Attorney General Eric Schneiderman announced this past week that New York state’s share of Citigroup Inc.’s $7 billion national settlement would come to the tune of at least $182 million.
As the Associated Press reported, the justice department said that the banking giant admitted to deceptive practices when handling risky subprime mortgages. Holder stated that such actions contributed to what became one of the worst financial crisis since the Great Depression.
In the settlement’s terms is a $2.5 billion penalty to pay for consumer relief and a $4 billion civil penalty to be paid to the federal government. As steep as these penalties are, the settlement has been criticized as being far too lenient.
“In the context of the damage done, the damage even described by the attorney general, we’re not even in the same ballpark,” said Bartlett Naylor, a financial policy advocate for Public Citizen.
New York’s share of the massive payout breaks down to $92 million in cash and $90 million worth or consumer relief efforts. Since many defendants can save between 10-30% by using a structured settlements, it may be possible that an such an arrangement could be made.
Some of the relief that the bank is promising to provide includes the forgiveness of some borrowers’ fist and second mortgage principal amounts, refinancing to lower mortgages’ interest rates, and financial assistance for both returning and first-time home buyers on down payments and closing costs.
However, now that Citigroup has settled, many eyes are on the Bank of America, which is also being investigated by the task force created in 2012. Many believe that the financial service will also likely come to a settlement agreement similar to Citigroup, since the negative press could be a worse result.
“The last thing a bank wants to go through is have their business aired in the public domain,” said president of the Consumer Bankers Association Richard Hunt. “Personally, I would love to see it go to trial from time to time, because I think at times the Department of Justice is bullying banks to settle and not face the negative headlines.”
Though several are critical of the investigation’s outcomes and potential results, there is at least a silver lining in the form of consumer relief for hurting states like New York.