RBS had to be bailed out for £45bn by taxpayers during the financial crisis - REUTERS/Russell Cheyne/File Photo

Royal Bank of Scotland deliberately sold packages of “total f**king garbage” mortgages to investors which they knew could ultimately wreck the US housing market, according to internal emails unearthed by US regulators.

The bank - which was rescued by a £45bn UK state bailout at the height of the financial crisis - was one of the biggest participants in the toxic US mortgage underwriting market that helped cause the crash.

Internal emails sent between RBS bankers between 2005 and 2008 have been published as part of a $4.9bn (£3.9bn) settlement finalised between RBS and the US Department of Justice (DoJ) last night over the bank’s role in the scandal.

The role of the residential mortgage-backed securities (RMBS) market in the financial crisis was later popularised by the book The Big Short and Hollywood film adaptation of the same name starring Brad Pitt.

In the settlement document, US regulators describe how top RBS bankers mis-sold tens of billions of dollars worth of mortgage products they knew to be far riskier than they appeared, while pushing the risk “onto investors across the globe”.

In one exchange RBS’s head trader receives an email from a friend saying: “[I’m] sure your parents never imagine[d] they’d raise a son who [would] destroy the housing market in the richest nation on the planet.”

RBS timeline - back from the brink

To which the head trader responds: “I take exception to the word ‘destroy.’ I am more comfortable with ‘severely damage.’”

Another email from RBS’s chief credit officer in the US described some of the loans being bundled up as “total f**king garbage” with “fraud [that] was so rampant… [and] all random.”

“The loans are all disguised to, you know, look okay kind of… in a data file,” they added.

By October 2007, RBS’s chief credit officer said: “You can’t get to these default levels without having every possible, you know, style of scumbag... it’s like quasi organized crime...

"[F]acilitated by brokers . . . and just a lot of bad people who just said, 'Hey, there is a major flaw in this loan origination model. And we can fill it up like nobody’s business'... Nobody seems to care."

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The DoJ first agreed the $4.9bn (£3.9bn) settlement in principle with RBS in May. Despite the major hit, it actually came in below City expectations, allowing RBS to reinstate a dividend for the first time in a decade.

RBS confirmed it would pay an interim dividend of 2p last night, following the DoJ announcement.

Ross McEwan, chief executive of RBS, said: “We are pleased to have reached a final settlement with the DoJ and that we can focus our energy on serving our customers better and returning capital to our shareholders.

“This settlement dates back to the period between 2005 and 2007. There is no place for the sort of unacceptable behaviour alleged by the DoJ at the bank we are building today.”