Holder: Citigroup settlement doesn't preclude prosecution

Attorney General Eric Holder says the $7 billion settlement with Citigroup doesn't preclude the possibility of criminal prosecution for the bank or individual employees.

Citigroup today agreed to pay $7 billion to settle a federal probe into its handling of risky subprime mortgages. The bank admitted to a pattern of deception that Holder said had "shattered lives" and contributed to the worst financial crisis in decades.

Besides a $4 billion civil penalty, the bank will also provide $2.5 billion to help borrowers who lost their homes to foreclosure. And it will settle claims from state attorneys general and the Federal Deposit Insurance Corporation.

The total settlement package represents about half of Citigroup's $13.1 billion profit last year. Analyst Gerard Cassidy of RBC Capital Markets says the bank should have the capital it needs to absorb the settlement.

He also says that the "unintended consequence" of the settlement is that banks like Citigroup are less likely to lend -- hurting would-be homebuyers with student debt who are seeking a mortgage. He says banks now "won't go near those customers."

Investors today have shrugged off the settlement, a sign that they expect Citigroup to continue to operate without much disruption. Shares in Citi were up by three percent.