WASHINGTON (AP) — Attorney General Eric Holder says the $7 billion settlement with Citigroup doesn’t preclude the possibility of criminal prosecution for the bank or individual employees.
Citigroup today agreed to pay $7 billion to settle a federal probe into its handling of risky subprime mortgages. The bank admitted to a pattern of deception that Holder said had “shattered lives” and contributed to the worst financial crisis in decades.
Besides a $4 billion civil penalty, the bank will also provide $2.5 billion to help borrowers who lost their homes to foreclosure. And it will settle claims from state attorneys general and the Federal Deposit Insurance Corporation.
The total settlement package represents about half of Citigroup’s $13.1 billion profit last year. Analyst Gerard Cassidy of RBC Capital Markets says the bank should have the capital it needs to absorb the settlement.
He also says that the “unintended consequence” of the settlement is that banks like Citigroup are less likely to lend — hurting would-be homebuyers with student debt who are seeking a mortgage. He says banks now “won’t go near those customers.”
Investors today have shrugged off the settlement, a sign that they expect Citigroup to continue to operate without much disruption. Shares in Citi were up by three percent.
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150-a-08-(Attorney General Eric Holder, at news conference)-“be the last”-Attorney General Eric Holder says other banks are on notice that they too will pay for misdeeds like those of Citigroup. (14 Jul 2014)
< 149-a-08-(Attorney General Eric Holder, at news conference)-“in the future”-Attorney General Eric Holder says Citigroup could face criminal penalties in addition to the civil penalties of this settlement. (14 Jul 2014) < APPHOTO DCPM107: Attorney General Eric Holder, left, with Tony West, Justice Department’s lead negotiator, right, and US Attorney for the District of Colorado John Walsh, center, announces at the Justice Department in Washington Monday, July 14, 2014, that Citigroup will pay $7 billion to settle an investigation into risky subprime mortgages, the type that helped fuel the financial crisis. The agreement comes weeks after talks between the sides broke down, prompting the government to warn that it would sue the New York investment bank. The bank had offered to pay less then $4 billion, a sum substantially less that what the Justice Department was asking for. The settlement stems from the sale of securities made up of subprime mortgages, which fueled both the housing boon and bust that triggered the Great Recession at the end of 2007. (AP Photo/Pablo Martinez Monsivais) (14 Jul 2014) < Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
