(CBS) — The state of Illinois will get $84 million from Citigroup, after the bank agreed to pay $7 billion to settle the federal government’s allegations it misled investors about the risks of subprime mortgages.
WBBM Newsradio Political Editor Craig Dellimore reports the U.S. Justice Department and attorneys general from several states, including Illinois, accused Citigroup of knowingly selling defective mortgage investments, leading to the housing crisis that set of the recession of 2008.
Illinois Attorney General Lisa Madigan said $44 million of the settlement money will go to the state’s underfunded pension systems, to cover losses they suffered when they invested in securities backed by subprime mortgages, which were a lot riskier than Citigroup said they were.
“These securities, backed by pools of some of the riskiest home loans, were a chief contributor to the economic collapse of 2008,” Madigan said. “Citigroup’s failure to fully disclose the nature of these financial products caused investors – including Illinois’ pension systems – to make riskier investments than they originally understood.”