Goldman Sachs has had to open up its wallet today, paying over $5 billion in claims and fines to both US Justice department and other US legal entities.
More specifically, Goldman Sachs will settle a claim worth $5 billion to resolve both state and federal investigations into its improper handling of mortgage-backed securities prior to the US financial crisis of 2008, largely seen as the worst in the country’s history.
The agreement by Goldman Sachs will settle both actual and potential claims by myriad legal entities, including the US DOJ, the attorneys general in the state of New York and Illinois, the Federal Home Loan Banks of Chicago and Seattle, and the National Credit Union Administration.
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Overall the agreement will encompass a figure of nearly $5.0 billion by Goldman Sachs. This will include a civil monetary penalty of $2.4 billion, a cash payment of $875 million and $1.8 billion in consumer relief. These figures are hardly arbitrary, as prior investigations have centered on whether the banks misrepresented the real value of the assets.
According to Lloyd C. Blankfein, Goldman’s Chairman and Chief Executive Officer (CEO) in a recent statement on the claims: “We are pleased to have reached an agreement in principle to resolve these matters.”
“The consumer relief will be in the form of principal forgiveness for underwater homeowners and distressed borrowers; financing for construction, rehabilitation and preservation of affordable housing; and support for debt restructuring, foreclosure prevention and housing quality improvement programs, as well as land banks,” he added.