Deutsche Defies DoJ, Says It Won’t Pay Anything Near $14 Billion in Mortgage Settlement

Wowsers. Jamie Dimon had a bit of a hissy fit back in the day over the proposed settlement of JP Morgan’s mortgage liabilities. And while the settlement did come in lower, it wasn’t ginormously lower. By contrast, Deutsche Bank has gone out aggressively after the Wall Street Journal reported that the Department of Justice was seeking a $14 billion settlement for crisis-related mortgage liabilities versus the German bank’s position that $3 billion was a reasonable figure. Note that Deutsche Bank has €5.5 billion set aside in litigation reserves and seems to think it can hold the damage to this level.

As we’ve pointed out, the gap between the headline figure for these mortgage settlements and the actual economic value has always been large. So it would not appear to be wise to defy the DoJ by engaging in a media war, particularly since Deutsche is widely seen to be a garbage barge and its CEO is not Obama’s favorite banker. But the bank’s stock has taken a drubbing in the wake of the Wall Street Journal story and desperation may be overruling prudence.

:

Deutsche Bank AG slumped after receiving a $14 billion claim from the U.S. Justice Department to settle an investigation into the firm’s sale of residential mortgage-backed securities, a figure the German lender said it’s not willing to pay.

“Deutsche Bank has no intent to settle these potential civil claims anywhere near the number cited,” the company said in a statement early Friday in Frankfurt. “The negotiations are only just beginning. The bank expects that they will lead to an outcome similar to those of peer banks which have settled at materially lower amounts.”

Given that settlements involve not just dollar amounts but can also involve behavioral issues, if CEO John Cryan is willing to admit to bad conduct, fire some executives or claw back pay, the DoJ might be quite willing to trade a lot of settlement dollars against the sort of things that US bank reformers have demanded but have not gotten to any meaningful degree in other settlements.

But absent that, Cryan’s argument that Deutsche’s settlement should be lower based on a simple comparison to other banks headline figures isn’t sound. A $14 billion ask in in range. Whether that is fair or not depends on the severity of the bank’s misconduct and also how cooperative it was during the investigation. Deutsche has been the target of a raft of private and government actions for price fixing in foreign exchange, precious metals, and Libor markets. So it’s unlikely to be getting good actor points in the settlement.

However, as we noted in our earlier post, the senior staff at the DoJ may feel time pressure to wrap up the settlement before the election-determined regime change. If so, that considerably weakens their bargaining position, and may explain why Deutsche has decided to take the unusual approach of being frontal. But the last time a big banks tried that, which was Barclays with the Bank of England over Libor price fixing, and later Standard Chartered’s CEO Peter Sands versus the New York’s Superintendent of Financial Services Benjamin Lawksy, both came out losers in a big way. The three top executives of Barclays were forced to resign. Peter Sands backed down and ate a lot of crow, and when his bank defied the regulators again (he claimed by negligence rather than design), he was defenestrated.

Now this is an argument over price, rather than a more fundamental fight over government authority, so even in a worse case scenario, any battle of wills between Deutsche and the DoJ is very unlikely to go as far as it did with financial regulators versus Barclays and Standard Chartered. But the question remains: will the DoJ flex its muscles or will careerist considerations (the need to notch up the Deutsche Bank settlement relatively soon) prevail? Stay tuned.

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37 comments

  1. Richard Davet

    The tough guy image by Deutsche will be dropped in short order and they will pay up per the script.

    After all, others moaned and groaned but paid up because after all it is a small price to pay to be a player/partner in the GSE Business Model (“fatally flawed”). The Model allows them to go back to the troth today and suck up more funds subsidized by the US Taxpayers.

    This is all bad theater with the intention of making it appear that they are all doing something.

  2. Harry

    DB has been close to the wall recently. And they may be counting on some close support from the German government. If you think about it the EU and US have slave to trade. Apple vs DB for example. But with TPP going bad is easy to see how this can all go wrong.

