California Attorney General Kamala D. Harris says the Golden State will collect around $200 million of the roughly $7 billion that Citigroup announced Monday it would pay to settle federal claims regarding the sale of defective mortgage investments during the subprime housing boom.
Citigroup, the nation’s third-largest bank, said this morning it would pay $4.5 billion in fines and $2.5 billion in consumer relief.
The settlement stems from the sale of securities made up of subprime mortgages, which was part of the complex web of factors that collapsed banks in 2008 and lead to years of economic stagnation in the U.S.
The crisis stemmed from the bursting of the housing bubble, as homeowners found property values, which had skyrocketed for several years, suddenly plummeting, leading to a wave of foreclosures.
Reuters reported Citibank’s negotiations with the U.S. Justice Department accelerated June 9, as the corporation’s leaders struggled to prevent the government from suing. Negotiations began last fall, just after the U.S. announced a $13 million settlement with JP Morgan Chase, which also included money set aside for fines and consumer relief.
According to Reuters, Bank of America continues to participate in talks with the Justic Department.
Harris, in a statement released in Los Angeles, said California will receive $102.7 million in damages, which will serve to reimburse the state’s pension funds for losses on investments in the mortgage-backed securities of Citigroup and its affiliates.
The state is also guaranteed at least $90 million in consumer relief, she said.
“Citigroup misled consumers and profited by providing California’s pension funds with incomplete information about mortgage investments,” Harris said. “This settlement holds Citi accountable and compensates the state’s pension funds that protect the retirement savings of hardworking Californians.”
– City News Service