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Elliott Stein on Deutsche Bank $14 Billion Suit (Audio) · Bloomberg Intelligence

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  Speaker 1: I'm Charlie. That's the Bloomberg business flash you're listening to.
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  Speaker 1: Taking stock with Kathleen Hay and Pim Box on Bloomberg Radio.
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  Speaker 1: The lawsuits they just keep coming. Shares of Deutsche Bank
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  Speaker 1: today down more than eight percent. The US Justice Department
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  Speaker 1: and demanding fourteen billion dollars as part of a settlement
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  Speaker 1: having to do with the residential mortgage backed securities. It's
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  Speaker 1: just adds to the woes at Deutsche Bank and many
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  Speaker 1: other banks. The bank has previously been sued by various
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  Speaker 1: entities for foreign exchange rates, interest rate swaps, liebor ss
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  Speaker 1: A bonds as well as treasuries. They're being investigated for
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  Speaker 1: for x for metals trading, as well as sanctioned breaches.
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  Speaker 1: The list goes on here to tell us what's important
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  Speaker 1: and what's not. As Elliot Stein, he is senior litigation
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  Speaker 1: analyst for Bloomberg Intelligence, Elliott Boy, this has got to
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  Speaker 1: keep the lawyers busy for quite a long time. It
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  Speaker 1: has been for years, um, and it will continue to
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  Speaker 1: keep lawyers gainfully employed for a while. UM. You know this, this, uh,
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  Speaker 1: this settlement, potential settlement, settlement, anticipated settlement. Is not a
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  Speaker 1: surprise when new Deutsche Bank was going to be one
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  Speaker 1: of the next big banks to settle with the Department
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  Speaker 1: of Justice. Um, but I think the number the fourteen
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  Speaker 1: billion dollar figure. It took a lot of people by surprise. UM.
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  Speaker 1: Our Bloomberg intelligence estimate UH for a settlement was about
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  Speaker 1: four billion to eight billion dollars, which leads us to
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  Speaker 1: believe that, you know, it'll probably wind up being untilds
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  Speaker 1: the high end of that range. Okay, I just want
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  Speaker 1: to play a clip from Catherine Nixon, the chief investment
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  Speaker 1: officer at Northern Trust. She was speaking earlier on Bloomberg
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  Speaker 1: and then get your reaction, gentlemen, to this. It's it's
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  Speaker 1: just keeps coming back. It's you know, like Jason from Friday,
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  Speaker 1: and it's very hard for us to get away from this.
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  Speaker 1: And you know, when you think about what it what
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  Speaker 1: it does for the macro outlook in Europe. And you know,
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  Speaker 1: we've been talking previously about how the European banking system
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  Speaker 1: was facing an income statement issue, not a balance sheet
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  Speaker 1: issue with with low and negative interest rates, and now
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  Speaker 1: it's become a balance sheet issue again. So it's not
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  Speaker 1: just Georgia Bank. We have UBS, RBS credit Suite who
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  Speaker 1: are going to soon be dealing with the same thing.
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  Speaker 1: Um and it just keeps on going. That was Catherine Nixon,
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  Speaker 1: chief Investment Officer at Northern Trust, speaking earlier on Bloomberg. So,
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  Speaker 1: Elliott Stein, what do you make of this is it's
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  Speaker 1: just gonna be just the beginning of what is going
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  Speaker 1: to be a continuous litigation process. Well, it is for
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  Speaker 1: a lot of European banks. So you know, as most
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  Speaker 1: people will recall, Um, the Department of Justice did settle
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  Speaker 1: some of its larger r MBS probes with US banks
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  Speaker 1: via a city JP Morgan Goldman, Morgan Stanley. Um, but
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  Speaker 1: it still is investigating several European banks, just like that
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  Speaker 1: clip showed. Um. So in addition to Deutsche Bank, you
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  Speaker 1: have Barkley's credit Suites, HSBC, RBS UBS. They're all being
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  Speaker 1: investigated by the Department of Justice over r MBS practices
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  Speaker 1: from almost ten years ago. Um. And so we anticipate
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  Speaker 1: more settlements with those banks as well. And you know
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  Speaker 1: this anticipated settlement with Deutsche Bank. Um, is you know
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  Speaker 1: going to tell us a little bit about where those
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  Speaker 1: settlements are gonna wind up? Well, I mean, what did
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  Speaker 1: Bank America got a seventeen billion dollars settlement? Right? So
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  Speaker 1: is Deutsche Bank almost as guilty of this is Bank America.
