Speaker 1: Seven point two billion dollars. That's the price Doutsche Bank
Speaker 1: will pay the US Justice Department to settle the case
Speaker 1: over its handling of mortgage backed securities before two thousand
Speaker 1: and eight. The mortgage investigation was among the bank's biggest
Speaker 1: litigation risks. Justice initially wanted fourteen billion from Deutsche. The
Speaker 1: bank also agreed to hire an outside monitor to review
Speaker 1: its compliance with its pledge to provide consumer relief. If
Speaker 1: you're counting, that brings the number of monitors that Deutsche
Speaker 1: has to five the other supervised swaps, currencies, interest rates,
Speaker 1: and sanctions. Our guest is Peter Handing, a professor at
Speaker 1: Wayne State University. Peter Deutsche Bank admitted to making false
Speaker 1: representations and omitting material information from disclosures to investors. Financial
Speaker 1: institutions don't usually admit wrongdoing in these settlements. Could this
Speaker 1: lead to other claims against Deutsche Bank. Well, certainly there
Speaker 1: is going to be at least some risk for the
Speaker 1: bank that these types of disclosures or these types of
Speaker 1: statements that they have admitted to UH, and there's some
Speaker 1: emails that are in there that as typically do embarrass
Speaker 1: the bank. That could lead to some additional litigation risk,
Speaker 1: but certainly not at the billion dollar level like it
Speaker 1: was facing. And of course as a German bank, it
Speaker 1: doesn't face the risk from a shareholder lawsuit that a
Speaker 1: bank that is charted in the United States would face. So, um,
Speaker 1: it's an embarrassment certainly for Deutsche Bank, and they have
Speaker 1: admitted that they acted wrongfully, but I think that the
Speaker 1: major blow here is behind them when they pay the
Speaker 1: about three point one billion as the penalty and then
Speaker 1: the rest as consumer relief. So, Peter, you know, we
Speaker 1: tend to focus a lot on what you know, this
Speaker 1: is the the Obama administration getting a lot of these
Speaker 1: done towards the end. But this is really for dot
Speaker 1: to bank a very good outcome, isn't it. Well, certainly
Speaker 1: it's a good outcome in that it puts it behind
Speaker 1: the bank. Can now put this in the rear view
Speaker 1: mirror And also to the real hit the bank took
Speaker 1: at least on the markets, was when that fourteen billion
Speaker 1: dollar figure first came out. Um, that that's what the
Speaker 1: Justice Department was asking for demanding as kind of its
Speaker 1: opening salvo in the negotiations that drove down Deutsch's stock significantly.
Speaker 1: And so really now the bank can say we have
Speaker 1: this behind us. UM. You know, as June mentioned that
Speaker 1: they have their fifth monitor. Uh. You know, at some
Speaker 1: point they're going to have to emerge from this. One
Speaker 1: would hope and be able to say that the costs
Speaker 1: that are associated with these legacy cases is really over with,
Speaker 1: so that they can try to move forward, Peter. In
Speaker 1: the last few years, we've seen all the big banks
Speaker 1: basically settle except for Barkleys and most Bank of America, JP,
Speaker 1: Morgan Chase, City Group, Goldman Sachs, Morgan's, Downley Credit Suite,
Speaker 1: and Deutsche Bank. Now why is Barkley's holding out? Do
Speaker 1: you have any insight? Well, one reason maybe that the
Speaker 1: Department of Justice's demand was too high. Given how much
Speaker 1: Barclay's participated in the residential mortgage backed securities market UM,
Speaker 1: the Justice Department has very much focused on UM any
Speaker 1: type of resolution in the billions UM that would include
Speaker 1: both consumer relief and a penalty. So I think there
Speaker 1: was a concern on Barclay's part that the Department was
Speaker 1: demanding too much, and the collateral consequences for Barclay's really
Speaker 1: aren't all that significant. Barkley's took a big hit back
Speaker 1: when it was the first one to settle the libor litigation. Uh,
Speaker 1: it has really put almost all of this behind it.
Speaker 1: And my guess is that at some point they just
Speaker 1: decided to draw a line in the sand and say,
Speaker 1: let's see what the Justice Department will do, especially under
Speaker 1: a new administration. Will the new administration be as committed
Speaker 1: to pursuing this case? Well, Peter, that's exactly what I
Speaker 1: was going to ask you, you know, going with the
Speaker 1: things that are unsettled and about we've got about thirty
Speaker 1: seconds left, what do you expect the new administration is
Speaker 1: going to do in regard to this sort of thing? Well,
Speaker 1: I don't think. Well, I don't think we'll see anything
Speaker 1: quickly because they've got to get settled in But a
Speaker 1: few months out from now, I could certainly see settlement
Speaker 1: talks where there will be a lower number, perhaps in
Speaker 1: the millions rather than billions.