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Goldman Sachs Pays $5 Billion in latest mortgage settlement


By Sue Reisinger, From Corporate Counsel

Federal prosecutors today announced a $5 billion deal with the Goldman Sachs Group Inc. to resolve claims over Goldman Sachs’ misconduct in packaging and selling mortgage-backed securities from 2005 to 2007.

Such misconduct was widespread among financial institutions at the time and led to the economic collapse of 2008. The deal, which includes $1.8 billion for consumer relief, was one of 10 mentioned in a Corporate Counsel series published last week.

The settlement also includes nearly $2.39 billion in federal civil penalties and $875 million to settle other federal and state claims. A Goldman Sachs representative said,
have taken significant steps to strengthen our culture, reinforce our commitment to our clients, and ensure our governance processes are robust.”

A statement of facts alleges that Goldman Sachs made false and misleading representations to prospective investors about the characteristics of the loans, including that they met certain underwriting standards, when in fact many didn’t.

“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,” said acting Associate Attorney General Stuart F. Delery in a statement.
In consumer relief, the DOJ said Goldman Sachs will provide loan modifications, including loan forgiveness and forbearance, to distressed homeowners across the country, as well as financing for affordable rental and for-sale housing throughout the country. “This agreement represents the largest commitment in any [recent government] agreement to provide financing for affordable housing—a crucial need following the turmoil of the financial crisis,” the DOJ statement added.

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