06,319 --> 00:01:09,000 Speaker 1: statements that they have admitted to UH, and there's some 18 00:01:09,400 --> 00:01:14,039 Speaker 1: emails that are in there that as typically do embarrass 19 00:01:14,120 --> 00:01:19,040 Speaker 1: the bank. That could lead to some additional litigation risk, 20 00:01:19,120 --> 00:01:22,960 Speaker 1: but certainly not at the billion dollar level like it 21 00:01:23,040 --> 00:01:25,600 Speaker 1: was facing. And of course as a German bank, it 22 00:01:25,680 --> 00:01:30,200 Speaker 1: doesn't face the risk from a shareholder lawsuit that a 23 00:01:30,319 --> 00:01:34,440 Speaker 1: bank that is charted in the United States would face. So, um, 24 00:01:34,480 --> 00:01:37,520 Speaker 1: it's an embarrassment certainly for Deutsche Bank, and they have 25 00:01:37,600 --> 00:01:41,600 Speaker 1: admitted that they acted wrongfully, but I think that the 26 00:01:41,720 --> 00:01:45,200 Speaker 1: major blow here is behind them when they pay the 27 00:01:45,280 --> 00:01:48,600 Speaker 1: about three point one billion as the penalty and then 28 00:01:48,960 --> 00:01:53,240 Speaker 1: the rest as consumer relief. So, Peter, you know, we 29 00:01:53,320 --> 00:01:55,440 Speaker 1: tend to focus a lot on what you know, this 30 00:01:55,520 --> 00:01:57,560 Speaker 1: is the the Obama administration getting a lot of these 31 00:01:57,600 --> 00:01:59,920 Speaker 1: done towards the end. But this is really for dot 32 00:02:00,040 --> 00:02:03,200 Speaker 1: to bank a very good outcome, isn't it. Well, certainly 33 00:02:03,400 --> 00:02:05,680 Speaker 1: it's a good outcome in that it puts it behind 34 00:02:06,560 --> 00:02:08,839 Speaker 1: the bank. Can now put this in the rear view 35 00:02:08,880 --> 00:02:12,000 Speaker 1: mirror And also to the real hit the bank took 36 00:02:12,120 --> 00:02:15,680 Speaker 1: at least on the markets, was when that fourteen billion 37 00:02:15,720 --> 00:02:18,600 Speaker 1: dollar figure first came out. Um, that that's what the 38 00:02:18,680 --> 00:02:22,919 Speaker 1: Justice Department was asking for demanding as kind of its 39 00:02:22,960 --> 00:02:28,120 Speaker 1: opening salvo in the negotiations that drove down Deutsch's stock significantly. 40 00:02:28,600 --> 00:02:31,840 Speaker 1: And so really now the bank can say we have 41 00:02:32,000 --> 00:02:34,800 Speaker 1: this behind us. UM. You know, as June mentioned that 42 00:02:34,880 --> 00:02:37,760 Speaker 1: they have their fifth monitor. Uh. You know, at some 43 00:02:37,800 --> 00:02:41,000 Speaker 1: point they're going to have to emerge from this. One 44 00:02:41,040 --> 00:02:44,080 Speaker 1: would hope and be able to say that the costs 45 00:02:44,120 --> 00:02:49,560 Speaker 1: that are associated with these legacy cases is really over with, 46 00:02:49,680 --> 00:02:53,520 Speaker 1: so that they can try to move forward, Peter. In 47 00:02:53,560 --> 00:02:56,560 Speaker 1: the last few years, we've seen all the big banks 48 00:02:56,600 --> 00:03:01,080 Speaker 1: basically settle except for Barkleys and most Bank of America, JP, 49 00:03:01,120 --> 00:03:04,680 Speaker 1: Morgan Chase, City Group, Goldman Sachs, Morgan's, Downley Credit Suite, 50 00:03:04,680 --> 00:03:08,080 Speaker 1: and Deutsche Bank. Now why is Barkley's holding out? Do 51 00:03:08,120 --> 00:03:13,480 Speaker 1: you have any insight? Well, one reason maybe that the 52 00:03:13,520 --> 00:03:18,560 Speaker 1: Department of Justice's demand was too high. Given how much 53 00:03:18,639 --> 00:03:23,880 Speaker 1: Barclay's participated in the residential mortgage backed securities market UM, 54 00:03:24,040 --> 00:03:28,360 Speaker 1: the Justice Department has very much focused on UM any 55 00:03:28,400 --> 00:03:32,320 Speaker 1: type of resolution in the billions UM that would include 56 00:03:32,320 --> 00:03:34,880 Speaker 1: both consumer relief and a penalty. So I think there 57 00:03:34,880 --> 00:03:38,240 Speaker 1: was a concern on Barclay's part that the Department was 58 00:03:38,360 --> 00:03:44,600 Speaker 1: demanding too much, and the collateral consequences for Barclay's really 59 00:03:44,640 --> 00:03:47,680 Speaker 1: aren't all that significant. Barkley's took a big hit back 60 00:03:47,760 --> 00:03:51,800 Speaker 1: when it was the first one to settle the libor litigation. Uh, 61 00:03:51,840 --> 00:03:54,160 Speaker 1: it has really put almost all of this behind it. 62 00:03:54,560 --> 00:03:57,960 Speaker 1: And my guess is that at some point they just 63 00:03:58,040 --> 00:04:00,680 Speaker 1: decided to draw a line in the sand and say, 64 00:04:01,200 --> 00:04:04,160 Speaker 1: let's see what the Justice Department will do, especially under 65 00:04:04,160 --> 00:04:08,040 Speaker 1: a new administration. Will the new administration be as committed 66 00:04:08,080 --> 00:04:10,720 Speaker 1: to pursuing this case? Well, Peter, that's exactly what I 67 00:04:10,800 --> 00:04:12,800 Speaker 1: was going to ask you, you know, going with the 68 00:04:12,800 --> 00:04:14,880 Speaker 1: things that are unsettled and about we've got about thirty 69 00:04:14,920 --> 00:04:17,600 Speaker 1: seconds left, what do you expect the new administration is 70 00:04:17,600 --> 00:04:19,920 Speaker 1: going to do in regard to this sort of thing? Well, 71 00:04:19,960 --> 00:04:22,120 Speaker 1: I don't think. Well, I don't think we'll see anything 72 00:04:22,200 --> 00:04:25,719 Speaker 1: quickly because they've got to get settled in But a 73 00:04:25,760 --> 00:04:29,200 Speaker 1: few months out from now, I could certainly see settlement 74 00:04:29,240 --> 00:04:32,640 Speaker 1: talks where there will be a lower number, perhaps in 75 00:04:32,680 --> 00:04:34,760 Speaker 1: the millions rather than billions.