Nearly every week brings new hope that our largest and most important financial companies are making progress at putting former misdeeds behind them.
Yesterday, it was announced that Citigroup (NYSE: C ) , the nation's third largest bank by assets, has agreed to pay $590 million in damages, to settle a lawsuit related to the financial crisis.
The class action was brought on behalf of investors who purchased shares in the lender between the beginning of February 2007, and the middle of April 2008. At the heart of it is the allegation that Citi's executives knowingly concealed losses related to collateralized debt obligations that it had ostensibly sold to institutional investors.
More specifically, the complaint averred that Citi misled investors in 2007, when it disclosed that it held $43 billion of super senior CDO tranches when, in reality, the number was closer to $54 billion. The additional $10 billion related to the CDOs it claimed to have sold, albeit with one minor proviso: Citi guaranteed the buyers against any losses incurred by the toxic securities.
While the bank "denies the allegations," and claims to be entering into the settlement "solely to eliminate the uncertainties, burden and expense of further protracted litigation," it nevertheless acknowledges that it "will be pleased to put this matter behind us," and that the settlement "is a significant step toward resolving our exposure to claims arising from the period of the financial crisis."
At the end of the day, of course, the settlement is a pyrrhic victory, taxing current shareholders for the wrongdoing of former executives, like Chuck Prince, who received a $38 million golden parachute upon his retirement in 2007, and famously noted in the lead up to the crisis that, "As long as the music is playing, you've got to get up and dance."
It's for these reason, and many others, that investors in financial stocks are getting back to the basics and investing in solid, successful, and conventional banks, like the one identified by our analysts in our most recent free report, "The Only Big Bank Built to Last." To learn the identity of this bank, simply click here now.