Justice Department officials announced the settlement today. The $7 billion payout is more than twice what analysts initially predicted, but less than the $12 billion the government had pushed for in early negotiations, according to a Reuters report.
This settlement, however, is just the beginning. Associate Attorney General Tony West said today that the government’s residential mortgage-backed securities working group will be bringing forward more investigations “in the very near future.”
The government has stepped up its probes of big lenders in recent months. In May, Attorney General Eric Holder announced that the Justice Department would be pursuing criminal charges against many lenders, saying that no company was “too big to jail.”
“To be clear, no individual or company – no matter how large or how profitable – is above the law,” Holder said. “When the Department of Justice conducts investigations, we will always follow the law and the facts, wherever they may lead.”
The Citigroup settlement ends months of tense negotiations, which at one point grew so strained that the government threatened to sue the bank. Citigroup agreed to pay $4.5 billion in cash and $2.5 billion in consumer relief, according to Reuters.
“The penalty is appropriate given the strength of the evidence of the wrongdoing committed by Citi,” Holder said in a statement today. “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.”
Citigroup has agreed to shell out $7 billion to settle allegations that it sold shoddy mortgage bonds in the run-up to the financial meltdown – and more mortgage-related litigation is on the way.