Royal Bank of Scot­land to Pay $4.9 Bil­lion for Its Sub-prime Mort­gage Fraud

Trillions - - Contents -

The Royal Bank of Scot­land (RBS) has agreed to a $4.9 bil­lion set­tle­ment to re­solve fed­eral civil claims that RBS mis­led in­vestors in the un­der­writ­ing and is­su­ing of res­i­den­tial mort­gage-backed se­cu­ri­ties (RMBS) be­tween 2005 and 2008.

The penalty is the largest im­posed against a sin­gle com­pany by the U.S. Depart­ment of Jus­tice (DOJ) for fi­nan­cial cri­sis-era fraud.

Ac­cord­ing to the DOJ, RBS used RMBS to push the risk of the loans, and tens of bil­lions of dol­lars in sub­se­quent losses, onto un­sus­pect­ing in­vestors across the world, in­clud­ing non-prof­its, re­tire­ment funds, and fed­er­ally-in­sured fi­nan­cial in­sti­tu­tions. As losses mounted, and af­ter many mort­gage lenders who orig­i­nated those loans had gone out of busi­ness, RBS ex­ec­u­tives showed lit­tle re­gard for this mis­con­duct and even made light of it.

RBS was just one player in the great­est fraud of all time that col­lec­tively si­phoned tril­lions from in­vestors by repack­ag­ing Amer­i­can junk mort­gages as high grade in­vest­ments.

The en­tire scam was made pos­si­ble by Ge­orge W. Bush, who pushed to make it much eas­ier for those who didn't qual­ify for a mort­gage and couldn't make pay­ments to get loans with no money down. When state reg­u­la­tors tried to in­ter­vene the Bush ad­min­is­tra­tion blocked them so that the scam could con­tinue. In swooped fly-by-night mort­gage com­pa­nies and big banks who gave loans to al­most any­one then pack­aged the junk loans and got rat­ing agen­cies like Mc­graw Hill's Stan­dard and Poor's and Moody's to rate their RMBS garbage as grade A se­cu­ri­ties. Then Wall Street, know­ing that the RMBS were re­ally junk, sold them to on to large in­sti­tu­tional in­vestors. Many of those large in­vestors also knew that they were spend­ing their clients' money on junk.

In­ter­est rates went up as de­faults in­creased and then the hous­ing bub­ble ex­ploded and all those junk mort­gages de­faulted and the world econ­omy crashed.

Wall Street got bailed out and years of al­most un­lim­ited free loans and the world has not been the same since.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.