The Slatest

Goldman Sachs Reaches $5 Billion Settlement for Peddling Junk Mortgages to Customers

Tourists pose in front of the Wall Street Bull near the New York Stock Exchange on September 16, 2013 in New York City.  

Photo by John Moore/Getty Images

Goldman Sachs announced Thursday it had reached a $5 billion settlement with federal and state regulators over its packaging, marketing, and sale of toxic mortgage-backed securities that helped fuel the financial crisis in 2008. The regulatory penalty is the largest in the bank’s history, but is much smaller than other banks: Bank of America paid $16.6 billion and JPMorgan Chase paid about $13 billion in 2013 in similar settlements to investigations into whether they deliberately misled customers about the quality of the individual loans in the mortgage-backed securities.

Here’s more from Goldman on the terms of the settlement:

Under the terms of the agreement in principle, the firm will pay a $2.385 billion civil monetary penalty, make $875 million in cash payments and provide $1.8 billion in consumer relief. The consumer relief will be in the form of principal forgiveness for underwater homeowners and distressed borrowers; financing for construction, rehabilitation and preservation of affordable housing; and support for debt restructuring, foreclosure prevention and housing quality improvement programs, as well as land banks.

“Goldman said litigation legal expenses stemming from the accord would trim its fourth-quarter earnings by about $1.5 billion, after taxes,” according to the Wall Street Journal. “Crisis-related settlements by banks, mortgage firms, brokerages and others total at least $181.1 billion, according to an analysis done this month by Jeff Nielsen, a managing director at Navigant, a litigation consulting firm.”