Deutsche Bank sued over financial crisis losses

French-Belgian bank Dexia is suing Deutsche Bank for more than $1 billion in losses caused by dodgy mortgage backed securities that imploded during the 2008 financial crisis.

Deutsche Bank sued over financial crisis losses
Photo: DPA

The lawsuit, filed in a New York court, accuses the German banking giant of fraud and making “false and misleading statements” when it sold Dexia the securities, Dexia said in a statement.

Deutsche Bank bundled thousands of poorly documented subprime mortgages into products called residential mortgage-backed securities (RMBS) that it sold to Dexia while privately betting against them, the lawsuit said.

“Deutsche Bank originated, purchased, financed and securitized exceptionally high-risk loans into these RMBS, all while internally disparaging the poor quality of these loans and the RMBS they backed as ‘pigs’ and ‘crap,'” it said.

While touting the securities’ top-notch AAA rating, Deutsche Bank took out a $10-billion short position against the US housing market which became profitable as those RMBS plunged in value, the lawsuit said.

A spokesperson for Deutsche Bank said that the lawsuit was unjustified and that the bank would use “all legal means at its disposal” to fight back.

Dexia was hit hard by the financial crisis. It received a €6.4-billion ($9.0 billion) bailout from the governments of Belgium, France and Luxembourg in 2008 after suffering steep losses from the downturn in the US housing market.

Before its lawsuit against Deutsche Bank, Dexia filed a similar lawsuit against subprime-mortgage lender Countrywide Financial and Bank of America over its losses from mortgage-backed securities.

Bank of America, which acquired Countrywide before the crisis in early 2008, recently proposed an $8.5-billion settlement with holders of distressed mortgage-backed securities originated by Countrywide.

Dexia said on Thursday that the proposed settlement did not apply to its lawsuit against Bank of America because it did not cover claims for fraud.


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Deutsche Bank set ‘to cut ties with Trump’

Deutsche Bank will cease its longstanding relationship with outgoing US president Donald Trump, The New York Times reported on Tuesday.

Deutsche Bank set 'to cut ties with Trump'
Deutsche Bank's headquarters in Frankfurt. Photo: DPA

Deutsche Bank was Trump's primary lender for two decades, and he owes the institution more than $300 million, according to the newspaper, which cited an unnamed source as saying the German lender “has decided not to do business with Mr. Trump or his company in the future.”

Deutsche Bank declined to comment to AFP.

The move comes on the heels of last week's violent attack on the US Capitol by Trump supporters at the president's incitement, and follows steps taken by other companies to cut ties with Trump and his businesses.

READ ALSO: Trump under investigation for Deutsche Bank ties

Christiana Riley, head of Deutsche Bank's US division, called the violent
siege on the Capital “a dark day for America and our democracy” in a post on LinkedIn last week.

“We are proud of our Constitution and stand by those who seek to uphold it to ensure that the will of the people is upheld and a peaceful transition of power takes place,” Riley said.

“It is my hope that these shocking events will result in a reinvigoration
of the principles our nation was built upon.”

Trump's relationship with Deutsche Bank has sparked numerous probes in the United States, including in New York, where the Manhattan District Attorney is investigating whether Trump committed financial crimes as he sought loans.

READ ALSO: 'Worlds between us': What Trump's German family's town thinks of him today