Topline
Swiss bank UBS has agreed to pay $1.435 billion to resolve a lawsuit from the Department of Justice alleging misconduct in issuing 40 residential mortgage-backed securities in 2006 and 2007, the DOJ and UBS announced Monday, the last of a string of cases investigating banks’ conduct in igniting the 2008 financial crisis.
UBS agreed to pay $1.435 billion for their allegedly issuing 40 residential mortgage-backed … [+]
Key Facts
The settlement comes almost five years after the DOJ filed a civil lawsuit against UBS, accusing the bank of defrauding investors in dozens of mortgage-backed securities and breaking federal financial laws.
The DOJ alleged UBS made “false and misleading statements” to the buyers of residential mortgage-backed securities, by downplaying the fact that many of the mortgages contained in the products were shaky and at risk of default.
The DOJ says those UBS mortgage-backed securities “sustained catastrophic losses,” part of a nationwide trend that led to the 2008 recession.
UBS did not admit to wrongdoing in the settlement, but Forbes reached out to them for comment.
Key Background
Ten years after the onset of the Great Recession of 2008 and 2009, the DOJ launched what would be their final civil suit against banks or their involvement in triggering the financial crisis. The $1.435 billion that is to be paid by UBS has brought the penalties paid by banks in relation to the financial crisis of 2008 to $36 billion. During the Great Recession of 2008, the unemployment rate was over 10%, the S&P 500 was down 57%, home prices fell about 30% and about six million homes were lost. The residential mortgage-backed securities, which is a type of residential real-estate loan where interest paid on the loans go to investors, that were distributed contributed to the crisis as homeowners defaulted on their mortgages, spiking losses for banks and investment firms and gains for firms across the nation.
Tangent
UBS purchased rival bank Credit Suisse for $3.2 billion earlier this year. The agreement with the DOJ comes weeks after UBS faced $387 million in fines from U.S. and U.K. regulators over alleged failures by Credit Suisse.
Further Readings
UBS Cuts $10 Billion Government Backstop For Credit Suisse Rescue (Forbes)
UBS To Pay $387 Million Fine Over Credit Suisse’s Failed Dealings With Archegos (Forbes)
UBS Buying Rival Credit Suisse In $3.2 Billion Rescue Deal (Forbes)
Source: https://www.forbes.com/sites/darreonnadavis/2023/08/14/ubs-agrees-to-pay-nearly-15-billion-doj-fine-related-to-2008-recession/