Stephanie ruhle. Welcome back from london. I had a great time. A lot of news these past couple of months. I landed yesterday and made it in time for the world cup finals. What a goal. Lets talk about citigroup everybody. Here. Now the action is eric holder is due to formally announce that 7 billion settlement with citigroup in the next few minutes. Is all about city sales and Mortgage Backed securities in years before the financial crisis. That is washington. We will take you to that press conference as soon as holder takes the podium. Citigroups about secondquarter earnings. They beat analyst estimates if you exclude that 7 billion settlement cost. Scarlet fu is here with more. You and i have been looking at these numbers all morning long. The stock is trading up because there is extensively a good a extensively a extensively good news here. What it means in terms of finances is 3. 8 billion of pretax charge. City actually ended up with a 180 million the doubt of profit just barely. They eat out of profit just barely. Almost six years we finally have some movement there. The Capital Markets trading would be a pretty dismal quarter. It didnt end up being that bad. A combined drop of 15 in fixed income, currencies, commodities fell year over year. This is all a reflection of low volatility and a lot of macro uncertainty. Youhat is your stance said provisions are obviously 7 billion so far. Are they going to afford this fine . A lot of analysts are looking at the neighborhood of seven billion dollars. This doesnt take too many people by surprise. It begs the question what is next in terms of returning cash to shareholders. He expects the bank to generate 50 billion in excess capital over the next three years. You can argue whether you agree or disagree with that. Its the idea that city has gotten over this big comp big comp. Citigroup is doing what banks do. Citigroup on an average basis, there are two ways of looking at it. Up 4. 4 year are over year. You can see the loan growth is accelerating only four quarters a grope ago. The loan to deposit ratio is improving. Is inall the action is corporate lending. Business in asia, europe, and latin america. There was corporate loan growth across the board. It is not that the u. S. Economy is recovering. There is demand for corporate loans around the world. If you show that chart again, four point 4 loan growth is impressive given that were looking at gdp being down 2 in the first quarter, a rebound in the second quarter, and who knows where and the second half. That is better than gdp. A lot of people are looking for to continued accelerating. The stock is trading higher showing that relief. Of getting closer to 55. Now lets turn our attention to that 7 billion settlement. Was accused of deceiving investors about the quality of mortgagebacked bonds it sold during the financial crisis. Phil mattingly is in washington and Kerry Geithner is here in new york city. With have been covering the settlement. The attorney general coming in any minute. , the story is not over for the Justice Department. Citigroup is the third in what we anticipate to be a very long list of settlements. That is right. I think the Justice Department feels they have a model. They laid out a template with the jpmorgan settlement based on how these residential cangagebacked securitys be used. They can use the specific part of the lot go after them. They have been successful in forcing big dollar settlements. We know that the bank of america has been in lengthy negotiations. Officials say those negotiations are not in a good place but there are a number of other banks. This type of highlevel of a settlement number the Justice Department has a lot coming up in the pipeline. I think they feel very good about where they are. So, basically going back to this model hurts the banks. There is real money involved. We say this because citigroups secondquarter earnings were down 96 and basically this fine wiped that out. If we take a step back, analysts are looking at does this model work . It is this money that goes and the u. S. Treasury department for the Justice Department, you just write a check and it is in. You are having an actual impact on shareholder values. Is this a way to claw back the loss we had at a financial crisis and two td and to deter future behavior . Is it worth it to go through all this . The department of justice has been under a lot of political pressure. The you think they are going to be satisfied with this seven phil 7 billion . Bank of america is expected to pay significantly larger. This is really the last big bang the Justice Department has to punish banks. After this it will be going back to focusing on other regulatory infractions we have seen, whether it is tax evasion or sanctions violations. Perhapse to say it and it has taken me too long, but my my perspective is awfully cynical. The banks in general say the talks in citigroup were interrupted by the identification of one of the benghazi perpetrators in libya and had that not happened the Justice Department was going to hold a press conference and say it was being transgendered. Over 7e to terms billion. It makes clear all the Justice Department is really after is publicist a. The Justice Department is after publicity it is not getting great publicity in the stock markets. There are two tracks you can look at on this. One that looks bad for the Justice Department. They were right on the line. That was pulled back on the last minute largely because of the arrests in benghazi. Side of things, the Justice Department feels like shamings of public are very important to the deterrent strategy. I think what was said earlier, they were