Citigroup Inc (NYSE:C) did not expect to pay as much as $7 billion to settle a current legal spat with the US Department of Justice, Andrew Grossman said in a recent discussion on Wall Street Journal Live.
The comment came from reporter of The Wall Street Journal after his story that Citigroup Inc (NYSE:C) is nearing an agreement with the Justice Department for the bank to pay $7 billion to settle allegations that it sold substandard mortgages before the 2008 crisis.
According to Grossman:
“The latest is, after talks between the Justice Department and Citi looked like they were close to falling apart in mid-June – the Justice Department was going to go and file a lawsuit [although]they didn’t – it appears Citi came back to the table and they’re now close to a deal that would have Citi pay about $7 billion in a combination of consumer relief and just a cash payment to the U.S. Government to resolve these allegations that it sold bad mortgages before the financial crisis.”
Asked by Steven Russolillo what changed over the past few weeks, Grossman said that it is hard to be certain. However, he noted that they know that Citigroup Inc (NYSE:C) was offering $4 billion while the government wanted $10 billion. It’s no surprise that the figure purportedly to be paid by the bank is somewhere in the middle, he noted.
Russolillo then asked Grossman how the $7 billion, if indeed Citigroup Inc (NYSE:C) pays it, stacks up in the grand scheme of things, Grossman explained:
“It’s larger than [what]the bank wanted to pay. They thought, because they securitized a whole lot fewer mortgages than JP Morgan [and]the Bank of America, that they wouldn’t be on the hook for as much money. We’re still waiting on another big settlement. The Bank of America is still in talks with the Justice Department. They are fairly far along. We’re expecting that to come out within the next few weeks of months but we don’t quite know how that one is going to end up yet. We know those two sides were also fairly far apart. This could put some pressure on Bank of America because the DOJ might have gotten a bit more from Citi than [what]Citi wanted to pay here.”
Watch the discussion below.
Citigroup Inc (NYSE:C) shareholders includes Leon Cooperman’s Omega Advisors which reported, by the end of the first quarter of the year, 5.36 million shares in the financial giant. Another investor is Larry Robbins’ Glenview Capital which reported, during the same period, about 5.18 million shares in the company.