Goldman Sachs Pays $5 Billion Settlement For Swindling Investors

Stephen Scherr

For hoodwinking mortgage bond investors leading up to the financial crisis in 2008, Goldman Sachs Group Inc will be paying  $5.06 billion in claims, according to a U.S. Department of Justice pronouncement on Monday.

Goldman is one of five major banks to reach settlements with the Residential Mortgage Bank Securities, RMBS, since 2012. JPMorgan Chase & Co. has settled for $13 billion, Bank of America Corp. for $16.6 billion, Citigroup Inc. for $7 billion and Morgan Stanley for $3.2 billion.

Lloyd Blankfein, chief executive officer of Goldman Sachs Group. Source: bloomberg.com

According to a Huffington Post report,  out of the $5 billion, the settlement earmarks $480 million to be allocated for consumer relief and mortgage assistance in New York, including $50 million for the creation and preservation of affordable rental housing, $220 million for debt restructuring, $30 million for land banks and land trusts, $30 million for code enforcement, and $150 million in principal reduction for distressed borrowers. In addition to the $480 million, the state will receive $190 million in cash.

General Eric Schneiderman, New York Attorney, revealed in a statement about $670 million of the money will go to the state of New York to aid the ongoing recovery.

“This settlement, like those before it, ensures that these critical programs — such as mortgage assistance, principal forgiveness, and code enforcement — will continue to get funded well into the future, and will be paid for by the institutions responsible for the financial crisis,” he said in a statement.

Eric Schneiderman, New York Attorney General Source: catsimatidis.com

In 2006, Goldman Sachs played a heinous role in spreading the subprime-mortgage crisis that finally led to the 2008 global financial meltdown. During the said period, Goldman Sachs purposefully packaged AAA-rated mortgage-backed securities, thereby offering unsuspecting  and vulnerable clients a low-risk way of profiting from America’s housing boom.

See how Goldman Sachs were grilled at the Senate in 2010.

Watchers think Goldman is paying less for its major role in a crisis that some of its competitors have paid more. A credit crunch America lost a staggering $12.8 trillion.

As if Godman’s investors are not perturbed by the huge fine, shared of Goldman Sachs [NYSE: GS] has gone up at 154.23USD per share by $2.03 (1.33%) as at the time of finalising this report.