Citi, U.S. $7 billion settlement announcement expected Monday

Sun Jul 13, 2014 5:41pm EDT
 
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By Karen Freifeld and Aruna Viswanatha

NEW YORK (Reuters) - Citigroup agreed to pay $7 billion to resolve a U.S. government investigation into shoddy mortgage-backed securities the bank sold in the run-up to the 2008 financial crisis in a settlement set to be announced on Monday, sources said.

The $7 billion includes $4 billion in cash to the U.S. Department of Justice, $2.5 billion in consumer relief, more than $200 million to the Federal Deposit Insurance Corporation and just under $300 million to settle probes by five states, said sources familiar with the negotiations.

Spokespeople for the Justice Department and the bank declined comment. Representatives of attorneys general of New York, Delaware, California, Massachusetts and Illinois, the states said to be involved, did not immediately return requests for comment. Nor did the FDIC.

The settlement, signed over the weekend, caps months of negotiations, during which the government demanded $12 billion and threatened to sue Citigroup, according to the sources.

The deal is scheduled to be announced on Monday morning when Citigroup executives also will report second-quarter results before the stock market opens in New York, the sources said.

The $7 billion has surprised stock analysts and people inside the bank, who expected Citigroup to resolve the investigations for much less.

Citigroup is the second major bank to settle with authorities since President Barack Obama ordered the formation of a task force to investigate the sale and packaging of toxic home loans, which were at the center of the 2008 financial crisis. The Justice Department issued more than a dozen subpoenas to financial institutions in early 2012.

Bank of America Corp also has been negotiating with the Justice Department over similar claims.   Continued...

 
A Citigroup logo is pictured from the floor of the New York Stock Exchange July 9, 2014. REUTERS/Brendan McDermid