Date
23 October 2017
Goldman Sachs said it has taken significant steps to ensure robust governance processes. Photo: Bloomberg
Goldman Sachs said it has taken significant steps to ensure robust governance processes. Photo: Bloomberg

Goldman Sachs to pay US$5 bln in US mortgage bond claims

Goldman Sachs Group Inc. has agreed to pay US$5.06 billion to settle claims that it misled mortgage bond investors during the financial crisis, the US Department of Justice said.

The settlement, which Goldman disclosed in January, stems from the firm’s conduct in packaging, securitization, marketing and sale of residential mortgage-backed securities between 2005 and 2007, Reuters reported, citing a statement from the justice department.

Investors suffered billions of dollars in losses from the securities bought during the period.

The settlement comprises a US$2.385 billion civil penalty and US$1.8 billion in other relief, including funds for homeowners whose mortgages exceed the value of their property, as well as distressed borrowers.

It also preserves the government’s ability to bring criminal charges against Goldman and does not release any individuals from potential criminal or civil liability, the department said.

In addition, Goldman will pay US$875 million to resolve claims by the New York and Illinois attorneys general, the National Credit Union Administration and the Federal Home Loan Banks of Chicago and Seattle.

A state and federal working group formed to investigate wrongdoing in the pre-financial crisis mortgage-backed securities market negotiated the settlement, said New York Attorney General Eric Schneiderman.

The group has reached settlements with five other major financial institutions since 2012: JP Morgan Chase (US$13 billion), Bank of America (US$16.6 billion), Citibank (US$7 billion) and Morgan Stanley (US$3.2 billion).

“We are pleased to put these legacy matters behind us,” a Goldman spokesman said in a statement.

“Since the financial crisis, we have taken significant steps to strengthen our culture, reinforce our commitment to our clients, and ensure our governance processes are robust,” he said.

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