California Attorney General Kamala Harris has issued a subpoena to Citigroup, seeking answers to a wide range of questions about the bank's mortgage practices, according to the Los Angeles Times. This follows the creation of a state Mortgage Fraud Strike Force, which in May was tasked with investigating every step of the mortgage daisy chain. Harris has previously indicated that she might use the state's False Claims Act to prosecute banks.

The Citigroup news is interesting and can be interpreted in several ways. On one hand, all the states are locked in negotiations with the banks and servicers to broadly settle allegations of misdoing when it comes to mortgage and foreclosure practices. Some states, however, have decided to seek their own one-off settlements. California may be one of those states, as it suffered relatively more than other states. You have to wonder if this hints that the state will also be taking a look at other banks that were active in the state, notable Bank of America and Wells Fargo.

All this activity points to a messy process through which banks are seeking settlement with various federal and state entities. It would be a lot cleaner if one massive, superseding settlement were inked.  But that opportunity has long passed. There will likely be a lot of overlap in the remedies, so compliance may not be that much more difficult. The real issue may be how much money is required to fund consumer aid programs.

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