Credit Suisse Settles With DOJ For $5.3 Billion; Will Pay $2.5 Billion Civil Penalty

Tyler Durden's picture

Shortly after last night's news that Deutsche Bank had settled with the DOJ for $7.2 billion, of which it would pay $3.1 billion in a civil penalty, far lower than the $14 billion number initially speculated (the stock popped as much as 4% before settling just over 2% higher currently), Credit Suisse likewise closed the books on its pre-crisis RMBS fraud when the largest Swiss bank agreed to pay $5.28 billion to resolve a U.S. investigation into its business in mortgage-backed securities. Credit Suisse will pay a $2.48 billion civil penalty and $2.8 billion in relief for homeowners and communities hit by the collapse in home prices, it said in a statement Friday. Credit Suisse will take a pretax charge of about $2 billion in addition to its existing reserves during the fourth quarter.

The two settlements follow a surprise announcement by the DOJ which said on Thursday it sued Barclays Plc for fraud over its sale of mortgage bonds after the bank balked at paying the amount the government sought in negotiations. The lawsuit announced on Thursday is rare for big banks, which typically settle with the government rather than risk drawn-out litigation and a possible trial.

“With this settlement, the largest remaining major uncertainty is now eliminated” for Credit Suisse, Peter Casanova, an analyst at Kepler Cheuvreux told Bloomberg. “This is good news.”

The Obama administration is pressing to wrap up investigations of Wall Street firms for creating and selling the subprime mortgage bonds that fueled the 2008 financial crisis. Before the two deals on Friday, authorities had already extracted more than $46 billion in fines from six U.S. financial institutions over their dealings in mortgage-backed securities. Bank of America Corp., which had the largest such settlement, agreed to pay $16.7 billion over bonds that were worth four times those of Deutsche Bank. Meanwhile, Deutsche Bank said that the fine will cut its pretax profit by $1.2 billion this quarter as the firm taps existing legal reserves to blunt much of that cost.

Credit Suisse said it would pay the consumer relief over five years following the settlement. The bank had set aside about 2.1 billion francs ($2.1 billion) in general litigation provisions by the end of the third quarter.

Chief Executive Officer Tidjane Thiam tapped shareholders for 6 billion Swiss francs in late 2015 while shifting the company’s focus away from capital-heavy investment banking toward wealth management. Thiam has updated investors twice on his plan, which includes a partial initial public offering of its Swiss unit in late 2017. In December, the former insurance executive pledged more cost cuts and lowered targets for the international wealth management and its Asian unit.

As Bloomberg adds, the Swiss bank remains under Justice Department scrutiny over its handling of U.S. clients in Israel. The department fined Credit Suisse $2.6 billion in 2014 for helping Americans dodge taxes in Switzerland. The bank is also a target of several antitrust cases in the U.S., including class actions related to foreign-exchange rates and interest-rate swaps.

At least three other European banks remain under investigation over the role of their mortgage-backed securities business: UBS, HSBC and Royal Bank of Scotland. In addition to Bank of America, U.S. banks that have settled include Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley. Wells Fargo & Co. and Moody’s Corp. have disclosed U.S. investigations into their mortgage-backed securities dealings and have said they’re cooperating.

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Bobbyrib's picture

I don't understand why countries participate in a rigged system. You would think Europe would tell the US to fuck off by now. Goldman Sach's fines are always a fraction of what everyone else pays. JP Morgan also pays fines lower than most banks. It's almost as if Goldman Sachs' and JP Morgan's securities violations are sanctioned.

Arnold's picture

Mortgage Backed Securities.

Sub prime Mortgage Backed Securities...

No expertise offered,

but Fannie and Freddie handled a majority of them

and still hold an insolvent amount of liability as assets.


Thank Barnie Frank.

Mr. Universe's picture

So how many Banksters went to jail?

slammin_dude's picture

Lol...the US has the largest standing army in Europe.....Germany, Italy, and Japan are stilloccupied territoies 75 AFTER the end of ww2....ppl just dont want to admit it

Singelguy's picture

When I read about these so called "settlements" I always ask WHO GETS ALL THAT MONEY? It certainly doesn't go to the people that were screwed by these criminal practices and the employees of the banks that perpetrated these crimes are niether fined nor jailed. Let me put on my tin foil hat and say the government regulators and banks are working together and the billions paid are somehow funnelled back to the banks so they keep doing what they were not supposed to be doing. Does that sound crazy ?

