IE Business Daily Business news for the Inland Empire.
One of the nation’s largest banks will pay approximately $7 billion to end a federal investigation into high-risk subprime mortgages the bank made, the kind of loans that helped bring about the Great Recession.
Citigroup will make a $4 billion civil payment to the U.S. Department of Justice and another $500 million payment to state attorneys general and the Federal Deposit Insurance Corporation, according to an agreement announced today.
California will receive $200 million and is guaranteed $90 million in consumer relief, according to the agreement.
Citigroup sold securities made up of subprime mortgages and downplayed the risks of those mortgages when selling them to mutual funds, investment trusts, other banks and investors. The value of the securities dropped when the housing market collapsed in 2006 and 2007.
Those losses helped cause the worst financial crisis in the United States since the Great Depression of the 1930s.
“Citigroup misled consumers and profited by providing California’s pension funds with incomplete information about mortgage investments,” Attorney General Kamala D. Harris said in a statement. “This statement holds Citigroup accountable and compensates the state’s pension funds that protect the retirement savings of hardworking Californians.”
