(NEW YORK) — Citigroup and the Department of Justice reached a $7 billion deal in a federal investigation into mortgages, officials announced Monday.
The government suit alleged that the bank misled investors about mortgage securities sold in the run-up to the 2008 financial crisis.
Citigroup learned of “serious and widespread” defects in loans but still concealed the information, including the level of risk, according to Attorney General Eric Holder.
“The bank’s misconduct was egregious,” Holder said Monday. “And under the terms of this settlement, the bank has admitted to its misdeeds in great detail.”
A $4 billion civil penalty is included in the agreement, marking the largest payment of its kind to date. Citigroup is the second big bank to settle, following in the footsteps of JP Morgan Chase, which made a deal for $13 billion.
“As a result of their assurances that toxic financial products were sound, Citigroup was able to expand its market share and increase profits,” Holder added. “They did so at the expense of millions of ordinary Americans and investors of all types — including other financial institutions, universities and pension funds, cities and towns, and even hospitals and religious charities. Ultimately, these investors suffered billions of dollars in losses when Citi’s false and fraudulent claims came crashing down.”
The deal will also include $2.5 billion going toward consumer relief to finance affordable multifamily rental housing, as well as principal reduction in residential loans.
Copyright 2014 ABC News Radio
Kathryn Vasel, CNN
Matt Egan, CNN
Ahiza Garcia, CNN