Bobbyrib's picture

Yeah, it's pretty much like the mafia at this point. Unless it is a lawsuit settlement or it directly states consumers will be refunded I imagine the government will get its taste of the action. Kick a little up to the Don (the regulators in this case).

larz's picture

The mafia had a code of honor.   .gov does not

SoDamnMad's picture

That's crazy.  Who could buy your line of thinking?  (ME, for one)

refill6times's picture

These settlements are coming fast and hard before the chimp in chief retires because I believe that the civil penalty can be distributed to favorite liberal organizations of the chimps chosing.

This is the last big cash cow and they are not going to let Trump have a decision on what to do with all this cash.


And yes, not enough lamposts...

SillySalesmanQuestion's picture

Aaaaaaaaaaand, no one goes to jail...again.
Please remit our 10% finders fee to our private account #'s below.
The DOJ.

Last of the Middle Class's picture

and just exactly how much QE money that we can't talk about did they get???? See the pattern here guys, no consequences no changie changie bad practices. Ummm Duh.

restelle's picture

"A billion here, a billion there.  Pretty soon, you're talking some real money".

(author not known)

NoDebt's picture

Everett Dirksen.  Republican congressman and eventually senator from Illinois back in the 40s and 50s.  

(author identified!)


And that's just his best known quote.  He's got zillions of other good ones:


Sorry, but I got a head full of bad trivia and sometimes it's just gotta come out.  I have a severe birth defect that causes this- I was born entirely without a memory hole.  

restelle's picture

Thanks for the refresher!

Cassandra.Hermes's picture

These banks must love Obama nightmare coming to the end, they have paid total of 230B

overmedicatedundersexed's picture

criminals can bk a co or have said co pay fines..they keep the loot and tell share holders to pound sand..we all know the crooks run the corzine free hillary..Trump needs to put teeth back into our doj.

overmedicatedundersexed's picture

here's a thought: how many jobs would be created if all US mega banks were broken up ?? thousands of small banks got a piece of that break up..ans millions.

Baby Eating Dingo22's picture

Treasury writing this check too?

5.3 bliion divided by 330,000,000 is one stop at Starbux

Sheepie will never notice

Give til it hurts

ConnectingTheDots's picture

The fine money will be given back to the banks in interest payments for money these banks created out of thin air and "lent" to the government.

Greed is King's picture

The banking greed and fraud epidemic started on Wall St and then infected the rest of the global financial system. A really good incite into who started the disease and how they managed to contaminate the Wolds banks can be found by watching the Matt Damon narrated film: Inside Job.

overmedicatedundersexed's picture

if you need a movie to understand this, you never will.

ConnectingTheDots's picture

"The Big Short" also lays out what happens clearly and does it in a very entertaining way. For those who want to better understand what really happens, this movie is a must see.

Faeriedust's picture

What a farce.  The banks profit handsomely, taking out multiples over what they give back in damages.  The costs are paid by individuals, mostly of the middle classes, who lack the resources to sue or exert political pressure, and many of them are financially ruined; some even die.  Then the token penalties are paid to the corrupt governments to benefit government employees and contractor cronies in the "community relief" schemes, almost none of which trickles back to those who actually were harmed.  Some of the fines even trickle back to the banks as "public-private partnership" financing schemes and tax-relief gifts.  It's all just a pile of crap.

Eat the rich.  With sauce.  There ARE ways to choke the life out of bankers.  Read your medieval history.  Research Tokugawa Japan.  There have been cultures which kept bankers properly leashed for thousands of years.  First you have to stop believing their lies.

ConnectingTheDots's picture

And exactly how many top executives will be going to prison?

So basically we fine them, they get the shareholders to pay the fine, and they do not face prison, get to keep their ill-gotten gains.

That will teach them that crime does not pay, and no one will ever dare do this AGAIN. /sarc

Oliver Jones's picture

"Okay, let's see what Credit Suisse's appetite is..."

NoWayJose's picture

I got some consumer relief from a life insurance company that got their wrists slapped. No cash. Just some 'increased insurance amount' for a limited time. I didn't die - so who kept the consumer relief money?

TUpRich's picture

The money goes into the Government coffers never to be seen again.