Deutsche Bank, Credit Suisse Reach Settlements with DOJ Over Sale of Toxic Mortgage Securities

Two major banks, Deutsche Bank and Credit Suisse, have reached agreements in principle with the U.S. Department of Justice to settle claims that the sale of toxic mortgage securities by the banks contributed to the 2008 financial crisis.

Deutsche Bank has agreed to a $7.2 billion settlement in principle, the bank said in a statement. The bank will pay a civil monetary penalty of $3.1 billion and $4.1 billion in consumer relief in the United States. In its statement, the bank said the consumer relief is expected to be in the form of loan modifications and other assistance to homeowners and borrowers, and other similar initiatives to be determined. The relief will be delivered over a period of at least five years.

The bank's agreed-upon settlement also puts to rest months of uncertainty and speculation over the bank's future. Last fall, there were reports that the U.S. government was seeking $14 billion from the bank, the New York Times reported. The large sum, as the Times explains, raised concerns about the bank's short-term prospects as well as its business model.

Deutche Bank's stock also took a hit as negotiations were underway.

Credit Suisse will pay a $2.48 billion civil penalty and $2.8 billion in relief, to be paid over five years following the settlement. Both settlements are subject to negotiation.

Bloomberg reports that the settlements will likely mean the banks will see second straight annual losses.

As the Washington Post notes, the settlement with Deutsche Bank also reduces concerns about President-elect Donald Trump's potential conflict-of-interest with the bank as his businesses have borrowed more than $300 million from the bank.

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