$2.5B of $7B Citigroup penalty earmarked for consumer relief

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Citigroup has agreed to pay $7 billion to settle government allegations that it misrepresented the quality of mortgage-backed securities (MBS) to investors when selling them in the run-up to the housing meltdown, The Wall Street Journal reports.

The bank will pay $4 billion to the Justice Department, $500 million to the Federal Deposit Insurance Corp. and several states, and $2.5 billion in consumer relief through assistance such as mortgage modifications, The Journal said.

Unlike a similar agreement with JPMorgan Chase, the settlement releases Citigroup from potential liability for collateralized debt obligations (CDOs), not just MBS, according to The Journal. Source: The Wall Street Journal.