New York, NY, United States (4E) – Citigroup Inc. agreed to pay $7bn as part of its settlement with the U.S. government’s probe that it misled investors about the quality of mortgage securities it sold before the financial crisis.
The bank was aware that it sold mortgage-backed securities with loans that had “material defects” and did not reveal that information to investors, according to the Justice Department. Attorney General Eric Holder described Citi’s actions, which helped cause the financial crisis in 2008, as “egregious” misconduct.
Under the terms of the deal, Citigroup will pay a civil penalty of $4bn to the Justice Department, including $500mn to the Federal Deposit Insurance Corp. and a number of states. Citigroup will also allocate $2.5bn on consumer relief, and modify mortgages for struggling homeowners.
Citigroup also disclosed its second-quarter earnings on Monday, reporting that profit fell 96 percent in the quarter largely due to a pretax charge of around $3.8bn linked to the settlement. The company’s earnings surpassed analysts’ forecasts.