Swiss bank UBS agrees to settle claims stemming from 2008 financial crisis

Don Jacobson
·3 min read
UPI
The Swiss bank UBS Global has agreed to settle claims it helped fuel the 2008 financial crisis by paying more than $1.4 billion to U.S. authorities. Photo by Hugo Philpott/UPI

Aug. 14 (UPI) -- Swiss bank UBS Global said Monday it will pay a fine of more than $1.4 billion to U.S. authorities to settle charges that it sold risky residential mortgage-backed securities in the run-up to the 2008 financial crisis.

In a brief statement, the banking giant said it is handing over $1.435 billion to the Department of Justice to "resolve all civil claims by the DOJ in connection with UBS's legacy RMBS business in the U.S."

Federal prosecutors called the settlement an acknowledgement of "fraudulent conduct" perpetrated by the bank that helped "fuel the 2008 financial crisis."

In the wake of the crisis, "people all across the country experienced financial ruin and emotional devastation, and many are still recovering nearly 15 years later," Associate Attorney General Vanita Gupta said in a statement.

"As this settlement demonstrates, the department and our partner agencies remain committed to holding accountable those who break the law and undermine the well-being of American families," she said.

UBS and other financial institutions that profited from the sale of fraudulent residential mortgage-backed securities during the last decade "mistakenly believed themselves to be above the law," added Ryan Buchanan, U.S. Attorney for the Northern District of Georgia.

"The scope of this settlement should serve as a warning to other financial institutions -- both large and small -- of the significant penalties that can result when corporations misrepresent vital information to investors and undermine trust in our public markets." he said.

Prosecutors said the settlement with UBS represents the final litigation brought against more than a dozen financial institutions since 2012 by the RMBS Working Group, a coalition of state and federal investigators from the Federal Housing Finance Agency, the Department of Housing and Urban Development, the Securities and Exchange Commission, the FBI, and other entities.

The DOJ says it has collected more than $36 billion in RMBS-related civil penalties from 18 major domestic and foreign entities under the effort, including Bank of America, Barclays, Citigroup, Credit Suisse, Deutsche Bank. General Electric, Goldman Sachs, HSBC. JPMorgan, Moody's, Morgan Stanley, Royal Bank of Scotland, S&P and Wells Fargo.

The financial crisis was triggered in 2007 when losses on residential mortgage-backed financial assets began to cause strains in global financial markets, and in December 2007 the U.S. economy entered a recession as several large financial firms experienced financial distress.

By late 2008, the economic contraction had worsened and ultimately became deep and protracted enough to acquire the label "the Great Recession."

The financial crisis and resulting recession is estimated to have cost the country 15% of GDP, or $4.6 trillion, by 2016, as measured by the decrease in per-capita GDP compared to the pre-crisis trend, while more than 6 million Americans lost their homes to foreclosure.