Guardian: “Citigroup agreed to pay $7bn on Monday to settle a federal investigation into the toxic mortgage products the bank sold in the run-up to the financial crisis.”
“The agreement comes after months of tense negotiations and comes as Justice Department continues to negotiate a similar settlement with rival Bank of America.
“The bank’s misconduct was egregious,’’ attorney general Eric Holder said in a statement. “As a result of their assurances that toxic financial products were sound, Citigroup was able to expand its market share and increase profits.”
He said the bank’s conduct had “contributed mightily to the financial crisis that devastated our economy in 2008.”
Citigroup admitted to many of its misdeeds “in great detail” the Justice Department said. According to a statement of facts released by the government, and agreed by the bank, Citigroup executives ignored their own warnings and misrepresented the quality of the subpar mortgages they were selling to investors.
In an internal email cited by the government one Citigroup trader stated the bank “should start praying” because so many of the investments it had made were about to fail. The trader said he was “amazed” the loans had ever been made.
Despite knowledge that many of the loans were failing or likely to, Citigroup packaged up the home loans and sold them to investors. “Our teams found that the misconduct in Citigroup’s deals devastated the nation and the world’s economies, touching everyone,” said Loretta Lynch, the US attorney from Brooklyn.
Citigroup will pay $4bn in cash to the Justice Department – the largest payment of its kind – and a further $500m will go to state attorneys general and the Federal Deposit Insurance Corporation.
….Negotiations with the bank had become increasingly tense. Citigroup had originally offered to pay $363m to settle the investigation and believed its fine should be a fraction of the $13bn JP Morgan agreed to pay to settle its issues last year.
Holder said that the settlement did not absolve “Citigroup or its individual employees” from future criminal charges.
“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 said.
….Closer to home the Justice Department is in tense negotiations with Bank of America over its role in selling mortgage-related products that contributed to the financial crisis. Those talks have stalled with Holder refusing to see BofA chief executive Brian Moynihan in person because he argues the two sides are too far apart on a settlement.
Holder has moved to toughen the Justice Department’s stance on banks after criticism of earlier fines some had argued had treated financial institutions too lightly. In a video address in May Holder said: “There is no such thing as ‘too big to jail,” Holder declared in a weekly video message. “No individual or company, no matter how large or how profitable, is above the law.”
Fines: $25bn — Ally Financial, Bank of America, Citigroup, JP Morgan Chase, Wells Fargo. The fine was imposed in February 2012 over alleged foreclosure processing abuses.
$13bn — JP Morgan. The fine was imposed in November 2013 over charges that it over-sold dodgy mortgage products in the run up to the financial crisis.
$9.3bn — Aurora, Bank of America, Citibank, Goldman Sachs, HSBC, JPMorgan Chase, MetLife Bank, Morgan Stanley, PNC, Sovereign, SunTrust, US Bank, and Wells Fargo. The fine was imposed in March 2013 over alleged foreclosure abuses.
$8.5bn — Bank of America. The fine was imposed in June 2011 to mortgage bondholders over the sale of mortgage-backed securities. The settlement is still awaiting a judge’s approval.
$7bn – Citigroup. The fine was imposed in July 2014 over the sale of toxic mortgage-backed financial products.
$2.6bn — Credit Suisse. In May 2014 Credit Suisse Group became the first financial institution in more than a decade to plead guilty to a crime after it admitted to conspiring to aid tax dodgers.”
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