Economy Watch: Citi Pays Fine for Subprime Misdeeds
- Jul 15, 2014
Citigroup agreed to pay $7 billion to settle charges levied by the U.S. Department of Justice that the banking giant routinely and brazenly securitized and sold vast numbers of bum mortgages to investors in 2006 and ’07, and knew it was doing so. It’s one of the largest settlements of its kind, but fairly small beer in the greater scheme of the company, which had revenues of $19.3 billion in the second quarter of 2014 and total assets of more than $1.8 trillion.
The settlement was unusual in some ways. One component had Citigroup agreeing to provide $180 million to build affordable rental housing in “high cost of living areas,” though as yet those areas remained unspecified. The rationale seemed to be that since the company’s mortgage business isn’t large enough any more for it to provide as much homeowner relief in the form of modified mortgages, it can provide affordable housing as an alternative compensation.
Other terms of the settlement include $4 billion for the U.S. Treasury, along with money to pay for mortgage modifications and down payment assistance. The company will also donate to legal aid groups specializing in housing, among other measures. The FDIC will receive more than $200 million, since it needed to deal with three banks that failed because of large and very bad portfolios of loans sold to them by Citigroup.
Oil, gas prices edge down
The price of oil continued on its nearly month-long slide on Monday, with West Texas Intermediate—the benchmark affecting prices the most in the United States—ending the day just above $100 a barrel. A month ago, WTI was around $107 a barrel. Brent, another important international metric, has been similarly dropping.
Retail prices of gas have likewise been falling a bit in recent weeks, despite the fact that July is one of the peak driving months. According to AAA, the average price for a gallon of regular was $3.614 on Monday. A month earlier, the average was $3.657 a gallon. Prices are now roughly where they were a year ago, at $3.60 a gallon.
Hawaii leads the nation with the most expensive price per gallon at $4.34, followed by Alaska ($4.19) and California ($4.10), according to the organization. While prices in many states remain high, the price at the pump in 45 states and Washington, D.C., has fallen over the past week, with the biggest drops in Indiana (down 13 cents), Michigan (down 12 cents) and Kentucky (down 10 cents).
Wall Street had another up day on Monday, with the Dow Jones Industrial Average gaining 111.61 points, or 0.66 percent, putting it above 17,000 once again. The S&P 500 gained 0.48 percent and the Nasdaq advanced 0.56 percent.