Goldman Sachs Group will be paying a settlement of $5.1 billion to end a U.S. probe into how it handled mortgage-backed securities that involved allegations the loans were not vetted properly prior to being sold to investors as bonds of high quality.
Goldman Sachs based in New York, announced details of this accord back in January. It will pay a civil penalty of $2.39 billion, make cash payments totaling $875 million and provide consumer relief in the amount of $1.8 billion, said a statement released by the Department of Justice.
The resolution on Monday is the fifth settlement in the multibillion-dollar bracket reached with banks in the U.S. resulting from the push by the government to hold firms on Wall Street to accounting for the creating and the selling of mortgage bonds that were subprime that helped spur on the financial crisis of 2008.
Other banks, including Deutsche Bank AG and Royal Bank of Scotland are still being investigated said people who are familiar with the case.
Goldman Sachs has already made a provision for the majority of the government’s charges. The bank set aside more than $1.95 billion for litigation and legal expenses during the 2015 fourth quarter, which amounted to a total of $4.01 billion for the entire year of 2015.
That amount set aside had been over double what it had set aside in 2013 and 2014 combined.
In addition to the Department of Justice, this deal resolves the claims from authorities in California, Illinois and New York for the bank’s securitization underwriting as well as sales of its bonds between 2005 and 2007.
This accord will resolve claims as well by the Federal Home Loan Banks of Seattle and Chicago and the National Credit Union Administration, said the statement released by the DOJ.
Goldman Sachs agreed to the statement of facts that was put together as a section of this resolutions, which has examples of what the DOJ said were misleading and false representations to investors.
The due diligence of the bank in one of its August of 2006 RMBS reported unusually high numbers of loans with compliance and credit defects, according to the just released statement.