    That said, the US looks very much like it had been favoring is own in the great “let’s beat up on banks” game. I can see why euro-thieves might feel a little indignant at US double dipping.

    1. flora

      “favoring its own”

      Well, no post-govt job with 7 figure salary (revolving door) at DB for US DoJ employees. ;)

      1. flora

        adding:

        This is the 8th anniversary of Lehman’s collapse.

        “After much research, I have come to believe that at the highest levels of government, the financial industry managed to convince prosecutors that it was against societal interests to bust bankers. The revolving door between government and the private sector, between regulators and regulated, figures in this. If you’re a prosecutor, but you might like a big payday from business, do you really want to go hard on the companies that might offer you a job one day?”

  3. Bottom Gun

    If you invite contempt, ultimately someone is going to take you up on the invitation.

    Also, Deutsche is a client of Covington & Burling, and perhaps of Eric Holder’s personally. Just sayin’.

    1. steelhead23

      Oooh, that’s a juicy tid-bit. I’m sure DB thought they had purchased a ‘Get outta jail free’ card.

      1. Yves Smith Post author

        *Sigh*. No, Covington has lots of clients and DB as a foreign firm is not going to have enough matters to be top of their list. The top bank lawyer in the US is Rodgin Cohen of Sullivan & Cromwell, by far. He represents everyone and manages to get away with it.

  4. weinerdog43

    “…any battle of wills between Deutsche and the DoJ is very unlikely to go as far as it did with financial regulators versus Barclays and Standard Chartered.”

    I tend to agree with this.

    It has been my experience when I’m negotiating a particularly large settlement, the bigger it is, the more potential you have for one party to just say, “screw it”, it’s just too much. We’ll let the jury decide. When it gets to that phase, you start to wonder if your opponent is bluffing, or if he or she is really willing to blow up the entire settlement.

    In this case, we know already that DB has admitted it is a market manipulator. The question I’m wondering is whether they know that if the DOJ presses too hard, they are going to name some names that will be very painful for not only Obama, but potentially for the Repubs as well. Not to mention JP Morgan and Citi.

    In other words, if DB goes down, we’re taking everyone with us.

    1. flora

      After 8 years of watching the DoJ let the US TBTF banks skate away, maybe it’s time for a ‘Sampson pulling down the pillars’ event.

    2. readerOfTeaLeaves

      Normally, I’m partial to manageable, sustainable, shifts and changes.

      But if DB wants to ‘name names” and take everyone with it as it goes down, I want to be sure that I have an ample supply of popcorn handy.

      These guys are bankers, not Forces of Nature. Mistaking one for the other is always a fatal conceit.
      If the DoJ can’t distinguish between the two, then they need to resign or retire.

  5. Stupendous Man - Defender of Liberty, Foe of Tyranny

    Some years back William K. Black suggested that if President Obama, and AG Eric Holder, weren’t willing and able to “man up” and prosecute wall street violators for their … er, um, … violations they should at least have the integrity to change the name of the Department of Justice.

    “Deutsche has been the target of a raft of private and government actions for price fixing in foreign exchange, precious metals, and Libor markets.” Yes, that has been covered/reported by many sources, including nakedcap, going back a number of years. How is it regulators in the US have allowed them to continue marauding across the country? (maraud, v. i. 1. to rove in quest of plunder)

    “Quis custodiet ipsos custodes?” This is usually attributed to the Roman poet Juvenal, and translates as “Who will guard the guards themselves?”

    I submit that with Deutsche Banks established patterns and practices of wanton, flagrant, disregard of any and all “rules” any response, and certainly any appropriate response, must include the termination of its privileges to operate within our borders. That must be extended to also prohibit any other entities operating within our borders from conducting any business with Deutsche Bank.

    Too costly, or too difficult, you say? Poppycock!!

    “Fiat iustitia ruat caelum.”

