NEW YORK, NEW YORK - Goldman Sachs will be paying approximately $5 billion to settle federal and state investigations regarding the company's involvement in substandard mortgages in the years that led to the housing bubble and financial crisis.
Almost eight years following the crisis, Goldman Sachs' settlement will be the largest amount an investment bank has made in relation to its role in the crisis. However, the payment is overshadowed by those made by some of its counterparts on Wall Street.
Goldman Sachs is slated to pay $2.39 billion in civil monetary penalties, while $875 million will be made in cash payments. The company will also provide $1.8 billion in consumer relief by way of mortgage forgiveness and refinancing.
"We are pleased to have reached an agreement in principle to resolve these matters," Lloyd Blankfein, Goldman Sachs Group Inc. Chairman and CEO, said in a statement.
The U.S. Department of Justice, along with the attorneys general of Illinois and New York and other regulators that are involved with the settlement have yet to officially sign off on the settlement deal.
As it turns out, the settlement is part of a much bigger movement. NBC News reports:
"The government agencies are part of a joint state-federal task force created by President Barack Obama after the 2008 financial crisis that has extracted some of the largest settlements out of Wall Street. Goldman, like other Wall Street banks, has been under investigation for allegedly misleading investors on the safety of the securities they created by bundling and selling mortgages."
Because of the huge settlement deal, Goldman Sachs said that its fourth quarter earnings would be decreased by $1.5 billion. In the its third quarter, Goldman earned $1.33 billion.
Goldman Sachs isn't the only investment bank that's been hit hard with settlements from regulators for the financial crisis. Bank of America, JPMorgan Chase and others have also made massive settlements in 2014 and 2015.
