http://www.local12.com//news/features/top-stories/stories/citigroup-pay-7b-subprime-mortgages-probe-...
Updated: Monday, July 14 2014, 01:53 PM EDT
WASHINGTON (AP) -- Citigroup will pay $7 billion to settle an investigation into risky subprime mortgages, the type that helped fuel the financial crisis.
The agreement announced Monday comes weeks after talks between the sides broke down, prompting the government to warn that it would sue the New York investment bank. The bank had offered to pay less than $4 billion, a sum substantially less than what the Justice Department was asking for.
The settlement stems from the sale of securities made up of subprime mortgages, which fueled 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 them 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
