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Barclays settles US mortgage fraud complaint for $2 billion

The British bank Barclays is just the latest big bank to settle mortgage fraud allegations with the U.S. government over its role in the subprime mortgage and subsequent foreclosure crisis. It has recently agreed to pay $2 billion in civil penalties in order to settle a 2016 federal lawsuit alleging that Barclays:

  • Sold fraudulent mortgage-backed securities between 2005 and 2007
  • Misled investors about the quality of the underlying mortgages in those securities

In what has unfortunately turned out to be an unusual move, the Justice Department targeted two individuals for their part in the alleged fraud. One was a banker who, according to the Associated Press, helped to package sub-prime mortgages into securities. The other was Barclays' head trader of mortgage-backed securities.

They have also agreed to settle without officially accepting any responsibility for their actions. The two men will pay a combined $2 million in order to have all charges against them dismissed. For example, the banker claims to have agreed to the settlement "solely to put this matter behind him." The other claimed "the government has relented in its efforts to prove wrongdoing where none exists."

For its part, Barclays referred to the massive alleged fraud as a "significant legacy matter" that needs to be put behind the bank so it can position itself for stronger earnings for shareholders. It did, however, refer to the settlement as "fair and proportionate."

Barclays was considered a holdout on the settlements the Department of Justice has arranged with the largest banks. Bank of America, JPMorgan Chase, Goldman Sachs and Citigroup have also reached settlements with the DOJ in recent years.

It has been a source of serious disappointment for many people that the Justice Department has proved unable to hold these big banks and bankers accountable for the serious misconduct that led to the 2008 financial meltdown and foreclosure crisis. When the U.S. government allows bad actors to settle without accepting responsibility, it would be more satisfying if it would at least insist they no longer deny it.

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