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A 'Citi' sign is displayed near Citibank headquarters in Manhattan on December 5, 2012 in New York City.
(Mario Tama/Getty)
Back in June, President Obama announced that the suspect in
the September 11, 2012 attack on the U.S. Consulate in Benghazi, Libya
had been apprehended.
“When Americans are attacked, no matter how long it takes, we will find those responsible and bring them to justice," President Obama said.
Though the focus was on Benghazi, the president might have actually planned to discuss the financial crisis that day, and bringing Wall Street to justice.
Today, the Department of Justice announced a $7 billion settlement with Citigroup over the mishandling of mortgage securities that helped to set off the financial crisis. It's a victory for the DOJ, which is hoping to show the American public that they are getting tough on Wall Street.
But Ben Protess, a reporter for our partner The New York Times, says the timing of this announcement says everything about playing to the media rather than making motions to federal judges.
On the day that the government announced that a suspect in the Benghazi attack had been taken into custody, members of the media were already waiting on standby for another big announcement.
"The press conference room was booked, they were telling journalist to be ready," says Protess. "Everybody expected the lawsuit to come down that Wednesday, and then suddenly the brakes were hit."
Portess says that the Justice Department stalled their original announcement because they didn't want the Benghazi arrest to overshadow the Citigroup news. Because the announcement was delayed, the door was opened for settlement talks. During this time, the prosecution announcement morphed into a $7 billion penalty.
"It really was this twist of fate that nobody necessarily expected, but ultimately kind of had this great opportunity for both sides to get back on the same page," Protess adds.
Even so, coming to an agreement was a difficult process. When settlement talks began, Citigroup was only offering $363 million, while the Justice Department was demanding Citigroup pay $12 billion.
"Basically the government said, 'Look we're not going to rely on your assertions. Just because you had a small portion of the security market back in '06, '07, '08, that doesn't mean you get a free pass and you get to pay a small sum, perhaps less than a billion dollars,'" adds Protess.
During those negotiations, the bank wanted to calculate the penalty based solely on its share of the mortgage security market. The government, however, had enough evidence to show that Citigroup was responsible for more than its share of the mortgage market.
The government investigation exposed Citigroup's fraudulent mortgage practices and history of manipulating investors. After contentious negotiation, Citigroup will pay $7 billion—a huge win for the Justice Department.
"There's a pretty big gap there between $363 million and $12 billion," says Protess. "Certainly, I think anyone can do the math and figure out that the bank came more towards the government."
While Protess believes there is an argument for the final settlement being unfair, he says the government has been savvy in its efforts to keep Wall Street accountable.
"They're using a little-known statue that allows them to use $1.1 million per violation—it's a statue called FIRREA (or the Financial Institutions Reform, Recovery, and Enforcement Act)," he says. "It's really been a huge potent tool for them, so you get what you pay for."
“When Americans are attacked, no matter how long it takes, we will find those responsible and bring them to justice," President Obama said.
Though the focus was on Benghazi, the president might have actually planned to discuss the financial crisis that day, and bringing Wall Street to justice.
Today, the Department of Justice announced a $7 billion settlement with Citigroup over the mishandling of mortgage securities that helped to set off the financial crisis. It's a victory for the DOJ, which is hoping to show the American public that they are getting tough on Wall Street.
But Ben Protess, a reporter for our partner The New York Times, says the timing of this announcement says everything about playing to the media rather than making motions to federal judges.
On the day that the government announced that a suspect in the Benghazi attack had been taken into custody, members of the media were already waiting on standby for another big announcement.
"The press conference room was booked, they were telling journalist to be ready," says Protess. "Everybody expected the lawsuit to come down that Wednesday, and then suddenly the brakes were hit."
Portess says that the Justice Department stalled their original announcement because they didn't want the Benghazi arrest to overshadow the Citigroup news. Because the announcement was delayed, the door was opened for settlement talks. During this time, the prosecution announcement morphed into a $7 billion penalty.
"It really was this twist of fate that nobody necessarily expected, but ultimately kind of had this great opportunity for both sides to get back on the same page," Protess adds.
Even so, coming to an agreement was a difficult process. When settlement talks began, Citigroup was only offering $363 million, while the Justice Department was demanding Citigroup pay $12 billion.
"Basically the government said, 'Look we're not going to rely on your assertions. Just because you had a small portion of the security market back in '06, '07, '08, that doesn't mean you get a free pass and you get to pay a small sum, perhaps less than a billion dollars,'" adds Protess.
During those negotiations, the bank wanted to calculate the penalty based solely on its share of the mortgage security market. The government, however, had enough evidence to show that Citigroup was responsible for more than its share of the mortgage market.
The government investigation exposed Citigroup's fraudulent mortgage practices and history of manipulating investors. After contentious negotiation, Citigroup will pay $7 billion—a huge win for the Justice Department.
"There's a pretty big gap there between $363 million and $12 billion," says Protess. "Certainly, I think anyone can do the math and figure out that the bank came more towards the government."
While Protess believes there is an argument for the final settlement being unfair, he says the government has been savvy in its efforts to keep Wall Street accountable.
"They're using a little-known statue that allows them to use $1.1 million per violation—it's a statue called FIRREA (or the Financial Institutions Reform, Recovery, and Enforcement Act)," he says. "It's really been a huge potent tool for them, so you get what you pay for."
Guests:
Ben ProtessEditors:
T.J. RaphaelContributors:
Kaitlin RobertsRelated
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Comments [1]
How much money was made by Citi
Bank with the delay of taking that 7 billion dollars today instead of a
couple of years ago. Can we calculate that interest of how much money
is earned every day on 7 billion dollars.
How long could I live on the interest from one day from 7 billion dollars? I don't have time to figure it out, but my gut says it could float me for a while.
Now, here's my problem. That 7 billion dollars that is being taken away from Citi-Bank is great, but does it change the lifestyle of anyone who created the financial mess in the first place? Who in Citi-Bank does this affect? Low level dudes who make 60 grand and now won't get a raise?
What will the bonus be for the CEO this Christmas?
Bankers who were able to bring this country to its knees for their own self gain, probably tighten the belt when it comes to tipping their waiters in fancy restaurants rather than any kind of remorse or change of lifestyle.
Jul. 14 2014 02:36 PM
How long could I live on the interest from one day from 7 billion dollars? I don't have time to figure it out, but my gut says it could float me for a while.
Now, here's my problem. That 7 billion dollars that is being taken away from Citi-Bank is great, but does it change the lifestyle of anyone who created the financial mess in the first place? Who in Citi-Bank does this affect? Low level dudes who make 60 grand and now won't get a raise?
What will the bonus be for the CEO this Christmas?
Bankers who were able to bring this country to its knees for their own self gain, probably tighten the belt when it comes to tipping their waiters in fancy restaurants rather than any kind of remorse or change of lifestyle.
Score: 0/0