    1. tonycat

      Considering their Libor rate fixing surely caused many homeowners with adjustable rate mortgages to have accelerating interest rates and not be able to pay their mortgages, and then to be foreclosed upon by Deutsche (as it was in my own case, with foreclosure by Deutsche who was a “holder” in our great (NOT! Or at least not anymore!) state of North Carolina through using the sub-servicer SPS Select Portfolio Servicing), seems to me any foreclosures by Deutsche should be invalidated or reversed, and any subsequent sales the same way. Have DeutscheBank pay everyone their damages, lawyer fees, etc. (INSTEAD of fines to the government!). Make DeutscheBank give any new purchaser of the foreclosed houses for value some time to get out, reimburse what the purchaser paid for the house some extra for moving fees/the purchaser’s damages, and then give our houses back to their rightful American homeowners who were manipulated into foreclosure. Our government seems to instead be going along aiding and abetting the crime of house theft from homeowners. How about doing the right thing for once? Where the banks screwed up through greed or negligence, then by God, the banks SHOULD be the ones to suffer and lose – not the innocent homeowner. Then shut DeutscheBank out of operating within the USA at all. That is what should happen if any justice is to occur.

      .

      1. flora

        ” Our government seems to instead be going along aiding and abetting the crime of house theft from homeowners.

        from Wallstreetonparade:
        ‘The FCIC released thousands of documents in March of this year, showing that it had made multiple criminal referrals to the DOJ. [Sen. Elizabeth] Warren wrote in her letter:

        ‘ “A review of these documents conducted by my staff has identified 11 separate FCIC referrals of individuals or corporations to DOJ in cases where the FCIC found ‘serious indications of violations[s]’ of federal securities or other laws. Nine individuals were implicated in these referrals (two were implicated twice). The DOJ has not filed any criminal prosecutions against any of the nine individuals. Not one of the nine has gone to prison or been convicted of a criminal offense. Not a single one has even been indicted or brought to trial. Only one individual was fined, in the amount of $100,000, and that was to settle a civil case brought by the SEC.”

        ‘This particular paragraph is a Pandora’s Box by a factor of $2.5 trillion. The two individuals Warren refers to who were “implicated twice” in the FCIC’s criminal referrals are Robert Rubin, [and Chuck Prince]. ‘

  6. diptherio

    the last time a big banks tried that, which was Barclays with the Bank of England over Libor price fixing, and later Standard Chartered’s CEO Peter Sands versus the New York’s Superintendent of Financial Services Benjamin Lawksy, both came out losers in a big way. The three top executives of Barclays were forced to resign. Peter Sands backed down and ate a lot of crow, and when his bank defied the regulators again (he claimed by negligence rather than design), he was defenestrated.

    But did they both walk away filthy-frickin’ rich? Even when the criminals get caught and punished, they don’t ever really get punished. I’m willing to bet dollars to donuts that being a failed and disgraced WS banker is a heck of a lot more lucrative than, say, being a successful and well-respected high school teacher, for instance.

    Orange jumpsuits or it doesn’t count.

  7. John Wright

    The DOJ must be surprised ungrateful DB does not appreciate prior US government largesse.

    Per

    Titled “A.I.G. lists banks it paid with U.S bailout funds”

    “Big foreign banks also received large sums from the rescue, including Société Générale of France and Deutsche Bank of Germany, which each received nearly $12 billion; Barclays of Britain ($8.5 billion); and UBS of Switzerland ($5 billion).”

    As I remember, AIG was financially unable to pay the CDS it had underwritten and was in the process of negotiating haircuts with the banks owning the CDS contracts as AIG could not pay them in full.

    Then Timothy Geithner stepped in and forced AIG, with newly received US government bailout funds, to pay the CDS off at 100%.

    Truly a gift to the recipient banks from the US Government.

    DB received about 12 billion, when without Geithner’s involvement, it might have been far less.

    Maybe DB believes the US Government will fold again, even if it has a strong hand.

