Credit Suisse Pays $495M in Mortgage-Backed Securities Settlement

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Facts

  • Credit Suisse has agreed to settle a case brought by the New Jersey Attorney General in 2013 for $495M, wrapping up a years-long case related to residential mortgage-backed securities (RMBS) and the 2008 financial crisis.
  • The New Jersey Bureau of Securities originally sought $3B in damages, alleging the bank offered $10B in shoddy mortgage securities from 2006-2007 while "misrepresenting risks of the investments."
  • The bank says the settlement resolves its only remaining RMBS case brought by a regulator, though it has faced several other issues in recent years, including bad bets on hedge funds, a scandal over allegedly spying on UBS, and allegedly failing to prevent criminal gang money laundering.
  • New Jersey First Assistant AG Lyndsay Ruotolo said this will hold Credit Suisse "accountable" for helping "put the nation in financial crisis."
  • Credit Suisse has already paid billions in similar settlements, including $5.3B to the US DOJ in 2017 and $600B to the Municipal Bond Insurance Association last year. It's stock price has halved in the past 12 months.
  • Faced with the court readying to discuss new trial dates, Credit Suisse said it's "pleased to have reached an agreement," adding it "marks another important step in the bank’s efforts to proactively resolve litigation and legacy issues.”

Sources: Reuters, New Jersey Globe, Associated Press, and Breitbart.

Narratives

  • Narrative A, as provided by Yahoo! Finance. Between multiple failed investments and legal settlements, Switzerland's second-largest bank is running out of solutions as its capital funds and public relations continue to deteriorate. Credit Suisse isn't quite on the brink of total collapse, but the bank has absorbed virtually every negative blow possible, and it’s close to the edge.
  • Narrative B, as provided by The Motley Fool. Credit Suisse's sharp and rapid decline could provide a silver lining, as Middle Eastern sovereign wealth funds may capitalize on the bank's current low valuation. If these funds do choose to invest, Credit Suisse could begin to rebuild its business and remake its public image.