getting hammered on capitol hill. Bringing any cases in the wake of the financial crisis. If we are going to bring a case double federal jpmorgans time was jpmorgans fine was. They are pleased with that number. To your point, it doesnt look good when the pr portion of they feel like this is a Necessary Evil if they want to guy go with the deterrent strategy and put some of the heat off they have been getting in the last four years. Whether or not shares are up or down, clearly the Justice Department has to feel good about these huge amounts of money they are pulling in. Nearly 30 billion in total amount for bank settlements. Where does this money actually on the tech go . Today playedte out, it splits. This consumer relief portion is new print the Justice Department just outed implementing it on the jpmorgan settlement. It will immediately transferred to the treasury fund. Then you have the state attorney general. It they will get 500 million combined. Then you have the 2. 5 billion consumer relief portion. They will be using this to help distressed and homeowner areas. How that is tracked and whether or not it actually has a positive impact, i think that its something we as reporters and the Justice Department in general need to keep a close eye on going forward. We are not talking about an insignificant amount of money. More than ang about third of the total value of this settlement going to consumer relief. In what form does it take place . Who attracts it and what does it count for . Is why these are a big point of confusion for a lot of analysts and people looking at how they are done. To the righty go place and does it make a difference to go through this . Rocess it hurts shareholder values to pull it back out. People who are actually hurt by the financial crisis and have lost their homes and mortgages actually get money back from this . Will actually act will anyone actually have to move out of their houses . Goodthink it would be a idea for citigroup to show as the people that actually get relief from this so we can actually see with our own eyes. The settlement is over Mortgage Backed securities. It is not over the quality. It wouldnt even make sense it is the investors who have the issue here. Not the homeowners. Continually call consumer relief. With jpmorgan it was a similar type of settlement. Funds went tohose consumer relief. Where is the consumer getting paid back for this . It was basically a Business Model that was a big part of why the financial crisis happened. When holder takes the podium, what kind of posture do you expect him to strike . What i understand, the person leading these negotiations is the number three official tony west. Ultimately the buck stops of eric holder. I think he is going to have strong words. One of the interesting elements of these negotiations is citigroups feeling is they would not have to pay as much as jpmorgan. What holder says is going to be important. I eric holder is about to start speaking. And Inspector General for the finance agency Michael Stevens him as weak announce a significant step on our ongoing effort to hold accountable those markets threatened our and undermine the stability of our economy. Obtainedce department a landmark resolution with citigroup, totaling 7 billion in fines and consumer relief, to securitiesudulent that were backed by toxic loans. This includes a civil penalty of 4 billion. This is the largest penalty to date of its kind. It the penalty is appropriate, given the strength of evidence of wrongdoing committed by city. Despite the fact that citigroup and widespreadus defect among increasingly risky loans that they were securitizing, the bank and its employees concealed defects. They misrepresented the facts, including the level of risk. Toy sold defective loans countless investors, including federally insured Financial Institutions. And they made false statements to investors. They led investors and the public to believe that these Financial Products had been originated in compliance with the law and key underwriting guidelines when this was often not the case. The banks misconduct was egregious. Under the terms of the settlement the bank has admitted to its misdeeds in great detail. They contributed to the financial crisis that devastated our economy in 2008. Citigroup is not alone in its the lawess to disregard in order to defraud consumers and investors. This is a result that their insurances citigroup was able to expand its market share and also to increase its profits. They did so at the expense of millions of ordinary americans and investors of all types, including other Financial Institutions, universities, tension funds, cities, towns, even hospitals and religious charities. Ultimately investors suffered billions of dollars in losses in fraudulent claims. We hold them accountable for this wrongdoing, which had devastating ripple effects that cascaded through economies and Financial Institutions across the globe. It i want to thank u. S. Attorney their dedicated staff for making this resolution possible. A succession of witnesses is that of witnesses gave terabytes of data and unveiled its of documents. A 4 billion penalty has been assessed against citigroup and this also includes 2. 