Deutsche Bank sued for more than $1 billion
The investment bank Deutsche Bank is being sued by the federal government for more than $1 billion. The charges are related to the subprime mortgage deals which were part of the financial crisis in 2008.
Deutsche Bank is a German bank but its mortgage lending branch, called MortgageIT, was based in New York City until 2009 and approved about 39,000 mortgages which the Los Angeles Times reports were made "recklessly."
Many of the investment banks that stand accused of wrongdoing – Deutsche Bank is not the only one – are said to have made these loans without taking into account whether borrowers were financially able to pay their mortgage bills.
The lawsuit currently standing against Deutsche Bank also charges that the financial institution lied to the government. Another financial giant – Goldman Sachs Group Inc. – faces similar allegations, as both banks were named in an April report issued by the Senate. Congress condemned the actions of the financial institutions as well as their CEOs.
Some believe that the federal lawsuits against banks are a long time coming.
"All of us who have watched this unfold since 2008 have sort of waited and said, 'Where are these lawsuits? Where is the official action?'" Robert Simpson, the president of Investors Mortgage Asset Recovery, a mortgage auditor, told the news source.
Financial institutions such as Deutsche Bank stand accused of selling subprime mortgages to investors. As a result, the Federal Housing Administration has had to pay upwards of $386 million in insurance claims, for MortgageIT subprime loans alone. The FHA estimates that the insurance claims could reach $1.3 billion in the end.
The Deutsche Bank lawsuit is likely to be the first of several against major banks involved with the mortgage crisis.
"We go where the evidence takes us, and if it takes us to the larger players on Wall Street, so be it," Helen Kanovsky, the Housing and Urban Development Department's general counsel, told Bloomberg.