July 15, 2014 08:18
One of the biggest banks in the United States, Citigroup, is paying a $7 billion penalty to resolve U.S. government charges that it sold risky housing securities that helped trigger the country's deep recession in 2008.
Under the agreement Monday, Citigroup will pay $4 billion to the government's Justice Department, $500 million to a U.S. insurance fund and several state governments and provide $2.5 billion in relief to financially troubled homeowners having difficulty making their loan payments.
The bank made risky loans to weak borrowers and then packaged them for sale to investors as securities.
The government alleged that Citigroup misled investors about the quality of the housing loans in the securities they sold. Millions of American homeowners defaulted on their loans in the recession, unable to make monthly payments when they were laid off from their jobs and lost their houses.
Citigroup is the second largest U.S. bank to reach a settlement with the government over the failed mortgage securities that contributed to the steepest economic downturn in the country since the Great Depression of the 1930s. The largest U.S. bank, JPMorgan Chase, last year paid a $13 billion penalty, and negotiations are under way with Bank of America for its sale of the securities.
Some information for this report was provided by AP.
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