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  Speaker 1: They do just as much wrong in the same scale
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  Speaker 1: as Bank America. Right, So you know, first of all,
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  Speaker 1: these are civil fine, so guilty and innocence doesn't you know,
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  Speaker 1: guilt and innocence doesn't come into it then not know,
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  Speaker 1: I know what you mean. It is civil fraud. The
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  Speaker 1: charges are civil frauds so um or the allegations are
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  Speaker 1: potentially gonna be civil fraud charges. Um. Look, I think
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  Speaker 1: the number is gonna be lower than fourteen billion dollars.
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  Speaker 1: I think it's gonna wind up being a little north
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  Speaker 1: of eight billion dollars UM, which is a little higher
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  Speaker 1: than the range we had. Uh. You know, it just means,
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  Speaker 1: you know, the Department of Justice has taken several factors
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  Speaker 1: into account, the amount of evidence of fraud in documents
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  Speaker 1: and and um and that they get from other testimony.
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  Speaker 1: But then also the amount of securities that were sold
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  Speaker 1: during the relevant time period, the amount of losses that
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  Speaker 1: investors have incurred, and games that the bank's got um
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  Speaker 1: and you know, be of a because the countrywide was
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  Speaker 1: a much bigger player in the R and B S
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  Speaker 1: markets during the relevant time That's why it's fine was
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  Speaker 1: so large. That's my point. But this fine is almost
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  Speaker 1: as much as that. So what did d O J expect. No,
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  Speaker 1: it's gonna be it's gonna end up being lower than
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  Speaker 1: seventeen billion dollars. Um, you know JP JP Morgan paid
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  Speaker 1: thirteen billion dollars. I think it'll probably be a little
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  Speaker 1: south of that. Is there any possibility that this will
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  Speaker 1: sink Deutsche Bank? Uh? Well, like they have six billions
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  Speaker 1: stock is you know, the stockholders can't be happy about this, look,
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  Speaker 1: and I think that's um. You know, the Department of
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  Speaker 1: Justice is not in the business of putting banks out
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  Speaker 1: of business. Um, So you know, if it comes to that,
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  Speaker 1: I think that's a selling point that Deutsche Bank has
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  Speaker 1: in its pocket. They're gonna need some help from the
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  Speaker 1: German government. I can't comment on you smiling about that one.
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  Speaker 1: So I imagine there must be conversations. I mean, is
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  Speaker 1: that typical? Would there be government conversations? But Frow Miracle
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  Speaker 1: was asked about this in Bratislava today. She declined to
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  Speaker 1: common as well. But she certainly can't be happy now
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  Speaker 1: with the US government just piling fines onto all of
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  Speaker 1: these big German benchmark companies. I mean, um, you know, Bosh,
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  Speaker 1: I understand it is also being investigated, but that's a
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  Speaker 1: company exactly, and Volkswagen had fifteen more than sixteen billion
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  Speaker 1: dollars in fines, and now Deutsche Bank, I mean, the
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  Speaker 1: US Justice Department is just attacking German national companies. Well, look,
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  Speaker 1: it's not just the German companies. I mean, they're investigating
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  Speaker 1: you know, hey, they've find several US banks and now
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  Speaker 1: they've moved on to the European banks who were all
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  Speaker 1: involved in in selling rnbs during the relevant time. Um
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  Speaker 1: So I don't think they're you know, picking out any
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  Speaker 1: particular bank, any particular country. This was an industry wide phenomenon,
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  Speaker 1: and they're going after the players that they thought acted wrongfully.
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  Speaker 1: I wonder if it begs the question did any of
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  Speaker 1: the banks do things that were legal? Now otherways, I
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  Speaker 1: understand all the ones that they have now being sued,
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  Speaker 1: but did anyone not do something that was well, you know,
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  Speaker 1: the government doesn't stand up and write a thank you
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  Speaker 1: writer when clearly thank you very much for spending time
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  Speaker 1: with us. That Elliot Stein is our senior litigation analysts
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  Speaker 1: for Bloomberg Intelligence. Speaking about Deutsche Bank and the US
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  Speaker 1: Justice Department seeking fourteen billion dollars worth of fines, you're
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  Speaker 1: listening to taking stock I'm pim Fox. My co host
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