Citigroup Inc. and Deutsche Bank are agreeing to pay a total of $165.5 million to settle federal regulators' claims that they misled five failed credit unions about the risk of securities tied to mortgages.
The National Credit Union Administration announced the settlements Monday over securities that the big Wall Street banks sold the five wholesale credit unions.
After the five credit unions failed in 2009 and 2010, the federal agency seized them and liquidated them. It imposed charges totaling $3.3 billion on the 7,000 or so credit unions nationwide to cover the losses from those failures.
Citigroup will pay $20.5 million, and Deutsche Bank will pay $145 million. Neither admit or deny wrongdoing.
The NCUA has made similar allegations against JPMorgan Chase & Co., Goldman Sachs & Co. and Royal Bank of Scotland.
The settlements are the latest of many involving the role of big Wall Street banks before the financial crisis erupted in late 2008.
Last month, Citigroup agreed to pay $285 million to settle civil fraud charges by the Securities and Exchange Commission that it misled buyers of a complex mortgage investment just as the housing market was starting to collapse in 2007.
Goldman Sachs paid a record $550 million to settle similar SEC charges last year, and JPMorgan resolved similar charges in June and paid $153.6 million.
The federal agency that oversees government-controlled Fannie Mae and Freddie Mac has filed civil lawsuits against several banks in connection with the two mortgage giants' losses from securities tied to risky mortgages.
Buyers of the mortgage securities made money from the investments if the underlying debt was paid off. But as U.S. homeowners started falling behind on their mortgages and defaulted in large numbers in 2007, the securities failed and their buyers lost billions.
Wholesale credit unions, known as corporate credit unions, provide financing and investment services to the much larger population of retail credit unions. There are about 30 in the U.S. The five that failed were U.S. Central, Western Corporate, Southwest Corporate, Members United Corporate and Constitution Corporate.
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