Citigroup agrees to settle wrongdoing stemming from mortgage-backed securities in $7 B deal with Justic Department

The Wall Street Journal reported that Citigroup and the Justice Department are expected to announce a billion-dollar deal to settle wrongdoing by the bank regarding faulty securities. This was observed to be a surprising development considering that the deal nearly fell apart last month.

On the afternoon of June 17, the Justice Department reportedly did not want the news of its $7 billion deal with Citigroup to be overshadowed by the news that the key suspect behind the attacks on the US consulate in Benghazi in 2012. Since then, Citigroup, who has been preparing to be sued and is no longer interested in raising the offer again, did not hear the threat of the suit from the US government again, WSJ said.

US Associate Attorney General Tony West said on the day of the announcement that the more US banks could be taken to task for their handling of such securities in the near future, Fox News reported.

The $7 billion settlement is touted to be the biggest monetary agreement in settling a US government probe linked to the 2008 financial crisis. Apart from the cash fine of $4.5 billion, the agreement also includes consumer relief pegged at $2.5 billion.

US Attorney General Eric Holder said, ""The penalty is appropriate given the strength of the evidence of the wrongdoing committed by Citi. Despite the fact that Citigroup learned of serious and widespread defects among increasingly risky loans that they were securitizing. The bank and its employees concealed these defects. They misrepresented the facts including the level of risk."

On the other hand, Fox News noted that the agreement reached by Citigroup and the Justice department does not absolve the bank or its employees from facing any potential criminal charges in the future, DOJ clarified.

Ahead of the announcement, Citigroup reported a sharp decline in its second-quarter earnings, which reflected the charge connected to its settlement with the US over its involvement in risky subprime mortgages.

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Citigroup Inc, Citigroup DOJ subprime mortgages settlement, subprime mortgages, 2008 financial crisis, US Justice Department

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