OWS ammo: : CITI fined $285m by SEC. Promoted bubble securities designed to fail.

[denem]

SEC: Citi designed bad security for investors, bet against it. (LA Times)

Citigroup is paying hundreds of millions to settle a lawsuit accusing it of betting against its own clients on a mortgage-backed security that the bank had designed to fail.

Citi will pay $287 million to settle the lawsuit filed Wednesday by the Securities and Exchange Commission. The complaint involves a security that derived its value from subprime mortgages -– known as a collateralized debt obligation -- that Citi helped structure and sell to clients just as the mortgage meltdown was beginning in early 2007.

Without telling the clients who were buying the $1 billion security, which carried the name "Class V Funding III", Citi packed it with credit default swaps that were likely to fall in value as the mortgage market collapsed, according to the complaint. Citi traders then bet against the security, or shorted it, eventually making money at the expense of its clients, the complaint says.

One industry expert said at the time that it was “possibly the best short EVER!” according to the complaint.

http://latimesblogs.latimes.com/money_co/2011/10/sec-citi-designed-bad-security-sold-it-to-investors-bet-against-it.html

Yep, the classic money from misery scam, helped along by an S&P AAA rating. As I recall, Citi was the most urgent recipient of TARP funds. Disgusting.

BTW, the Dow fell sharply on the announcement.

[aquart]

1. Does the settlement cover the loss?

[denem]

2. The $285m is going to the duped investors - which probably

include pension funds. Very unlikely to cover the losses.

[aquart]

4. Then wtf did we settle?

Is the settlement as large as the total of the bonus packages? Is there anything punitive in it? Because there should be.

[The Doctor.]

3. Ummm.... no.

I don't have the details, but it's a very safe bet that CITI made a fuck of a lot more than that off the scam.