Citigroup Is Slapped with a $400 Million Fine for Doing Something So Bad It Can’t Be Spoken Out Loud

“Unsafe or unsound practices with respect to the Bank’s internal controls, including, among other things, an absence of clearly defined roles and responsibilities and noncompliance with multiple laws and regulations” have been identified.

By Pam Martens and Russ Martens of Wall Street on Parade.

Federal regulators are rapidly becoming bigger Dark Pools of information than those secretive stock exchanges run by the big banks on Wall Street. On Tuesday, September 29, when all eyes were focused on the presidential debate to occur that evening, the Justice Department issued a press release announcing the fourth and fifth felony counts against JPMorgan Chase in the past six years. In an unprecedented move, the Justice Department did not hold a press conference to explain why the country’s largest bank is allowed to perpetually commit felonies with no change in management. The bank admitted to the charges and was put on a three-year probation – its third such probation in six years. Jamie Dimon, the Chairman and CEO of the bank, who has presided over all five felony counts, was left in place at the bank.

Yesterday, when all eyes were on the vice-presidential debate last night, the Federal Reserve and Office of the Comptroller of the Currency (OCC) announced consent decrees with Citigroup, the third largest bank in the country. The OCC imposed a $400 million fine on Citigroup’s federally-insured commercial bank, Citibank, and stated in its Consent Order that it had “identified unsafe or unsound practices with respect to the Bank’s internal controls, including, among other things, an absence of clearly defined roles and responsibilities and noncompliance with multiple laws and regulations.”

“Noncompliance with multiple laws and regulations” means the bank has broken “multiple laws and regulations.” But, apparently, the laws it broke, how it broke them, and who benefited and by how much is just too explosive a story to see the light of day. The Consent Orders from both the OCC and Federal Reserve failed to specify exactly what crimes Citigroup had committed and instead used vague generalities such as “unsafe or unsound practices.”

The Federal Reserve’s Consent Order did include two deficiencies that jumped off the page: “capital planning” and “liquidity risk management.” Problems with capital and liquidity are not something one wants to read about Citigroup in 2020 because it is the bank that became insolvent and received the largest taxpayer bailout in global banking history during the 2007 to 2010 financial crisis.

The bank has obviously done something very bad because the OCC has put it on a very tight leash – which is done only in extreme circumstances. The OCC’s order requires that “With the exception of ordinary course transactions, such as hedging, market making, and securitization transactions…the Bank shall not complete any new portfolio or business acquisitions until it has received prior written determination of no supervisory objection to the review process from the Deputy Comptroller.” That means that Citibank can’t open new retail bank branches, acquire other banks, or increase its already massive derivatives book (other than hedging) without the express consent of the OCC…

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