Here’s How A Handful of Pension Funds Will Benefit From Citigroup’s $7 Billion Settlement

Last week, Citigroup agreed to settle the claim that it had misled investors about the quality of mortgage-backed bonds it sold prior to the 2008 Financial Crisis. The settlement required that Citi admit they misrepresented the quality of those bonds, and that admission carried a $7 billion price tag for the firm. Most of that money will be allocated toward fines it must pay to the Justice Department and to consumer relief.

But there were other victims as well, which means there are other winners in this settlement: the pension funds who bought those precarious bonds.

Illinois is one state that will benefit. From the Chicago Tribune:

Illinois will receive $84 million as part of a national $7 billion settlement resolving allegations by federal and state authorities that Citigroup Inc. sold risky mortgage-backed securities that harmed investors, which included pension systems and communities.

More than half the money headed to Illinois will fully compensate the state’s pension funds for losses suffered from 2006 to 2007, when they were misled by Citi, according to the Illinois attorney general’s office.

Citigroup will pay $33.04 million to the Illinois Teachers’ Retirement System, $3.12 million to the State Universities Retirement System and $7.83 million to the Illinois State Board of Investment, which oversees the State Employees’ Retirement System, General Assembly Retirement System and Judges’ Retirement System.

An additional $40 million will be dedicated to consumer relief, and an independent monitor will be appointed to help distribute the money.

“This relief will fully restore the losses Illinois’ pension systems incurred as a result of Citigroup’s fraudulent schemes in the mortgage-backed securities market, and it will provide much-needed aid to Illinois homeowners who are still paying for Wall Street’s reckless actions,” Illinois Attorney General Lisa Madigan said in a statement.

Illinois can’t yet break out the party hats: the state’s pension shortfall still stands at around $100 billion.

California is the other major beneficiary. As reported by the Sacramento Business Journal:

California will get nearly $200 million as part of Citigroup Inc.’s $7 billion nationwide settlement with the U.S. Department of Justice in resolving civil claims related to the financial company’s conduct in selling residential mortgage packages during the run-up to the financial crisis.

California’s two large public pension funds, California Public Employees’ Retirement System and California State Teachers’ Retirement System, will recover $102.7 million in damages for losses on mortgage-backed securities. California consumers also are guaranteed at least $90 million in relief.

“Citigroup misled consumers and profited by providing California’s pension funds with incomplete information about mortgage investments,” California Attorney General Kamala Harris said in a news release. “This settlement holds Citi accountable and compensates the state’s pension funds that protect the retirement savings of hardworking Californians.”

New York is receiving $92 million as well, but it’s not known whether the state’s pension funds will see any of that money.