It took a few months, but the Department of Justice has just announced a multibillion-dollar settlement with Citigroup over bad home loans which contributed to the 2008 financial crisis. (Via Getty Images)
Negotiations began in April but failed when Citigroup refused to budge from its $4 billion offer in June. The feds had initially planned stiff action.
The New York Times says what could have been a costly lawsuit for both sides was stalled and eventually dismissed by another event — the arrest of a suspect in the 2012 attack on the U.S. Consulate in Benghazi, Libya.
USA Today explains Citigroup admitted to concealing the true quality of many risky loans to investors. U.S. Attorney General Eric Holder called the bank's actions "egregious."
In a statement, the firm says its $7 billion settlement includes a $4 billion penalty, a $2.5 billion relief to homeowners and $500 million for the state attorneys general and FDIC. (Via Citigroup)
Citigroup is the third-largest bank in the U.S. and the latest to reach similar settlements. Although Holder dubs the $4 billion penalty the largest of its kind, as CNN points out, the settlement certainly isn't.
"J.P. Morgan paying a record, that was in November, that was $13 billion. $11.8 billion dollars from Bank of America. This $7 billion from Citi. Wells Fargo $5.8 [sic] billion. $1.25 billion from Morgan Stanley."
The Wall Street Journal notes banks fear such settlements show how the Justice Department is "getting increasingly heavy-handed against the industry" and this could set a precedent for future negotiations such as those with Bank of America, which have been put on hold pending the Citigroup agreement. (Via Getty Images)
The Journal noted the settlement is larger than what analysts expected. The settlement also absolves Citigroup from being hit with any potential lawsuits in the future.