  8. Kemal Erdogan

    A foreign bank publicly confronting US government is a sign that there is more at stake, probably at state level. I can’t fathom a private entity would go public over such an issue instead of silently making concessions and seeking friends among the bureaucrats.

    This has smell of US flexing muscles and EU declaring not yielding. Will see soon if that is so if/when a US bank gets targeted by the European commission.

    1. OpenThePodBayDoorsHAL

      EU slaps Apple with a $14B fine, a few days later the U.S. slaps Deutsche with a fine of…$14B.
      Real kids in the playground stuff.

      1. Yves Smith Post author

        No, you really have this wrong. Totally different government bodies. Apple’s fine was from the EU competition regulator, and was over a really indefensible special deal Ireland gave to Apple. Whacking a German bank is not gonna ruffle the feathers of any EU officials. German officials are a different matter.

        Plus this case has been long in the making. The Obama administration is wrapping up the last of the crisis-related bank cases, and the foreign banks wound up at the end of the queue.

        1. Kemal Erdogan

          The argument that these things long in the making is moot in my view as they can/do stop these cases if they deem necessary. Having seen all those wrongdoings on both sides, I can only view these actions as producing ammunition ready to use in case they are needed. And yes, I believe Europeans have the ability the coordinate actions of its various bodies; the treatment of Irish and Greek governments during the crisis is case examples of how at least three EU bodies coordinated their actions.

          This fight started with US government fine of 8 billion on French bank BNP, probably because they wanted to make deals with Iran.

          1. Yves Smith Post author

            Huh? First, the IMF is not a “European body”.

            Second, the ECB, IMF, and Eurozone members were all existing lenders to Ireland and Greece, hence they all had considerable skin in the game.

            By contrast, there is no meaningful Eurozone level banking regulation (there were new rules implemented in January but they were widely criticized as being worse of all possible worlds and failing to achieve meaningful integration, or even a semi-credible deposit backstop). There is no reason to think France is gonna pump for Deutsche Bank. The ECB does not stick its nose in political matters unless it has political cover. And it does not have direct access to the DoJ. The way this will roll is at most Schauble will call Jack Lew.

            And your remark about BNP says you are not even remotely up enough to comment on this topic. Iran was under sanctions. It was a clear violation of US law to do dollar transfers to them. If you do dollar transfers, you ultimately clear through the US, which means you are subject to US banking regs. So you act as if this was a political matter when it was a black letter law matter. Help me.

    2. Stupendous Man - Defender of Liberty, Foe of Tyranny

      “This has smell of US flexing muscles and EU declaring not yielding. Will see soon if that is so if/when a US bank gets targeted by the European commission.”

      Well, that flat out isn’t gonna happen. US Banks are beyond reproach.

      Bwahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahaha … gasp … hahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahahah!!!

  9. JimTan

    I’m not sure how firms are required to pay these fines, how much is due in cash, and where the cash comes from but Deutsche Bank’s equity (US market cap) is $18.2 Billion making this fine about 78% of their equity. I also think last year they had a $7 billion annual loss.

    1. Gamesjon

      How much of it is due in cash varies from settlement to settlement… you just have to read the terms of them and it will lay out how much is due in cash and how much is due in whatever other method may be used (have included things such as loan forgiveness, funding this or that project and/or educational campaign, repurchasing securities, etc…) As for where the cash comes from notice at the end of the first paragraph where it says the bank has 5.5b euros set aside in litigation reserves. There are stories at the beginning of a new quarter/year that one sees about this or that company adding x amount to their litigation reserves if they are facing lawsuits or regulatory penalties. Like in this it mentions in the 5th paragraph how that was caused in part by the 1.2 billion euros they added to their litigation reserves.

  10. Howard Beale IV

    Rumors are that DB is Trump’s main bank-maybe they’re kicking the can down until past election day?

    1. Yves Smith Post author

      That is ridiculous. Do not spread rumors. It discredits the site and confuses readers. I’m putting you in moderation over this.

