As reported by the Washington Post, Citigroup will pay $75 million to settle charges related to subprime mortgages and the housing bust of 2007. The Securities and Exchange Commission alleged fraud charges against the company asserting that it mislead investors about potential losses from subprime mortgages.
Citigroup Center in New York
The allegations by the SEC went something like this: Citigroup had repeatedly made misleading statements in both calls with securities analysts and in regulatory filings. The misleading statements were regarding the extent of the company’s holdings tied to the high-risk subprime mortgages.
When borrowers started defaulting, Citigroup starting losing money – lots of money. The company’s losses reached tens of billions of dollars and the company was on the brink of a financial meltdown and collapse. Citigroup had claimed its exposure was $13 billion, the SEC, however, state that exposure was more like $50 billion.
In the end, the tax-payers had to bail the company out with TARP funds – $45 billion worth. In 2007, the company posted a $10 billion loss for the fourth quarter. The largest loss in the company’s history.
In the settlement reached with the SEC the company neither admitted nor denied any of the government’s allegations.
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