Citigroup, one of the most dysfunctional and malevolent financial institutions in American history, has agreed to pay $7 billion to settle investigations into the fraud it committed in the mortgage security market that led to the financial crash of 2008. The selling and marketing of volatile mortgage security products to investors around the world as safe and stable mined the financial markets to blow up in 2008.
The resulting financial crisis saw the American people suffer incredible pain while Citigroup received a federal bailout from Congress under TARP and a wide open line of endless credit from the Federal Reserve. No Citigroup executives will be prosecuted nor face personal liability and the company will go on with the fine serving as a minor inconvenience.
Attorney General Eric Holder, once a Wall Street lawyer who represented clients involved in mortgage fraud that led to the 2008 crisis, said “The bank’s misconduct was egregious,” while promoting the inconsequential settlement.
The settlement, announced on Monday morning, includes a $4 billion cash penalty to the Justice Department – the largest payment of its kind – as well as $2.5 billion in so-called soft dollars earmarked for aiding struggling consumers and $500 million to state attorneys general and the Federal Deposit Insurance Corporation.
The deal, after months of contentious negotiations, averts a lawsuit that would have proved costly for both sides and resolves a civil investigation into Citigroup’s packaging and selling of mortgage securities that soured during the financial crisis, causing large losses to investors.
The Justice Department declined an earlier offer from Citigroup noting it had emails and other evidence that, according to AG Holder, showed “[W]idespread defects among the increasingly risky loans they were securitizing, the bank and its employees concealed these defects.” Kind of sounds like criminal fraud doesn’t it?
Citigroup itself was formed under dishonest circumstances through the merger of Citibank and Travelers Group when Federal Reserve Chair Alan Greenspan approved the merger despite it being illegal at the time. Congress, who had taken millions of dollars from owners and investors in Citigroup, then approved the merger. One of those lobbying for the merger to be retroactively legalized was Clinton Treasury Secretary Robert Rubin who would go on to serve as chairman of Citigroup and make over $100 million.
Citigroup has been bailed out at least four times by the federal government and continues to be implicated in illegality regarding money laundering for terrorists and drug cartels as well as other crimes in the foreign exchange market. The former CEO of Citigroup and architect of the merger in the 90s, Sandy Weill, has said the merger no longer makes sense and Citigroup should be broken up.
But why break up a good thing?
Photo by Tukka under public domain.