Today’s Economic Shakers

Credit Suisse agrees to pay $2.48 billion to settle financial crisis charges...

Swiss banking giant Credit Suisse has agreed to settle long-standing charges stemming from its role in selling mortgage-backed securities that contributed to the financial meltdown of 2008.

In a statement that was released by Credit Suisse early Friday, the bank said that it had agreed to a deal with the US Department of Justice (DOJ) that calls for a $2.48 billion settlement arising from its sale of questionable mortgage-based vehicles.

The bank said that it had also agreed to pay an additional $2.8 billion into a fund that will be created to return to consumers a portion of the money that was lost due to the sale of the same securities.

In well-documented evidence, the securities were misrepresented as low-risk financial vehicles when in fact they were bundles of toxic mortgages that turned out to be extremely high risk.

The $2.48 billion fines will be paid to the Justice Department in short order once the agreement is finalized, while the remaining $2.8 billion will be contributed to the consumer compensation fund over the course of the next 5 years.

The Credit Suisse announcement comes on the heels of another bank’s agreement to settle with the DOJ.

Germany’s largest financial institution, Deutche Bank, had earlier agreed to pay the Justice Department $7.2 billion to settle the DOJ’s claims against it, which were also derived from the sale of similarly fraudulent securities.

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World’s oldest bank receives bailout from Italian government…

In what was an expected move, the Italian Prime Minister said that the government had agreed to bail out Monte dei Paschi di Siena, the world’s oldest bank and Italy’s third largest.

The Italian government has authorized up to $20.9 billion to bail-out the bank in a move seen as necessary to keep it from potential insolvency.

A failure of Monte dei Paschi di Siena could potentially trigger a series of bank defaults that could take down the Italian economy, which is already struggling under the burden of a banking sector riddled by a portfolio of bad loans.

The bank had attempted to raise enough capital from the private sector in an effort to ward off failure, but investors didn’t bite, seeing Monte dei Paschi di Siena as too risky an investment without the financial backing of Italy’s government.

Italy’s banks are currently bending under the collective burden of nearly $372 billion in bad loans, which represents almost one-third of the amount of all the euro zone’s bad loans.

Italy’s government has assured taxpayers that they will not assume the full burden of the bail-out, in accordance with the rules set forth by the European Union, which sets the terms for the region’s financial bail-outs.

Bondholders, on the other hand, could find that they will be receiving a “haircut” to the tune of 25%.