The US Justice Department and Citigroup Inc (NYSE:C) have closed the gap in the bid-ask spread on a financial settlement and may be close to a deal.


Citigroup prepared to settle deceptive mortgage product sales allegations

The Wall Street Journal is reporting that Citigroup Inc (NYSE:C) is prepared to settle allegations the bank packaged and sold deceptive mortgage products designed to be opaque. The actual agreed upon settlement price should be interesting to watch.

“The two sides, which had been far apart just weeks ago, are now ironing out details of an agreement that would have the bank pay more than $4 billion to avert a federal lawsuit over the pre-crisis mortgages,” the Journal reported, noting the low end of the negotiation scale.

As previously reported in ValueWalk, Citigroup Inc (NYSE:C) had lowballed negotiations with the US Department of Justice, offering to pay just 40 percent on the bid to DoJ’s ask of a $10 billion dollar fine. At the time we noted the heat could turn up rather interesting information in a public trial, but the Journal noted a settlement could be announced as early as next week, citing people familiar with the matter.

Citigroup’s settlement reveals subtle threats of exposure of criminal information

The settlement comes as a sharp contrast to the somewhat terse negotiations and subtle threats of exposure of potentially criminal information being revealed at trial were said to be tempered by political concerns.

The DoJ settlement with the US bank will be interesting to note in light of the DoJ’s recent $8.9 billion settlement with BNP Paribas.  In that agreement, the French bank agreed to plead guilty to crimes for illegally transferring money to nations which had been placed on a US sanctions list.

The government’s effort will also be noted relative to further settlement agreements with the big banks. The Justice Department has also been in talks with Bank of America over similar issues regarding its mortgage related derivatives that were packaged in an apparently deliberately opaque fashion so the toxic nature of the contents could not be easily discerned.

News of the settlement and DoJ legal action didn’t do much for the stock in the past several weeks, as it has traded on either side of $48.