IT’S CRAPTACULAR!
Barclays plops down $2B for septic securities
British banking behemoth Barclays will pay $2 billion in civil penalties to the Justice Department for its role selling “craptacular” mortgages in the financial crisis — just 15 months after the US sued the bank for refusing to settle.
The bank misled investors about the quality of the mortgages underlying the bonds, the government said.
The settlement — while steep — is less than half than the reported $5 billion penalty that the Jes Staley-led bank could have faced before it chal- lenged Washington ahead of a December 2016 lawsuit.
“Barclays is pleased to have reached a resolution of this matter with the Department of Justice and in doing so put a significant legacy issue behind us,” Staley said in a statement.
The suit focused on 36 bundles of home loans — called residential mortgage-backed securities — that were sold to investors and ultimately led to billions in losses, according to the department.
The mortgages were so bad that their own traders referred to them as “craptacular” and having “the distinct aroma of default,” according to court filings.
About half of the total loans ended up failing, which contributed to the 2008 financial crisis, prosecutors claim.
“The substantial penalty Barclays and its executives have agreed to pay is an important step in recognizing the harm that was caused to the national economy and to investors in RMBS,” Richard P. Donoghue, the Brooklyn US attorney, said in a statement.
As part of the settlement, two former executives, Paul Menefee and John Carroll, paid a combined $2 million.
“As a Managing Director at Barclay’s Capital Inc., Mr. Menefee worked tirelessly, diligently and in good faith at all times on behalf of Barclays and its investors,” Barry Berke and Dani James, his lawyers, said in a joint statement. “Solely to put this matter behind him, Mr. Menefee has agreed to a settlement in which he has not admitted any wrongdoing.”
A lawyer representing Carroll couldn’t be reached, but had previously denied wrongdoing.