Citigroup Agrees to Pay $7 Billion in Mortgage Securities Scandal

Citigroup Agrees to Pay $7 Billion in Mortgage Securities Scandal

Citigroup and the Justice Department have announced a $7 billion settlement in the government's investigation into the mortgage-backed securities the bank sold to institutions here and elsewhere around the world that led to a major financial crisis.

The settlement with Citigroup includes a $4 billion cash penalty paid to the Justice Department, which Holder described as the largest penalty of its kind and "appropriate given the strength of the evidence of the wrongdoing committed by Citi." Five hundred million will be paid to state attorneys general and the Federal Deposit Insurance Corporation. The remaining $2.5 billion is earmarked to aid consumers struggling with mortgage-related issues and other relief programs. Citigroup said it will provide the consumer relief by the end of 2018.

The consumer relief will involve financing for the construction and preservation of affordable multifamily rental housing, principal reduction and forbearance for residential mortgages and other direct consumer benefits from various relief programs, the bank said.

Holder said the settlement did not absolve "Citigroup or its individual employees" from facing future criminal charges. However, in none of the previous settlements with major financial institutions has anyone gone to jail.

 Earlier this year JPMorgan got hit with $13 billion in fines for its role in the mortgage securities debacle (see What A Great Country. You Can Pick Your Own Reality). 

The last major bank that is still in the Justice Department's sights is the Bank of America, which essentially has been on hold while Citigroup worked out an agreement. Bank of America's contention that it should not be held liable for mortgage problems attributed to its Merrill Lynch unit has stalled agreement between the parties. The bank has argued that it did not want to purchase Merrill Lynch in the depths of the financial crisis, but was pressured by regulators to complete the acquisition.