Goldman Says U.S. Mortgage Settlement to Cost $5.1 Billion
Bloomberg - Jan 14, 2016
Goldman Sachs Group Inc. said it agreed to settle a U.S. probe into its handling of mortgage-backed securities for about $5.1 billion, cutting fourth-quarter profit by about $1.5 billion and closing out a year of record legal and litigation costs.
The proposed deal, which the bank announced in a statement Thursday, would be the latest multibillion-dollar settlement resulting from the government’s push to hold Wall Street firms to account for creating and selling subprime mortgage bonds that helped spur the 2008 financial crisis.
Authorities have already penalized the three biggest U.S. banks -- JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. -- more than $37 billion in the form of cash and consumer relief. In those cases, the government said the banks misrepresented to investors the quality of mortgage loans they securitized into risky bonds.
New York-based Goldman Sachs will pay a $2.39 billion civil penalty, make $875 million in cash payments and provide $1.8 billion in consumer relief under an agreement in principle with a U.S. task force, according to its statement.
The bank had already provisioned for some of the charges. Goldman set aside $2.41 billion for legal and litigation expenses in the first nine months of 2015, almost as much as the totals for the two previous years combined. The cost of the agreement will affect fourth-quarter earnings, allowing 2016 results to be free of the expense.
The deal would resolve claims from authorities including the Department of Justice and New York and Illinois attorneys general for the bank’s securitization, underwriting and sale of bonds from 2005 to 2007. The accord would also resolve claims by the National Credit Union Administration and the Federal Home Loan Banks of Chicago and Seattle, according to the statement.
