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.
Shares of contract chipmaker Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) came under pressure yesterday after a report that Apple Inc is looking to shift some orders from the Taiwanese company to Intel Corp. TSMC shares fell NT$55, or 2.4 percent, to close at NT$2,235 on the local main board, Taiwan Stock Exchange data showed. Despite the losses, TSMC is expected to continue to benefit from sound fundamentals, as it maintains a lead over its peers in high-end process development, analysts said. “The selling was a knee-jerk reaction to an Intel-Apple report over the weekend,” Mega International Investment Services Corp (兆豐國際投顧) analyst Alex Huang
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) is expected to remain Apple Inc’s primary chip manufacturing partner despite reports that Apple could shift some orders to Intel Corp, industry experts said yesterday. The comments came after The Wall Street Journal reported on Friday that Apple and Intel had reached a preliminary agreement following more than a year of negotiations for Intel to manufacture some chips for Apple devices. Taiwan Institute of Economic Research (台灣經濟研究院) economist Arisa Liu (劉佩真) said TSMC’s advanced packaging technologies, including integrated fan-out and chip-on-wafer-on-substrate, remain critical to the performance of Apple’s A-series and M-series chips. She said Intel and Samsung
POWER BUILDUP: Powered by Nvidia’s B200 Blackwell chips, the data center would support MediaTek’s computing power demand and business growth, the company said Smartphone chip designer MediaTek Inc (聯發科) yesterday launched a new artificial intelligence (AI) data center with a maximum capacity of 45 megawatts to meet its rising demand for computing power required to develop new advanced chips for AI applications. The company has completed the first-phase computing power buildup at the data center in Miaoli County’s Tongluo Township (銅鑼), providing 15 megawatts of capacity to support its research and development (R&D) capabilities, despite an industrywide shortage of key components, MediaTek said. Supply constraints have plagued a wide range of key components, including memory chips, solid-state drives, power supply units and central
TRANSITION: With the closure, the company would reorganize its Taiwanese unit to a sales and service-focused model, Bridgestone said Bridgestone Corp yesterday announced it would cease manufacturing operations at its tire plant in Hsinchu County’s Hukou Township (湖口), affecting more than 500 workers. Bridgestone Taiwan Co (台灣普利司通) said in a statement that the decision was based on the Tokyo-based tire maker’s adjustments to its global operational strategy and long-term market development considerations. The Taiwanese unit would be reorganized as part of the closure, effective yesterday, and all related production activities would be concluded, the statement said. Under the plan, Bridgestone would continue to deepen its presence in the Taiwanese market, while transitioning to a sales and service-focused business model, it added. The Hsinchu
RSS