5 billion in relief that will bring pride and that be provided to by the banksfected fraudulent activity. This is a musthave elements. It will remain so. In anyagreement does not way absolve citigroup or its individual employees from facing any possible criminal charges in the future. And scope ofe size this resolution goes beyond what could be considered the mere cost of doing business. It was not at all inevitable in the past few weeks that this case would be resolved out of court. This action is merely the latest in our active and ongoing pursuit of those whose activities defrauded the american people. First Financial Institution to be held accountable by this Justice Department and it certainly will not be the last. The investigations that remain open will continue to move forward guided by the facts and guided by the law to achieve the to achieve justice for those affected by the crisis. These investigations are not only about holding those who violated the public trust accountable, it is also preventing this kind of conduct in the future. I would like to turn things over to tony west who provide Additional Details on todays announcement and has been a leader for the Justice Department. Eric holder holding a News Conference to announce the Justice Departments 7 billion settlement with citigroup over the sale of Mortgage Backed securities before the financial crisis. Phil mattingly is with us from washington. Kerry geithner is here in washington. Here in the studio. Lastroup will not be the bank to be held accountable for what he described as agreed just misconduct. As it as agreed just misconduct. You do see a pretty predominant trend for the department of justice of extracting huge settlement out of banks for various criminal and regulatory infractions. We have a lot of outstanding investigations. We have the Foreign Exchange investigation or affects markets, we have a lot of angst that havent settled over the libor interest rate. More settlement that come out of this mortgage issue. I think were going to be up here for the rest of the year. I think you heard it there from eric holder, it is the misconduct. It is not the level of funds that was misused. It was the misconduct of the bank. The quality of that goes to where are we going to get more individual cold ability . Individual culpability . As we saw earlier we had a graph that shows 30 billion of tanks settlements recently. Are we getting the true deterrent effect with the settlements . That is where wall street is grappling. This kerrys point, is working to the governments favor . Do people look at eric holder and tony west and call them heroes . Is the Obama Administration getting credit for it . Or is this dragging on for so long and so many years after the crisis that more and more people of coming around to the idea stop punishing these banks, stop punishing current shareholders for something that happened years ago, and ultimately thrown into question this idea that there is a deterrent effect. I think it is somewhere in the middle. I think that is why it is a negative. Whoe is a group of people will never be satisfied until they see a wall street ceo walking in handcuffs into a courtroom. There is another side to this is major money, shareholder money that is coming out largely because the Justice Department came to the conclusion that we need to figure out someway to punish somebody for what happened in 2006, 2007, 2008. If you point to the fact that this is far more than just the cost of doing business, if you ever want to know how sensitive the Justice Department and Obama Administration are, the criticism they have been getting, it is that line from people like Elizabeth Warren who believes that these fines are not a deterrent. And that this is just for a 1 billion institution. The attorney generals willingness to point that out and take it shows you that there is a lot of political issues in this. They are trying to figure out any way to push back. I dont think it will satisfy either side. No better way to underscore that point than perhaps by looking at stock price. Lets not forget earnings are involved. They announced those this morning. Investors are looking pass this cost of settlement. Thank you very much. Kerry geithner covers the intersection of justice and finance. Still to come, israel response to rocket fire from three sides. We will look at concerns of the violence concerns that violence in the region will only get worse. Of we are approaching 26 past the hour. Stocks are trading higher here on monday after the s p 500 saw in threest weekly loss months. Citigroup shares also on the rise after the bank agreed to pay 7 billion fine to settle a mortgage probe. Investors are looking for to hearing from janet yellen tomorrow, the chairman of the Federal Reserve will be speaking in washington to the Senate Banking committee. It is her semiannual Monetary Policy committee. A lot of m a activity. Bestming up, what is the what is the next big trend in food . The answer may surprise you. The war against smoking, activists pushing a ban against Menthol Cigarettes. This is Market Makers with Erik Schatzker and stephanie ruhle. You are watching Market Makers here on eric on bloomberg television. Is stepping up its defense in the gaza strip. The death toll has been pushed to release 170 five. Palestinian militants have launched 100,000 rockets at israel. There have been no fatalities. Lets bring in daniel kurtzer, a former u. S. Ambassador to israel in egypt. Good morning, thank you for joining us on Market Makers. It looks at Prime Minister netanyahu is under growing pressure from his cabinet to launch a ground invasion. Of analysts saying this air assault is laying the groundwork for tanks to roll in. How likely is it we are going to see a ground war . I would be doubtful reis doubtful we will see an incursion of ground forces. We may see more of these limited incursions. That israelis are sensitive to casualties. I think the Prime Minister would be wary about doing that. Is the thirds conflict of its type between israel and gaza since 2008. Is there any reason to expect a different outcom