Citigroup (C) Settles with FHFA
Shares of Citigroup Inc. (C) closed up +1.27 or +2.51 percent to $51.79 on Tuesday after news that the company had settled a lawsuit with the Federal Housing Finance Agency or FHFA. The settlement filing, announced in U.S. District Court in Manhattan on Tuesday, was one of several filings against Wall Street banks which are still pending. In the lawsuit, the FHFA had accused Citigroup of misleading two other federal agencies, Fannie Mae, and Freddie Mac into purchasing $3.5 billion in mortgage backed securities.
While the terms of the settlement were not disclosed, FHFA spokeswoman Stefanie Johnson stated that the settlement was "satisfactory" and that the agency, "remains active in settlement discussions with other parties that were subjects of these lawsuits." Daily Chart
Manhattan, New York based Citigroup is the result of the 1998 merger of Citigroup and financial conglomerate Travelers Group. With over 357,000 employees worldwide and more than $70 billion in annual revenues, Citigroup is the third largest bank holding company in the United States by assets. The FHFA lawsuit is one of 18 securities fraud cases which the FHFA filed in 2011 against Wall Street banks, which involve over $200 billion in mortgage backed securities sold by the banks to FNMA and FMAC. A separate lawsuit was settled against General Electric Co. (GE
) back in January involving the purchase of $549 million in MBSs. The current settlement with the FHFA follows a major setback for Citigroup and the other 17 defendants in the lawsuits. In May of 2012, 2nd U.S. Circuit Court of Appeals Judge Denise Cote rejected an argument by UBS AG (UBS
), that the agency had not filed the lawsuit in time. The decision of the appellate court was extended to include 14 other related cases before Judge Cote. The appeal brought by UBS alleged that the suit, brought in July of 2011 by the FHFA involving $6.4 billion in MBSs, was not timely in that the case involved 23 securitizations bought by Fannie Mae and Freddie Mac over a two-year period, which began in 2005. The appeal by UBS, alleged that the Housing Economic and Recovery Act that established the FHFA in 2008 gave the agencies three years to file its claim and did not supersede securities laws giving the plaintiffs three years from the time the specific acts of alleged wrongdoing were committed by the defendants. Citigroup stock has had an extremely good year, with the stock more than doubling since trading at under $25 per share in early June of 2012. The settlement of the case with the FHFA will take another obstacle out of the company's way and will most likely have a beneficial effect when the next earning report comes out on July 15th. With a PE of 19 and earnings per share of $2.72 in the trailing twelve months, Citigroup's potential for additional growth looks positive. Nevertheless, a downturn in the general market could potentially weigh on the stock, which has a Beta of 1.86. July's earnings release will be carefully watched by investors. Other News About C Citi Names New CEOs of CitiMortgage, Other Units
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Published on May 29, 2013
By Jay Hawk