Citigroup announced yesterday that it will pay roughly $7 billion to settle a federal investigation into risky subprime mortgages, the type that helped bring on the financial crisis.
The bank, one of America’s largest, revealed the deal as part of its quarterly earnings report. Justice Department officials were expected to discuss it at a news conference later Monday.
The settlement stems from the sale of securities made up of subprime mortgages, which led to both the housing boom and bust that triggered the Great Recession at the end of 2007.
Citigroup and other banks downplayed the risks of subprime mortgages when packaging and selling them to mutual funds, investment trusts, pensions, as well as other banks and investors.
The securities, which contained so-called residential mortgage-backed securities and collateralized debt obligations, plunged in value when the housing market collapsed in 2006 and 2007.
Those losses triggered a financial crisis that pushed the economy into the worst recession since the 1930s.
