Citigroup Inc and Bank of America Corp (BofA) are facing the prospect of being sued by the US Department of Justice after officials broke off talks aimed at settling probes into the banks’ sales of mortgage-backed bonds.
Justice department officials suspended negotiations with the banks on Monday because they are unsatisfied with the offers, said a person familiar with the discussions who asked not to be named because they are confidential.
A civil lawsuit against Citigroup could be filed as early as next week, the person said.
The department has asked for more than US$10 billion from New York-based Citigroup and US$17 billion from Bank of America, though prosecutors are willing to consider proposals below those amounts, the person said.
Bank of America has offered about US$12 billion while Citigroup has put forward less than US$4 billion, the person said.
“Even though talks have broken off, it doesn’t mean they can’t be restarted,” after lawsuits are filed, said Matthew Axelrod, a former senior justice department official whose firm is handling lawsuits against banks, including Bank of America and Citigroup, over mortgage-backed securities.
The justice department is taking a tougher approach following criticism that it had not done enough to punish large institutions for their role in the collapse of home prices and ensuing financial market turmoil.
Prosecutors are demanding multibillion-dollar penalties from banks for wrongdoing including tax evasion and sanctions violations and have used the threat of lawsuits to reach settlements.
US officials are seeking more than US$10 billion from BNP Paribas SA to resolve a probe into transactions involving sanctioned countries, people familiar with the matter have said.
The US secured the largest criminal penalty in a tax evasion case last month with Credit Suisse Group AG’s US$2.6 billion payment.
The settlement demands of Citigroup and Bank of America, which is based in Charlotte, North Carolina, show that the US is not only seeking high-dollar resolutions from banks outside the country, according to Erik Gordon, a professor at the University of Michigan.
“The effect is to take some of the wind out of the argument that these numbers are unfairly punitive and outrageous,” Gordon said in an interview.
Citigroup is among at least eight banks under investigation by the justice department for misleading investors about the quality of bonds backed by mortgages as housing prices plummeted.
Other banks that have faced scrutiny include Credit Suisse and Wells Fargo & Co.
JPMorgan Chase & Co agreed to pay US$13 billion in November last year to resolve similar federal and state investigations.
Citigroup and the Justice Department have been negotiating a resolution since April, the person said.
US Associate Attorney General Tony West, who is overseeing probes of improper mortgage-bond underwriting by banks, told the bank in a phone call on Monday that it was not making acceptable offers, the person said.
IN THE AIR: While most companies said they were committed to North American operations, some added that production and costs would depend on the outcome of a US trade probe Leading local contract electronics makers Wistron Corp (緯創), Quanta Computer Inc (廣達), Inventec Corp (英業達) and Compal Electronics Inc (仁寶) are to maintain their North American expansion plans, despite Washington’s 20 percent tariff on Taiwanese goods. Wistron said it has long maintained a presence in the US, while distributing production across Taiwan, North America, Southeast Asia and Europe. The company is in talks with customers to align capacity with their site preferences, a company official told the Taipei Times by telephone on Friday. The company is still in talks with clients over who would bear the tariff costs, with the outcome pending further
NEGOTIATIONS: Semiconductors play an outsized role in Taiwan’s industrial and economic development and are a major driver of the Taiwan-US trade imbalance With US President Donald Trump threatening to impose tariffs on semiconductors, Taiwan is expected to face a significant challenge, as information and communications technology (ICT) products account for more than 70 percent of its exports to the US, Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) president Lien Hsien-ming (連賢明) said on Friday. Compared with other countries, semiconductors play a disproportionately large role in Taiwan’s industrial and economic development, Lien said. As the sixth-largest contributor to the US trade deficit, Taiwan recorded a US$73.9 billion trade surplus with the US last year — up from US$47.8 billion in 2023 — driven by strong
A proposed 100 percent tariff on chip imports announced by US President Donald Trump could shift more of Taiwan’s semiconductor production overseas, a Taiwan Institute of Economic Research (TIER) researcher said yesterday. Trump’s tariff policy will accelerate the global semiconductor industry’s pace to establish roots in the US, leading to higher supply chain costs and ultimately raising prices of consumer electronics and creating uncertainty for future market demand, Arisa Liu (劉佩真) at the institute’s Taiwan Industry Economics Database said in a telephone interview. Trump’s move signals his intention to "restore the glory of the US semiconductor industry," Liu noted, saying that
AI: Softbank’s stake increases in Nvidia and TSMC reflect Masayoshi Son’s effort to gain a foothold in key nodes of the AI value chain, from chip design to data infrastructure Softbank Group Corp is building up stakes in Nvidia Corp and Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the latest reflection of founder Masayoshi Son’s focus on the tools and hardware underpinning artificial intelligence (AI). The Japanese technology investor raised its stake in Nvidia to about US$3 billion by the end of March, up from US$1 billion in the prior quarter, regulatory filings showed. It bought about US$330 million worth of TSMC shares and US$170 million in Oracle Corp, they showed. Softbank’s signature Vision Fund has also monetized almost US$2 billion of public and private assets in the first half of this year,
RSS