      It has been well reported that Trump does not have relations with any TBTF bank and he borrows mainly through a mid-sized lender than securitizes most of his loans. And separately, any NYC developer would be a third-tier client for a TBTF bank. Their best clients are private equity, overwhelmingly, followed by major multinationals.

      Plus the DoJ has been working on mortgage settlements for a while and has been working though its list of outstanding banks. Deutsche was a particularly bad actor in mortgage-related CDOs, as we’ve written repeatedly over the years.

  11. Synoia

    This has smell of US flexing muscles and EU declaring not yielding. Will see soon if that is so if/when a US bank gets targeted by the European commission.

    Nice US banking License you have there. Pit is something happened to it.

  12. Hayek's Heelbiter

    Broken record here…Broken record here…

    All roads in DB corruption lead back to the regime of Josef Ackermann (to the extent that “ackermannes” has become a German eponym for “banksters”).

    And no doubt, once again, Herr Josef will skate free.

    Sorry to keep repeating myself, but I cling tightly to the Roman aphorism about the coarseness of the mills of the gods.

  13. human

    The first thing that flashed in front of me when I read the beginning of the last paragraph, “Now this is an argument over price …”, was that old anecdote about “knowing what you are and now just haggling over the price.” How apropos.

  14. Lune

    DB is playing a very dangerous game.Generally speaking, the best strategy for a bank to get through this is to lay low, say “we don’t comment about ongoing investigations”, and use every backdoor channel (legal or illegal) to get the DOJ to reduce the figure and move on.

    The general public has no love for big banks, and for foreign big banks, even less. The more publicity this deal gathers, the harder it will be for the DOJ to back down. And in an election year, they risk Clinton or Trump taking up the DOJ’s cause.

    Right now, all this talk is only in the financial press, but once it leaks into the general public, it will be very easy for both Clinton and Trump to make DB the whipping boy to burnish their anti-Wall St. credentials. After all, they’re a foreign bank, they’ve had numerous other fines levied, and, in the eyes of the public, anything less than public beheading of the former CEO can easily be spun as letting the bank off too easy.

    John Cryan may be spooked by an 8% drop in his stock price and calming nervous investors. He’s risking converting that into calming 12 angry men in a jury box (at least for his predecessors and some current execs). Does he really think awakening the general public in an election year will lead to a better outcome for his bank than dealing with this quietly with the typical Friday afternoon press release dump non-event?

  15. JustWondering

    Granted there is no investment treaty between the United States and Germany, but if there were, couldn’t the treatment of DB potentially be ripe for an ISDS claim? If the settlement offer doesn’t get whittled down to something approximating what the U.S. banks ended up with, would that look like discrimination? Is the $5.5B set-aside a reasonable expectation, based on how others were treated or signals during negotiations (similar to discrimination but a different claim)? Who knows, maybe there’s an interest out there with standing under one of the existing US treaties (a counterparty holding a derivative stake in the settlement?). Anyway, not sure if this is a typical fact pattern, but anytime a major bank or multinational complains about its treatment at the hands of the US government, seems some lawyer somewhere is billing someone to look for the claim (or threat of claim).

    1. Yves Smith Post author

      No, as I’ve indicated repeatedly, looking at the gross amount of activity (“DB did 75% of the mortgages that JP Morgan did, therefore its headline settlement number should be 75% of JP Morgan’s”) is bogus. When regulators impose fines, they look at the severity of the misconduct and the behavior of the miscreant during the investigation. Someone could have engaged in vastly worse conduct on smaller total activity, and/or stonewalled a ton (or fabricated records or had officials lie!) during the investigative process. And there is no way DB can know that, since the regulatory exams themselves are secret.

      And the reasons ISDS has nothing to do with this is that this is a DoJ action. This is exactly like a private settlement process. 95% of threatened suits settle. If the settlement talks fail, the DoJ will go to court and sue DB. DB will be forced to pay whatever the court deems fitting based on the facts and law. I’m not sure what legal theories the DoJ will invoke, but they are pretty certain to include securities law theories and simple fraud. It is hard to argue that those laws are discriminatory AGAINST investors (the basis of ISDS claims) when they are designed to protect investors.

