Mortgage Deal Near for Citigroup
Citigroup is nearing an agreement with federal officials regarding mortgage bonds that were sold before the financial crisis of 2008. The deal is expected to be finalized in the next several days, according to the Wall Street Journal.
According to an anonymous source, Citigroup will pay $4 billion under an agreement with the Department of Justice and a total of $7 billion when consumer relief is figured in. The deal is seen as a compromise, as the lender had originally made an offer of $3 billion, while prosecutors had asked for $10 billion.
Citigroup is part of a larger group of banks that are now being investigated to determine if they inflated the value of mortgage-backed bonds, while home sales hit bottom. Numerous high-figure penalties have been sought by federal prosecutors for sanctions violations and advising their customers about tax evasion.
Talks between prosecutors and Citigroup broke down in early June when the lender made an offer under $4 billion as a means of resolution and to avoid a lawsuit. The offer included $1 billion in cash, with the remainder coming as relief to consumers. The Department of Justice still has the option to sue Citigroup.
The financial crisis of 2008 was considered to be the worst economic downturn since the 1930s. It resulted in bank bailouts, crashing stock markets and severe loss in home values. Many people suffered forclosure, eviction and long-term unemployment. Losses in consumer wealth and business failure ran into the trillions of dollars.
Citigroup stock closed at a 1.2 percent loss on Thursday, finishing the day at $47.42. Over the course of the year, the stock has fallen nine percent. It traded at $47.53 on the European stock markets.
Mark Costiglio, spokesperson for Citigroup in New York, has made no official comment on the impending deal.