Citigroup will pay approximately $7 billion to settle an investigation of subprime mortgages that fueled 2007's recession, The Associated Press reports.
The agreement was announced Monday after weeks of talks between Citigroup and the U.S. Justice Department. The AP reports that Citigroup "downplayed the risks of subprime mortgages when packaging them selling them to mutual funds, investment trusts, pensions, as well as other banks and investors," causing losses to investors.
"The bank's misconduct was egregious," Attorney General Eric H. Holder, Jr. said in a statement. "Despite the fact that Citigroup learned of serious and widespread defects among the increasingly risky loans they were securitizing, the bank and its employees concealed these defects." Holder added that the settlement does not absolve Citigroup from future charges.
The settlement includes a $4 billion cash penalty to the Justice Department, The New York Times reports. The deal will avert a lawsuit between Citigroup and the U.S. J.P. Morgan is the only other major U.S. bank with a similar settlement thus far, but the Times reports that the agreement "sets the stage" for the Justice Department's negotiations with Bank of America.