Credit Suisse to pay $5.3B over mortgage-backed securities
NEW YORK (AP) — Credit Suisse is paying $5.3 billion to settle claims that it misled investors about the quality of mortgage-backed securities that it sold in the lead-up to the 2008 financial crisis.
In the agreement with the Department of Justice, the Swiss bank acknowledged that it knew the mortgages it packaged and then sold as securities did not meet underwriting standards.
Some Credit Suisse employees referred to the mortgages as “bad loans” and “complete garbage,” according to the Justice Department.
“Today’s settlement underscores that the Department of Justice will hold accountable the institutions responsible for the financial crisis of 2008,” said Attorney General Loretta Lynch, in a statement Wednesday.
Credit Suisse will pay a $2.5 billion fine plus $2.8 billion for relief to struggling homeowners, borrowers or communities.
In a statement, Credit Suisse said Wednesday that it is pleased to put the matter behind it.
It’s the latest bank to settle with authorities for dealings in mortgage-backed securities, complex investments that were one of the causes of the global financial crisis in 2008.
Banks bundled mortgages from people with shaky credit into bonds whose risks many investors did not understand. When the mortgages went into default as the U.S. real estate market collapsed, so did the bonds, spreading losses and panic through the financial system.
Germany’s Deutsche Bank last month agreed to a $7.2 billion settlement with the Justice Department over its dealings in mortgage-backed securities.