The U.S. Justice Department (DOJ) on Monday announced a roughly $5 billion settlement with Goldman Sachs in connection with the investment firm’s packaging of mortgages into securitizations in advance of the financial crisis.
The deal resolves state and federal probes “over the bank’s deceptive practices”; which includes misrepresentations to investors about the quality of the mortgage loans it securitized and sold to investors, its process for screening out questionable loans, and its process for qualifying loan originators.
Under the settlement, Goldman must pay a US$2.4 billion civil penalty, and must provide US$1.8 billion in other relief (including relief to underwater homeowners, distressed borrowers and affected communities). Goldmanwill also pay US$875 million to resolve claims by other federal entities and state authorities.
According to the DOJ, the settlement preserves the government’s ability to bring criminal charges against Goldman, and does not release any individuals from potential criminal or civil liability.
“This resolution holds Goldman Sachs accountable for its serious misconduct in falsely assuring investors that securities it sold were backed by sound mortgages, when it knew that they were full of mortgages that were likely to fail,” says acting associate attorney general, Stuart Delery, in a statement.
This latest settlement with Goldman follows similar deals with several other major Wall Street banks, including J.P. Morgan Chase, Bank of America, Citibank, and Morgan Stanley.