US Justice Department Urges Citigroup to Raise Securities Settlement Offer
The U.S. Justice Department is urging Citigroup Inc. to raise its settlement offer in a long running probe that found the bank guilty of selling faulty mortgage securities that eventually led to the country's economic crash.
The department warned to sue the bank if it fails to raise its $4 billion offer.
Citigroup and the Justice department have been involved in settlement talks since April now. The bank offered to pay $4 billion, but the DOJ has been demanding $10 billion to end the investigation.
While the bank claims that it has a small share of securities market and only sold a fraction of them when compared to the other financial institutions, the prosecutors argue that Citigroup sold securities with a "higher percentage of bad loans," reports The Washington Post.
Citigroup has already settled a faulty mortgage lawsuit with the Federal Housing Finance Association (FHFA), regulator of the government-backed lenders Fannie Mae and Freddie Mac, paying $250 million in settlements. The bank is reportedly eager to settle with the DOJ too.
"The challenge of that is we don't get to pick the timing. We've got to wait until the agencies and the enforcement bureaus and so forth are wanting to engage with us....We'd love to get this stuff behind us this year," Michael Corbat, CEO of Citigroup, was quoted by The Journal while speaking to an analyst conference.
Analysts expect Citigroup to pay $6 billion to settle with the DOJ, according to The Star Online.
This is not the first time the department is facing an impasse with a bank charged with fraudulent trade practices. Last year, it had threatened to sue J.P Morgan Chase on the same issue, which bought the bank and the department back to the negotiating table again, reports The Wall Street Journal.
The DOJ is also preparing a similar lawsuit to press Bank of America's Meryl Lynch unit after talks to settle for more than $12 billion to $17 billion failed. Bank of America has also settled with the FHFA for $9.5 billion.