WASHINGTON (Legal Newsline) — The U.S. Department of Justice announced March 29 that Barclays Capital Inc. and several affiliates will pay $2 billion to resolve allegations of fraud stemming from the sale of residential mortgage-backed securities (RMBS) that helped cause the financial crisis.
“This settlement reflects the ongoing commitment of the Department of Justice, and this office, to hold banks and other entities and individuals accountable for their fraudulent conduct,” Richard P. Donoghue, U.S. attorney for the Eastern District of New York, said in a statement. “The substantial penalty Barclays and its executives have agreed to pay is an important step in recognizing the harm caused to the national economy and to investors in RMBS.”
According to allegations, Barclays underwrote and issued RMBS between 2005 and 2007 that were subpar and lacked quality. These RMBS caused billions of dollars in losses to investors. Alleged conduct of this nature violates the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA).
“The actions of Barclays and the two individual defendants resulted in enormous losses to the investors who purchased the residential mortgage-backed securities backed by defective loans,” Laura S. Wertheimer, inspector general of the Federal Housing Finance Agency Office of the Inspector General (FHFA-OIG), said in a statement. “[This] settlement holds accountable those who waste, steal or abuse funds in connection with FHFA or any of the entities it regulates. We are proud to have partnered with the U.S. Department of Justice and the U.S Attorney’s Office for the Eastern District of New York on this matter.”