Barclays Group  

Barclays faces mortgage-backed securities legal claim

Barclays faces mortgage-backed securities legal claim

The US Department of Justice has launched legal action against Barclays for fraud in the sale of residential mortgage-backed securities.

It comes as Deutsche Bank and Credit Suisse both reached billion dollar settlements over alleged mis-selling before the financial crisis.

Deutsche Bank said it had reached a $7.2bn (£5.8bn) settlement consisting of a fine and relief to consumers in relation to the issuing of residential mortgage-backed securities between 2005 and 2007.

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Meanwhile Credit Suisse agreed to pay $5.28bn (£4.29bn) to resolve a similar investigation.

With regards to Barclays, the DoJ alleges that between 2005 and 2007 its staff “repeatedly misrepresented” the characteristics of the loans backing securities they sold to investors throughout the world.

It said these investors incurred billions of dollars of losses as a result.

Principal deputy associate attorney general Bill Baer said: “The widespread fraud that investment banks like Barclays committed in the packaging and sale of residential mortgage-backed securities injured tens of thousands of investors and significantly contributed to the financial crisis of 2008.”

The case also names two Barclays executives, Paul Menefee, its had banker on subprime residential mortgage-backed securities, and John Carroll, its head trader for subprime loan acquisitions.

In a statement Barclays said: “Barclays rejects the claims made in the complaint.

“Barclays considers that the claims made in the complaint are disconnected from the facts.

“Barclays will vigorously defend the complaint and intends to seek its dismissal at the earliest opportunity.”

damian.fantato@ft.com