Citi Agrees to 7B Settlement with Justice DepartmentJul 15, 2014
On Monday, Attorney Generic Eric Holder announced that Citigroup has agreed to pay a landmark $7 billion to settle Justice Department accusations of the bank’s role in faulty mortgage securities. According to USA Today, $500 million will go to state attorneys general and the Federal Insurance Corp. and $4 billion towards civil penalties.
Federal authorities have been investigating Citi for faulty mortgage securities that exacerbated the housing bubble a decade ago.
Holder called the $4 billion civil penalty a “record” and said that it was "appropriate given the strength of the evidence of the wrongdoing committed by Citi." USA Today reports. The remaining $2.5 billion from the settlement will be used to help consumers who have issues stemming from the 2007-2009 financial crises, such as mortgage. According to the Wall Street Journal, the settlement falls between the $4 billion originally offered by Citigroup and the $10 billion sought by the government.
The Attorney General commented on Citi’s actions in a statement on Monday, USA Today reports. "Despite the fact that Citigroup learned of serious and widespread defects among the increasingly risky loans they were securitizing, the bank and its employees concealed these defects," Holder stated. "The bank's conduct was egregious. And under terms of this settlement, the bank has admitted to its misdeeds in great detail."
Holder said that Citi was able to secure its own financial security by asserting that its toxic “financial products were sound,"
"They did so at the expense of millions of ordinary Americans and investors of all types, including other financial institutions, universities and pension funds, cities and towns and even hospitals and charities,'' Holder said. "Ultimately, these investors suffered billions of dollars in losses when Citi's false and fraudulent claims came crashing down.''
The settlement may help hundreds of thousands of homeowners, according to Associated Attorney General Tony West. Holder points out that the deal does not, however, “absolve” Citi or its employees from potential criminal charges. "We believe the size and scope of this resolution goes beyond what could be considered the mere cost of doing business,'' the attorney general said, "In fact, it was not all inevitable in the these last few weeks that this case would be resolved out of court.''
Loretta Lynch, the U.S. attorney in New York’s Eastern District, said that prosecutors discovered “that the misconduct in Citigroup's deals devastated the nation and the world's economies, touching everyone," when reviewing every residential mortgage backed security issued or underwritten by the bank in 2006 and 2007.