      1. JustWondering

        Not sure this explanation dispenses with the possibility of ISDS. An investor can bring an ISDS claim over treatment by the DOJ — the point would be that DOJ’s conduct would be judged according to the international rules and standards set out in the treaty. ISDS addresses “treatment” of a foreign investor or investment that is attributable to the host government, meaning govt actors or agents at any level (except where expressly carved out), and can include a series or collection of actions or omissions across gov instrumentalities and need not take a specific form.

        Two interesting points raised here but not sure they rule out ISDS. First is whether, merely by negotiating and making an offer, DOJ has done anything actionable under the treaty or whether any conditions for exhaustion or remedies are satisfied. On the first issue, as noted “treatment” can be lots of things so not sure that as a matter of legal formality that would be a major hurdle — but as far as showing the treatment violates international obligations for purposes of this hypothetical, need to wait and see where DOJ lands. But that’s a merits issue, not a standing issue. On exhaustion — this is a long technical issue but the upshot is that DB probably would have options. The second point raised in the response is that every investigation is different and involves different facts and conduct, so DB can’t know if DOJ is applying a double standard. But that point, too, would seem to go to the merits of a claim and not to the ability to bring a claim in the first place. To allege discrimination (“national treatment”), DB would need to assert that its treatment was less favorable than DOJ’s treatment of U.S. investors in like circumstances (i.e., DOJ’s offers/negotiations/ etc., w/r/t banks in similar circumstances). Seems the different nature of the banks’ conduct would be highly relevant here — but we can only assume that if we know how these analyses play out, which I don’t. Point being that if DB can’t get DOJ down to a number that’s in the same ballpark as the other bank settlements, it seems it could at least allege discrimination — even if on the facts it’s a weak claim. Claimants also always allege failure to accord minimum standards of treatment and full protection and security. Again, not saying these would be good claims, just available claims — and claims that have nothing to do with the substance U.S. law per se, or with the ability of an international tribunal to “overrule” DOJ or replace U.S. adjudicators’ interpretation of U.S. law with its own, but rather have to do with whether in applying U.S. law — and in other interactions or actions w/r/t DB — the U.S. government’s treatment of DB satisfies U.S. international obligations in the applicable investment treaty. That’s the point — an ISDS tribunal is not judging U.S. law on its own terms, it is judging whether separate, independent international rules and standards are met, a critical distinction.

        There was an NAFTA ISDS claim brought over the handling of a private contract dispute by a U.S. state court. The investor faced a large jury award and a large bond requirement for appeal, and so took a settlement. Two years later, the investor brought a NAFTA ISDS claim for discrimination, min standards of treatment, and expropriation, believing it had been mistreated by the court. Five yrs. later with the ISDS still going on, the investor sold the investment in bankruptcy proceedings to a US owner, which dissolved jurisdiction before a final decision was issued. The merits were an open question — with some observers believing it was tilting toward the claimant. Anyway, main point being, any action(s) attributable to the gov potentially implicates ISDS.

        Thanks for the response. I appreciate the chance to think through these possibilities.

      2. JustWondering

        One clarification that occurs to me belatedly — in my hypothetical, the “investor” is Deutsche Bank, referring to its status under a (hypothetical) investment treaty (in reality there isn’t one, but would be under TTIP). Deutsche Bank would qualify as a German investment and would enjoy treaty protections vis a vis the United States. At issue in ISDS would be how DB (i.e., an “investment”) — or any holder of a treaty-recognized interest related to DB (i.e., an “investor”) — is “treated” by the U.S. government. The bank conduct at the heart of the investigation and settlement talks isn’t a first order issue — it’s relevance and import would be filtered through the lens of the investor’s claims, that is, how it weighs upon what Deutsche Bank (or any claimant) is trying to prove about its mistreatment. DB’s conduct would not have any relevance independent of how it pertains to legal conclusions about U.S. government conduct.

