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Lehman Brothers To Pay $2.38 Bln To Compensate For Its Role In Mortgage Crisis

Lehman Brothers Holdings Inc.'s bankruptcy estate will pay $2.38 billion to compensate for its role in the previous decade's mortgage crisis, a federal judge decided, far less than the $11.4 billion some hedge funds had sought.

Reports noted that U.S. Bankruptcy Judge Shelley Chapman ruled in Manhattan Thursday after a 22-day trial to resolve the long-running dispute over Lehman's flawed residential mortgage-backed securities. Her decision puts a final tally on what buyers of the securities, known as RMBS, can recover for breaches by the investment bank when it pooled individual home loans and sold them off as bonds during the housing bubble.

A settlement of RMBS claims is a landmark for Lehman's other creditors because it frees up more of the defunct bank's assets to distribute. Lehman recently closed out a $2 billion dispute with Citigroup Inc. over derivatives, and similar litigation over derivatives with Credit Suisse Group AG is the last major remaining contest.

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