Goldman Reaches $5 Billion Settlement Over Mortgage-Backed Securities
Pact will reduce bank’s fourth-quarter earnings by $1.5 billion after tax
Goldman Sachs Group Inc. said Thursday that it has reached a settlement worth more than $5 billion in a U.S. probe relating to securities backed by residential mortgages it sold in the mid-2000s.
Goldman said the agreement resolves actual and potential claims from the U.S. Department of Justice, the New York and Illinois Attorneys General, the National Credit Union Administration and the Federal Home Loan Banks of Chicago and Seattle.
Goldman was one of several banks targeted in investigations from federal and state officials into securities backed by residential mortgages, which plunged in value during the financial crisis.
Goldman will pay a $2.385 billion civil monetary penalty and a $875 million cash payment. It will also provide $1.8 billion in consumer relief in the form of forgiveness for underwater homeowners and distressed borrowers, among other things.
Several other banks, including J.P. Morgan Chase & Co., Citigroup Inc. and Bank of America Corp., reached settlements related to residential mortgage-backed securities between late 2013 and summer 2014.
In those cases, the government accused the banks of selling shoddy mortgage securities to investors without fully disclosing their quality.
The government has viewed the investigations as a way to hold the banks accountable for wrongdoing that led to the financial crisis. The banks have viewed them as a punishment for activities that they have since stopped and as a distraction from their efforts to ramp up lending and help aid economic growth.
Earlier Thursday in a separate case, Goldman agreed to pay $15 million to settle allegations that its securities lending violated federal regulations, the Securities and Exchange Commission said. Specifically, the SEC accused the broker-dealer of failing to adequately secure the stock needed to administer a short-selling trade.