Daily Management Review

Goldman Sachs to pay $ 5.1 billion of penalties


04/12/2016


US Goldman Sachs have come to an agreement with the Ministry of Justice of the United States. The bank will pay US authorities $ 5.1 billion within settlement of case on the sale of mortgage securities before the crisis of 2008. This agreement is the final in a series of penalties assigned to banks by US authorities for their role in the collapse of the US mortgage market. The latter led to the global financial crisis. Previously, the ministry concluded such agreements with JPMorgan, Citigroup, Bank of America.



Goldman Sachs Tower | by Spoon Monkey via flickr
Goldman Sachs Tower | by Spoon Monkey via flickr
On Monday, the US Department of Justice reported that the US bank Goldman Sachs agreed to pay $ 5.1 billion in the case of the release of the bank mortgage securities before the crisis of 2008. The US government conducted a large-scale investigation against the largest banks operating in mortgage-backed securities market. Several large US banks, including Goldman Sachs, had been accused of selling mortgage-backed securities without proper information about their risk for the buyer. Sale of high-risk mortgage securities in the early 2000s was one of the reasons for the multibillion-dollar US mortgage market’s collapse in 2007-2008, which caused the 2008-2009 global financial crisis.

Goldman Sachs agreed to pay $ 2.385 billion administrative penalties, as well as an additional $ 1.8 billion to home buyers, whose mortgage payments exceed value of their property. Above that, the bank will support the affected borrowers. The bank also will pay $ 875 million for the settlement of claims of prosecutors of New York and Illinois, the National Credit Union Administration and federal mortgage lending banks of Chicago and Seattle. "This decision holds Goldman Sachs liable for serious violations, as it assured investors that the securities were collateralized with high quality mortgage, knowing that many of the mortgages most likely would not be paid," – said the ministry in a statement.

The agreement with Goldman Sachs is final in a series of similar agreements between the US government and banks. In November 2013, JPMorgan agreed to pay for the sale of low-quality mortgage-backed securities a fine of $ 13 billion, in July 2014 there was Citigroup with $ 7 billion, and in August of the same year, Bank of America - $ 16,7 billion. In February 2015, Morgan Stanley also agreed to pay $ 2, 6 billion. Goldman Sachs announced its intention to enter into a similar agreement in January.

source: wsj.com






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