Is settlement looming between U.S. and RBS over pre-crisis mortgage bonds?
On to the next one…
Now that the U.S. government secured another massive settlement over pre-crisis mortgage bond practices, this time with Goldman Sachs to the tune of $5 billion, only one major investigation remains outstanding – Royal Bank of Scotland.
And according to a report from Reuters, a settlement between RBS and the feds could be coming in the next few weeks.
From Reuters, via uk.finance.yahoo.com:
Court documents filed in the United States in June suggested RBS could have to pay as much as $13 billion to settle the mortgage-backed securities claims, although some analysts' estimates are much lower.
Analysts expect U.S. regulators will be keen to wrap up the case well before U.S. presidential election campaigning begins in earnest.
"RBS is next in line and we would expect a settlement very soon," Chirantan Barua, analyst at Bernstein Research, said.
Barua also said that he feels there is real motivation to secure a settlement with RBS before Barack Obama leaves the White House next year.
RBS would the latest to settle with the feds over charges of misleading investors about the quality of mortgage bonds issued before the housing crisis.
Goldman Sachs announced Thursday that it agreed to a $5 billion settlement with the government over its pre-crisis mortgage business brought by the Residential Mortgage-Backed Securities Working Group of the U.S. Financial Fraud Enforcement Task Force.
Under the terms of the settlement, Goldman Sachs will pay $2.385 billion civil monetary penalty, make $875 million in cash payments and provide $1.8 billion in consumer relief.
But Goldman Sachs’ settlement paled in comparison to the settlements reached by Bank of America and JPMorgan Chase.
In August 2014, Bank of America agreed to a $16.65 billion settlement with the U.S. Department of Justice, certain federal agencies and six states to resolve claims over toxic residential mortgage-backed securities, collateralized debt obligations and an origination release on residential mortgage loans sold to Fannie Mae and Freddie Mac.
That settlement broke the previous record held by JPMorgan Chase, which settled in November 2013 for $13 billion.
The settlement resolved federal and civil claims related to the bank’s packaging, marketing, sale and issuance of mortgage-backed securities prior to the housing downturn. It also covers legacy issues left over from Bear Stearns and Washington Mutual, two entities JPM took over in the wake of the financial meltdown.
Citigroup also settled the government, to the tune of $7 billion. That settlement was announced in July 2014 and settled charges brought by the U.S. Department of Justice, several state attorneys general, and the Federal Deposit Insurance Corporation.
As Reuters reported, some think RBS may settle for as much as $13 billion, but RBS has reportedly set aside only $2.7 billion for the claims.