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It was announced on Monday that Citigroup Inc has agreed to pay $7 billion to settle the United States investigation into mortgage-backed securities, according to a report from Reuters.
The mortgage-backed securities were sold in the run-up to the financial crisis of 2008. The $7 billion settlement is much more than experts had expected the bank to pay, but it is markedly less than the $12 billion the government requested in negotiations with Citigroup.
The bank said that it is going to pay $2.5 billion in consumer relief and $4.5 billion in cash. Citigroup also said that it is going to take a pre-tax charge of $3.8 billion in the second quarter.
Since President Barack Obama created a task force to investigate the sale of toxic home loans, this is the second bank to settle with the government.
“The penalty is appropriate given the strength of the evidence of the wrongdoing committed by Citi,” U.S. Attorney General Eric Holder said in a statement on Monday.
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“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.
Within the $4.5 billion cash portion of the settlement, $4 billion will be a civil payment to the Justice Department and $500 million will be compensation payments to the Federal Deposit Insurance Corp. and state attorney generals.
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