World Economy

US Collected $150 billion in Bank Fines

US Collected $150 billion in Bank Fines US Collected $150 billion in Bank Fines

Since the outbreak of the financial crisis in 2007, financial institutions have paid more than Qatar’s GDP in fines for their wrongdoings. As investigations and lawsuits continue, that number is expected to grow.

According to the British business daily Financial Times, the US authorities have collected $150 billion  in fines from financial institutions for shady dealings with subprime mortgages since the beginning of the credit crisis in 2007, DW reported.

The FT report comes on the 10th anniversary of the onset of the global financial crisis, which led to the Great Recession, whose profound societal, economical and political repercussions are still reverberating today.

August 9, 2007, the day French bank BNP Paribas barred investors from accessing money in funds with subprime mortgage exposure, is widely regarded as the watershed moment when the disaster started unfolding. Subsequently, governments everywhere had to spend billions in taxpayers’ money to bail out the financial sector.

Even though it wasn’t until the August of 2007 that the financial crisis took on staggering proportions, it was the bursting of the US real estate bubble that made the market meltdown possible in the first place. After US house prices peaked in April 2006, an unprecedented decline began that affected the quality of the loans that had paid for them.

When the value of homes started falling and interest rates of subprime mortgages increased, it became more difficult for borrowers to refinance their loans. Packaged into so-called mortgaged-backed securities and marketed with positive rankings from international ratings agencies, those toxic assets, however, had already become hot sellers among investors all over the world, including many German regional banks.

Then, on August 9, when BNP Paribas shut access to several investment funds with US subprime mortgage exposure, the whole extent of the sham came to light.

In the past 12 months alone, the American Justice Department fined three European big banks $19 billion. First, the US Department of Justice fined Deutsche Bank and Credit Suisse a combined $12.5 billion. And just last month, Royal Bank of Scotland agreed to a $5.5 billion settlement with the Federal Housing Finance Agency.

Deutsche Bank’s $7.2 billion settlement to resolve its dealings in mortgage-backed securities is roughly a third of the entire amount it had to pay since the outbreak of the financial crisis.

While the FT valued the bank fines at said $150 billion, a Boston Consulting Group report said fines had added up to $321 billion.

That number, however, includes penalties for crimes such as money laundering, terrorist financing, benchmark interest rate rigging and violating US sanction law. According to this calculation, European banks have paid back $118 billion, compared to $204 billion by US institutions.


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