The world's largest financial services company entered into an agreement over the weekend with US authorities to end investigations into subprime lending in 2008. The company's capital amounts to 145 billion, but it will now have to subtract 7.000 million, i.e. the amount of the fine that Citi will have to pay to the US authorities.
Citigroup will pay $4,5 billion in cash, of which $4 billion to the Justice Department and $500 million to other authorities involved in the investigation. The remaining $2,5 billion will be distributed in customer rebates. The agreement will cause extraordinary charges of approximately 3,8 billion dollars before taxes in the second quarter.
The explosion of the 2008 crisis was triggered precisely by the granting of securitizations with no real value, sold instead as healthy financial products to investors who were promised high returns with contained risks. Citi's admission is significant precisely in the sense that the curtain has finally been lifted on the extent of the responsibility of American credit companies in the proliferation of the financial crisis whose consequences we are still paying today.
