Today’s New York Times reports that Citigroup is going to buy its way out of the responsibility for the 1 billion in bogus mortgage securities that it sold just before the financial collapse in 2009. The article: Citigroup to Pay Millions to Close Fraud Complaint– By Edward Wyatt explains how Citigroup executives bundled up some risky mortgage investments into securities, sold them and then bet against them to rake in huge profits. Citigroup has agreed to pay $285 mil. to settle a civil suit for defrauding investors and will be used to refund investors as well as a $95 mil. fine. The deal isn’t quite final yet as the federal district judge in the case, Jed S. Rakoff, a hardliner in other SEC cases, may not approve the agreement. The leniency of the settlement and the fact that neither the SEC nor the Justice Department have commented on whether Citigroup will face any criminal action.
With profits of $3.8 billion in the third quarter of this year alone it would seem that the $285 mil is just a drop in the ocean and with Citigroup’s tacit admission of fraud it would seem that criminal charges and harsher fines should be directed at the company. In a statement, Citigroup noted that the S.E.C. did not charge it with “intentional or reckless misconduct.” Rather, it settled charges that its actions were negligent and misleading to investors. Yet it would seem that for Citigroup executives to have hand picked the bad mortgages that made up the fraudulent investments that there must have been some sort of prior intent.
To date very few bank executives have been charged and fewer still have been convicted. It would seem that the authorities don’t want to, or can’t, find those responsible for the billions that were lost in the mortgage collapse and that during these financially depressed times that the banks are not going to have to repay any of the money that the government used to bail them out. Yet again the taxpayer is the one who pays for the rampant greed of Wall Street while the golden parachuted bank executives have gotten off scot free.