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* Deutsche seeks settlement ahead of presidential vote
* CEO will be in Washington this week
* German businesses give bank their support (Adds U.S. listed stocks)
By Georgina Prodhan, Kathrin Jones and Lawrence Delevingne
FRANKFURT, Oct 3 (Reuters) - Deutsche Bank sharesresumed falling on Monday after recovering from a record low atthe end of last week, as hopes faded of a swift deal with U.S.authorities over a multi-billion dollar penalty.
The German lender is throwing its energies into reaching asettlement before next month's U.S. presidential election, withthe Department of Justice demanding a fine of up to $14 billionfor mis-selling mortgage-backed securities.
Its shares didn't trade in Germany on Mondaybecause of a public holiday, but its U.S.-listed stock was downaround 2.8 percent at mid-morning.
The threat of such a large fine has pushed Deutsche sharesto record lows, and a cut-price settlement is urgently needed to help restore confidence in Germany's largest lender.
A media report late on Friday that Deutsche and the DOJ were close to agreeing a much lower penalty of $5.4 billionlifted the stock 6 percent higher, but on Monday that reportremained unconfirmed.
The Wall Street Journal reported on Sunday that the bank'stalks with the DOJ were continuing. Details are in flux, with nodeal yet presented to senior decision makers for approval oneither side, the paper said, citing people familiar with thematter.
"Clearly, so long as a fine of this order of magnitude ($14billion) is an even remote possibility, markets worry,"UniCredit Chief Economist Erik F. Nielsen wrote in a note onSunday.
Ratings agency Moody's said it would be positive forbondholders if the lender could settle for around $3.1 billion,while a fine as high as $5.7 billion would dent 2016profitability but not significantly impair the bank's capitalposition.
POTENTIAL RISK
Deutsche is much smaller than Wall Street rivals such asJPMorgan and Citigroup.
But it has significant trading relationships with all of theworld's largest finance houses and the International MonetaryFund this year identified it as a bigger potential risk to thewider financial system than any other global bank.
Deutsche Chief Executive John Cryan will be in Washingtonthis week for the annual meeting of the IMF, and the FrankfurterAllgemeine Zeitung reported that other executives would join himto try to negotiate a settlement with the U.S. authorities.
Like fellow large European banks also under investigationfor mis-selling mortgage-backed securities - Credit Suisse and Barclays - Deutsche will want to get adeal done with the current administration still in power.
A new administration to be installed after the Nov. 8election will bring unknown risks and likely delays.
Domestically, Deutsche Bank is fighting a rearguard action,seeking to shore up confidence among the public, politicians andregulators who say the bank brought many of its problems uponitself by overreaching itself and then reacting too slowly tothe 2008 financial crisis.
It suffered a further blow to its image this weekend with athird IT outage in the space of a few months on Saturday,denying some customers access to their money for a short time.
INDUSTRY SUPPORT
German business leaders from companies including BASF, Daimler, E.ON, RWE and Siemens lined up to defend the bank in afront-page article in the Frankfurter AllgemeineSonntagszeitung.
"German industry needs a Deutsche Bank to accompany us outinto the world," BASF Chairman Juergen Hambrecht said.
A spokesman for a blue-chip company that did not feature inthe article told Reuters he had been asked by Deutsche for anexecutive to provide a similar supportive comment.
Deutsche Bank and the government in Berlin have had to playa delicate balancing act, emphasising the substance andimportance of the bank without implying any need for state aidor willingness to supply it.
The bank has a market capitalisation of only about 15.9billion euros ($17.9 billion) and would almost certainly have toraise fresh cash to pay the full DOJ demand.
Both the bank and Berlin this week denied reports that thegovernment was preparing a rescue plan.
The Bild am Sonntag newspaper wrote on Sunday thatDeutsche's chairman had informed Berlin just before it disclosedthe potential $14 billion fine but had not asked for help.
The same newspaper quoted the president of the BavarianFinance Centre, Wolfgang Gerke, as saying that the Germangovernment should step in and buy a 20 percent stake in the bankbefore its value fell any further. The group representsfinancial services companies in the southern German state.
"Fundamentally, I'm against state interventions," he toldthe newspaper, but added that in this case a government stakewould be "a signal that could turn the whole market". ($1 = 0.8894 euros)
(Additional reporting by Harro ten Wolde and Michael Shields;Editing by David Goodman and David Stamp)
