Citigroup, Inc., will pay $7 billion to settle the government’s accusations that it misled investors about the quality of mortgage securities it sold in the run-up to the financial crisis, reports the Wall Street Journal. The bank will pay a $4 billion civil penalty to the Justice Department, plus $500 million to the Federal Deposit Insurance Corp. and several states. Citigroup also agreed to spend $2.5 billion on “consumer relief,” where it will get credit for modifying mortgages for struggling homeowners and similar actions.
“We believe that this settlement is in the best interests of our shareholders, and allows us to move forward and to focus on the future, not the past,” said chief executive Michael Corbat. Attorney General Eric Holder said the bank engaged in “egregious” misconduct by covering up problems with loans it was packaging into securities and selling to investors. “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. He said the civil settlement doesn’t rule out criminal charges against Citigroup or its employees.