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.
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.
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.