French-Belgian bank Dexia said Thursday that it was suing Deutsche Bank for more than $1 billion in losses caused by dodgy mortgage-backed securities that imploded during the 2008 financial crisis.
The lawsuit, filed late Wednesday in a New York court, accuses the German banking giant of fraud and making “false and misleading statements” when it sold Dexia the securities, Dexia said in a statement.
Deutsche Bank bundled thousands of poorly documented subprime mortgages into products called residential mortgage-backed securities (RMBS) that it sold to Dexia while privately betting against them, the lawsuit said.
“Deutsche Bank originated, purchased, financed and securitized exceptionally high-risk loans into these RMBS, all while internally disparaging the poor quality of these loans and the RMBS they backed as ‘pigs’ and ‘crap,'” it said.
While touting the securities’ top-notch AAA rating, Deutsche Bank took out a $10-billion short position against the US housing market which became profitable as those RMBS plunged in value, the lawsuit said.