Citigroup, the bank that played a central role in bringing America to its knees in 2008; received the largest taxpayer bailout in the history of finance to resuscitate its insolvent carcass; pleaded guilty to a felony count of rigging foreign currency trading in May and was put on a three year probation – is now under a string of criminal and civil investigations.
On August 3, Citigroup filed its quarterly report (10Q) with the Securities and Exchange Commission (SEC). Instead of reporting a pristine slate free of transgressions as one would expect from a felon on probation, Citigroup reported that it had settled allegations of money laundering with the Federal Deposit Insurance Corporation and the Commissioner of the California Department of Business Oversight involving its Banamex USA unit. The bank was, as typical, able to pay a penalty of $140 million and avoid an admission of guilt.
What Citigroup did not report on its 10Q is that it is also under another criminal money laundering probe by the Justice Department for its Mexican-based Banamex unit, according to a Bloomberg Business report. On July 24, Bloomberg reported the following:
“The U.S. Justice Department is investigating whether Citigroup Inc. let customers move illicit cash through its Mexico unit, setting the bank’s biggest international operation in the path of an expanding money-laundering probe.”
Publicly-traded companies are required to report material information to investors. Citigroup’s 10Q was filed on August 3 while the Bloomberg report was filed 10 days earlier, indicating that subpoenas had been issued to the company. Why Citigroup did not report the new investigation is unknown. Citigroup has a serial history of money laundering allegations, as Wall Street On Parade reported in 2013.
Also during the month of July, Citigroup reached a settlement with the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau (CFPB) over charges of bilking its credit card customers. The CFPB charged Citigroup’s commercial bank, Citibank, with a raft of illegal acts, including charging credit card customers for fraud and identity theft services that were never provided, and deceptive marketing practices to bilk customers out of illegal fees. The bank was ordered to return $700 million to 8.8 million customers and pay a penalty of $35 million.
A paltry penalty of $35 million dollars for ripping off 8.8 million customers for a felon bank on probation with a serial history of wrongdoing seems like a serious mismatch of punishment matching the crime.
Adding further to concerns that the four-year old CFPB, created under Dodd-Frank to stop these serial bank abuses of unsophisticated customers, is more lite-touch regulation, is the fact that as the CFPB was applying the wrist-slap of the $35 million penalty to Citigroup, which had $7.3 billion in profits last year, the CFPB was opening a new investigation into Citigroup’s abuse of student loans held by struggling college students. Citigroup reported the new investigation in its current 10Q.
In 2013, Wall Street On Parade took a hard look at Citigroup’s involvement in the student loan market. We reported the following:
“On February 27 of this year, the Consumer Financial Protection Bureau (CFPB) sought public comment on what borrowers were experiencing in the private student loan market. It received over 30,000 responses. Respondents who had taken out loans from Citibank painted the portrait of a cold-hearted, conniving miscreant.
“Allison L. from Rego Park, Florida wrote about her Citibank loans as follows: ‘I have made over $110-125K in the past 4 years with working overtime as a nurse. My base pay is $59,000. I cannot keep this pace any longer. I do not own a home, and it seems that I never will. I have paid my credit card and student loan debt on time for the past 13 years. I have paid $50,000 towards my student loans, but $25,000 has gone to interest. I will end up paying at least double on my student loan money by the time it is over. This was not clear to me when I had initially borrowed the money. Now my credit card interest rates are too high for me to be able to pay for food and gas. I am thinking about filing for bankruptcy, but of course my student loan debt is not dischargeable.’
“Allison is correct; under the bankruptcy reforms of 2005, there is limited ability to get out from under the crushing weight of student loan debt.
“Diane A. wrote the following to the CFPB about her Citibank loans: ‘I have been paying them $172 a month for almost 3 years for a $15,000 loan and I still have not gotten under the original $15,000 principal balance amount and I will not get there until the end of this year.’
“Erick A. wrote: ‘Citibank was comparable to the devil in every way.’
“Darlene L. put an even more personal face on the problem, writing: ‘…After 911, Citibank offered a forbearance to residents of NYC, which I (stupidly) took, if anything to build my savings just in case I lost my job, which I did two years later, just after Shock and Awe (business dropped because of it.) At this time, I took another forbearance. And another during the crash of ’08, when I again lost income. I did this to keep my credit rating from falling, as it is difficult to obtain an apartment in NYC with any adverse mark whatsoever on your credit report. During this time Citibank sold my loan to Sallie Mae, who changed the terms. (Citibank allowed me to pay off the interest, if I had it. Sallie Mae does not.) Now I owe Sallie Mae about $45,000, even though I have already paid $35,000 on a loan that was at approx. $32,000 when I graduated in 1994. Last year, I took on another job to pay down my debt (which nearly resulted in a nervous breakdown — should a person be working literally ALL THE TIME?)…’
“Mary Dove of Brooklyn, New York strengthened the case further against Citibank: ‘My original balance (5 years ago) with Citibank was $35,642.00. I have paid in total $15,293.96. And, my current balance is $32,459.69. The fact that banks can charge this type of interest on Student Loans is completely unethical. We should have government policies that address the gouging the banks are doing to student.’