A Sudden Burst of Activity on Mortgage Litigation

In the span of just 12 hours, three U.S. enforcement matters left over from the financial crisis made significant progress: Deutsche Bank AG and Credit Suisse Group AG separately announced that they would pay a combined $12.5 billion to resolve U.S. investigations into their sales of toxic mortgage debt, whereas Barclays Plc chose to roll the dice and let the Justice Department file a fraud lawsuit over its debt sales. Before these latest two deals, the U.S. investigations had already yielded more than $46 billion from six U.S. financial institutions.

So far, all that’s been disclosed is what they will pay -- $7.2 billion for Deutsche Bank, $5.3 billion for Credit Suisse. Because the Justice Department hasn’t commented, we don’t know what non-financial terms are contained in the agreement or what behavior, if any, the banks will admit. It’s also unclear when these preliminary deals will be made official: In February 2015, Morgan Stanley told investors that it had reached a deal with U.S. prosecutors over its mortgage-backed securities, but the agreement wasn’t finalized until a year later.