UBS Will Pay $1.4 Billion To Resolve Financial Crisis Fraud Case
UBS, a major Swiss bank, has agreed to pay a substantial sum of $1.4 billion to settle claims that it provided false information about mortgage-backed bonds it sold prior to the 2008 global financial crisis. This settlement marks the culmination of efforts by a Justice Department task force established in 2012, during the Obama administration, to investigate the involvement of prominent banks and financial entities in the sale of problematic and predatory mortgage products. These products were found to have played a role in the collapse of the United States housing market.
The settlement with UBS holds significance as it is the last action taken by this task force. The investigation delved into the conduct of big financial institutions, aiming to uncover their role in the selling of faulty mortgage products that contributed to the housing market crash. Federal prosecutors based in Brooklyn emphasized that this settlement reflects the consequences for those who attempt to profit unlawfully through fraudulent means, regardless of the time it takes to address these issues.
In response to the settlement, UBS issued a statement on its website, mentioning that the resolution was reached to address a legacy matter. The bank further clarified that the financial allocation for this settlement had already been accounted for in previous financial statements.
By reaching this agreement with UBS, U.S. prosecutors have chosen to dismiss a lawsuit that was filed against the bank in 2018. This settlement significantly boosts the total amount collected by the government task force, reaching a staggering $36 billion in fines and penalties. Some of this financial pool has been allocated towards providing relief to homeowners who faced adversity due to the financial crisis.
The 2008 financial crisis had far-reaching consequences, including more than six million mortgage foreclosures and the significant devaluation of numerous homes. During its peak, the Justice Department task force included over 200 legal professionals, drawing support from various federal housing agencies, the Securities and Exchange Commission (SEC), and the Federal Bureau of Investigation (FBI).
Regarding the specific case of UBS, federal prosecutors highlighted that the bank had deceived bond investors who had invested in 40 residential mortgage-backed securities. These securities were sold by UBS in the years 2006 and 2007. The lawsuit filed by prosecutors alleged that UBS had knowingly provided false and misleading information to investors regarding the quality of the mortgages bundled within these bonds. Ultimately, these mortgage-backed bonds suffered significant losses in value as the housing market experienced a crash, leading to homeowners struggling with their mortgage payments.
In conclusion, the settlement between UBS and U.S. prosecutors is a notable event in addressing the repercussions of the 2008 financial crisis. This resolution underscores the commitment to holding financial entities accountable for their actions. It provides a reminder of the enduring impact of the crisis on Wall Street and the global financial system.
