Goldman Sachs agrees $5bn settlement for MBS 'serious misconduct'

Mis-sold loans in 2005 to 2007

Natalie Kenway
clock • 1 min read

Goldman Sachs has agreed to settle a $5.1bn payment to US authorities over mis-sold instruments that were "full of mortgages that were likely to fail".

In the final agreement, Federal officials said investors suffered billions of dollars in losses from securities issued and underwritten by Goldman between 2005 and 2007, according to the FT.

In what is described as "serious misconduct" by Federal officials, the pools of loans went on to play a huge part in the economic meltdown of 2008.

Goldman acknowledged it had made "false and misleading representations" to potential investors about the loans underpinning the securities.

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The bank knew the instruments it sold "were full of mortgages that were likely to fail", said Stuart Delery, acting associate attorney-general of the Department of Justice.

Goldman agreed the settlement in principle in January, which was finalised yesterday, but provisions for the fines dented Q4 profits for the firm.

The Wall Street bank said in a statement: "We are pleased to put these legacy matters behind us . . . Since the financial crisis, we have taken significant steps to strengthen our culture, reinforce our commitment to our clients, and ensure our governance processes are robust."

Authorities have also reached settlements with Bank of America ($17bn), J.P. Morgan ($13bn) and Citigroup ($7bn).

 

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