The U.S. Department of Justice has accepted a settlement offer from Citigroup Inc for $7 billion, closing another chapter of the 2008 financial markets meltdown. The government had been investigating Citi for their sales of mortgage-backed securities leading up to the crash.
Citigroup is the second banking giant to settle with the government since President Obama set up a task force to investigate fraudulent financial practices related to the ’08 collapse. Last fall, JPMorgan Chase & Co paid a record $13 billion in civil penalties to settle a similar investigation. Currently, there are more than half a dozen banks being probed for activities that blossomed under Obama’s predecessor.
In the current settlement with Citigroup, the government had targeted $12 billion. For the negotiated amount, $4.5 billion will be paid in cash, and the other $2.5 billion will be dispersed as consumer relief. Of the $4.5 billion cash payment, $4 billion will be allotted to the Justice Department as a civil penalty, and the remaining $500 million allotted to state attorneys general and the Federal Deposit Insurance Corporation.
Attorney General Eric Holder issued the following statement:
“This historic penalty is appropriate given the strength of the evidence of the wrongdoing committed by Citi. The bank’s activities contributed mightily to the financial crisis that devastated our economy in 2008. Taken together, we believe the size and scope of this resolution goes beyond what could be considered the mere cost of doing business. Citi is not the first financial institution to be held accountable by this Justice Department, and it will certainly not be the last.”
While the settlement was much less than the government had sought, it was twice what analysts had predicted. Shareholders were undaunted, as Citigroup’s stock price climbed 1.4% to $47.65 per share before this morning’s trading.
h/t: Huffington Post