Citigroup Expected to Settle US Mortgage Probe

The bank and the Justice Department are close to reaching a nearly $7 billion settlement agreement.
4:34 | 07/09/14

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Transcript for Citigroup Expected to Settle US Mortgage Probe
Michelle Franzen in New York is Wall Street closes shop on Wednesday July 9 -- this story stock. And one stuck with the story today Citigroup. The third largest financial institution in the United States is -- up for the sales of mortgage backed bonds -- -- -- to the 2008. Financial crisis an unexpected settlement at seven. Billion dollars here to explain all the details behind the probe and the punishment. Joined now by Mike -- toll from Yahoo! finance so like a settlement was in the works for a while tell us about this expected deal not quite done yet. That's right -- the expected numbers seven billion dollars -- a total. Some of compensation payment from Citigroup. That what we're hearing by the reports is -- four billion dollars would be cash payment basically cash value in the settlement four billion to the government. Three billion dollars much more about a cut customer relief sort of concessions on outstanding loans things like that that would more directly. Help borrowers out there this is somewhat similar to other deals that have been struck by other big banks in terms that breakdown of -- what that. Punishment is essentially so let's take a look at -- today's. Stock chart for Citigroup and you can walk us through some -- but not out of the job. -- it didn't do very much what's interesting actually go about the way the stock has reacted is that -- last night after the market closed. You see a little bit of a spurt upward in the Stockton that was when the initial report said that the number's going to be four billion dollars turns out that -- only the cash portion -- in the seven billion dollar. Number came out today. And the the stock actually declined it was under pressure all day along with some other big bank stocks are basically at first Wall Street that -- something to celebrate because. This expense was gonna potentially be lower. Then anticipating then it turned -- seven billion is actually not so low in the grand scheme of things. -- could investors also waiting for the actual announcement to take place. Yes most likely they are there they want to hear the details and you know clearly. This negotiation is not finished and it really is -- negotiation with all of the the very large banks that have been targeted by the Justice Department. It has always come down to. The Justice Department puts -- a very high figure the bank counters with a a somewhat much lower figure. And they somewhere I mean in the middle so that's been that's been -- and so I'm sure that process is not necessarily absolutely finalized just yet and was this supposed to be smaller dollar amount to something like three or four billion dollars on the sticker shock also -- investors. You know it might I think there was hope out there that it would be smaller one of the issues here is that Citigroup was not. Actually one of the very largest sellers of these mortgage backed securities -- that are going going south. If you look back it was Bank of America and Merrill Lynch. That were responsible Marlins course owned by the event now as well as JPMorgan were much more active in this area than Citigroup voice and you kind of got into the game. Belatedly. And so people thought well proportionally speaking. -- fine -- there settlement number should be lower than those competitor banks but as it turns out obviously who didn't really have a great bargaining position beyond that observation. Because they're under pressure from regulators in general and they have not -- kind of put their house in order in the regulators mines in the extended like Tuesday. Well let's talk about the Justice Department in the SEC. A little bit. Are they committed to bringing more of these fines for the 2008 financial crisis we -- JPMorgan Chase with a thirteen billion dollar -- last year. Now -- Citigroup it seems there could be a deal with Bank of America and the works to should expect a similar settlement figure for B today. I think we're looking at a bigger want to be a -- -- because -- there was a bigger seller of these securities were of much bigger player in this area I think people are thinking about it -- twelve billion dollar number for Bank of America. So it seems like once these three big settlements -- Don assuming they do as anticipated it probably -- marks than the end of the the real elephant hunt by the by the Justice Department and SEC. To sort of pinned down. Some of the the folks who are now been basically considered to be offenders that caused helped cause the financial -- or at least help propagate the financial crisis. Around the world. -- -- toll from Yahoo! finance thanks as always for just all right thank you you've been watching stories stock. David For your latest business headlines I'm Michelle Franzen in -- --

This transcript has been automatically generated and may not be 100% accurate.

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