Banking bad: Who wins, who loses in the $7B Citigroup settlement?

Citigroup agreed to a $7 billion settlement with the Justice Department on Monday. Included in the deal is a record-breaking $4 billion penalty for the bank's role in the 2008 financial crisis.

In a press conference at the Justice Department, Attorney General Eric Holder called the terms "appropriate," saying, "The bank's misconduct was egregious. And under the terms of this settlement, the bank has admitted to its misdeeds in great detail. The bank's activities shattered lives and livelihoods throughout the country and around the world."

The agreement comes after months of tense negotiations between the government and the bank and brings an end to a federal investigation into Citigroup's selling of toxic mortgage securities.

Holder said, "They misrepresented the facts, including the level of risk. They sold defective loans to countless investors, including federally insured financial institutions. And they made false statements to investors in marketing materials and even in documents filed with the Securities and Exchange Commission. They led investors and the public to believe that these financial products had been originated in compliance with the law and key underwriting guidelines when this was often not the case."

Of the $7 billion penalty, $4 billion in fines will go to the Justice Department; $2.5 billion will fund consumer aid programs, including principal reductions and other relief options for homeowners and communities; and $500 million will be given to five states and the Federal Deposit Insurance Corporation, the agency that insures bank deposits up to $250,000.

The settlement, however, does not protect the bank or its employees against possible criminal charges. In response to the settlement, Citigroup CEO Michael L. Corbat said in a statement, “We believe that this settlement is in the best interests of our shareholders and allows us to move forward and to focus on the future, not the past.”

In November, the Justice Department reached a $13 billion civil settlement with JPMorgan Chase, the largest bank in the country. Now that there is a resolution with Citigroup, the DOJ will turn toward negotiations with Bank of America, the country's second-largest bank. Holder touched on that investigation in his press conference, saying, "In the investigations that remain open, we will continue to move forward — guided by the facts and the law — to achieve justice for those affected by the financial crisis. These investigations are not only about holding those who violate the public trust to account. They are also intended to deter banks from engaging in this type of conduct in the future."

The settlement with Citigroup represents a little more than half the bank's $13 billion in profits last year.

How extensive was Citigroup's role in the financial crisis of 2008?

How much has changed in the behavior of banks since the height of the crisis?

Why has no banking executive been indicted?

We consulted a panel of experts for the Inside Story.