Citi in $20bn settlement as crunch reverberates (at FT.com)

The fallout from the credit crunch hit the financial sector hard again on Thursday as Citigroup (NYSE:C) agreed to a $20bn settlement with regulators over its marketing of auction-rate securities and AIG shares plunged amid fears the insurer might need more capital. The protracted woes of two of the world's largest financial groups underline the extent of the problems plaguing Wall Street and suggest that, even after a year of huge losses and writedowns, banks and insurers remain under severe pressure. In its landmark settlement with state and federal regulators, Citi agreed to buy back within three months $7.5bn of ARS held by individual investors and small businesses. ARS are long-term debts issued by municipalities and others whose interest rates are set at auctions supported by banks. The bank also paid a $100m fine and... [read full story]