Goldman Sachs and the federal government has officially reached a settlement agreement over toxic mortgage bonds the bank sold to investors.
As reported by Housing Wire, the agreement would see Goldman Sachs paying a total of $5 billion, of which $2.385 billion will be paid to the government as a civil monetary penalty under the Financial Institutions Reform, Recovery and Enforcement Act.
In addition, $875 million will account for cash payments to resolve claims by other federal entities and state claims: National Credit Union Administration ($575 million), Federal Home Loan Bank of Des Moines ($37.5 million), Federal Home Loan Bank of Chicago ($37.5 million), state of New York ($190 million), state of Illinois ($25 million) and state of California ($10 million). Another $1.8 billion will be provided for consumer relief "to help repair the damage to homeowners and communities that Goldman acknowledges resulted from its conduct, and it makes clear that no institution may inflict this type of harm on investors and the American public without serious consequences," said Acting Associate Attorney General Stuart Delery.
According to the Department of Justice, which announced the settlement as official on Monday, the agreement with Goldman Sachs marks "the largest commitment in any RMBS agreement to provide financing for affordable housing."
"Today's settlement is another example of the department's resolve to hold accountable those whose illegal conduct resulted in the financial crisis of 2008," added Principal Deputy Assistant Attorney General Benjamin Mizer, head of the Justice Department's Civil Division.
The New York Times reported, meanwhile, that the amount could be less than what the papers would show. Goldman Sachs could pay up to $1 billion less once government incentives and tax credits have been deducted.
Dennis Kelleher, the founder of the advocacy organization Better Markets, said that in fine prints, the bank will be enabled to pay 50 to 70 percent less.