        The speculation at the end of my first post about potential parties with derivative claims (which can imply a different notion of “investor”) is not meant to confuse things — merely searching for an example to illustrate the possibility that even now there may be a party of a nationality that DOES have treaty rights and could meet the standing requirements to bring an ISDS claim in respect of the DB settlement negotiations or outcome (may be a bad example, just trying to illustrated how complicated it can get). To be clear, I have no idea in this instance, simple point being that it’s not impossible, and the field of possible claimants with a potential claim arising from DOJ “treatment” accorded through the DB settlement is not necessarily known. Obviously ISDS would not permit claims seeking to hold the United States responsible for Deutsche Bank’s treatment of its own investors (the very conduct DOJ presumably would be alleging against DB under U.S. law). The focus, put bluntly, is whatever the U.S.G. did that cost someone money. Again — not to be misunderstood, I am not trying to say that based on what we know there is ISDS exposure (look, I opened by acknowledging no German treaty!). I am merely highlighting what is possible, because (1) in this area, what’s possible often comes to pass, or at least gets threatened which can have its own consequences, and (2) even critics of ISDS seem not to understand how widely it can apply.

  16. JustWondering

    One clarification that occurs to me belatedly — in my hypothetical, the “investor” is Deutsche Bank, referring to its status under a (hypothetical) investment treaty (in reality there isn’t one, but would be under TTIP). Deutsche Bank would qualify as a German investment and would enjoy treaty protections vis a vis the United States. At issue in ISDS would be how DB (i.e., an “investment”) — or any holder of a treaty-recognized interest related to DB (i.e., an “investor”) — is “treated” by the U.S. government. The bank conduct at the heart of the investigation and settlement talks isn’t a first order issue — it’s relevance and import would be filtered through the lens of the investor’s claims, that is, how it weighs upon what Deutsche Bank (or any claimant) is trying to prove about its mistreatment. DB’s conduct would not have any relevance independent of how it pertains to legal conclusions about U.S. government conduct.

    The speculation at the end of my first post about potential parties with derivative claims (which can imply a different notion of “investor”) is not meant to confuse things — merely searching for an example to illustrate the possibility that even now there may be a party of a nationality that DOES have treaty rights and could meet the standing requirements to bring an ISDS claim in respect of the DB settlement negotiations or outcome (may be a bad example, just trying to illustrated how complicated it can get). To be clear, I have no idea in this instance, simple point being that it’s not impossible, and the field of possible claimants with a potential claim arising from DOJ “treatment” accorded through the DB settlement is not necessarily known. Obviously ISDS would not permit claims seeking to hold the United States responsible for Deutsche Bank’s treatment of its own investors (the very conduct DOJ presumably would be alleging against DB under U.S. law). The focus, put bluntly, is whatever the U.S.G. did that cost someone money. Again — not to be misunderstood, I am not trying to say that based on what we know there is ISDS exposure (look, I opened by acknowledging no German treaty!). I am merely highlighting what is possible, because (1) in this area, what’s possible often comes to pass, or at least gets threatened which can have its own consequences, and (2) even critics of ISDS seem not to understand how widely it can apply.

  17. Jim Thornton

    True story: Deutsche Bank held our mortgage in a securitized note from 2000-2008.
    When I lost my job and business, due to the financial crisis brought on by the overlevergaed banks. I applied for HAMP.

    After 50+ phone calls, 46 letters-copies if information, and being told we were accepted, they pulled out without telling us and we lost our house.

    In a moment of brevity the on the phone informed us the Deutsche Bank had not intention of honoring any HAMP modifications, and was forcing us into foreclosure (we short sold and had to pay the difference) so they could sell the house AND collect the HAMP money from the US government (read middle class taxpayers).

    They should be closed down and thrown in jail, 14b on shareholders backs mean nothing.

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