Goldman Sachs Group Inc. will pay $5.1 billion to resolve U.S. allegations that it failed to properly vet mortgage-backed securities before selling them to investors as high-quality debt.
New York-based Goldman Sachs, which announced details of the accord in January, will pay a $2.39 billion civil penalty, make $875 million in cash payments and provide $1.8 billion in consumer relief, according to a Justice Department statement.
“This resolution holds Goldman Sachs accountable for its serious misconduct in falsely assuring investors that securities it sold were backed by sound mortgages, when it knew that they were full of mortgages that were likely to fail,” said Acting Associate Attorney General Stuart Delery.
Monday’s resolution is the fifth multibillion-dollar settlement reached with U.S. banks 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.
Other banks, including Royal Bank of Scotland Group Plc and Deutsche Bank AG remain under investigation, people familiar with the matter have said.
“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,” said Michael DuVally, a company spokesman, in an emailed statement.
The bank already provisioned for most of the charges. Goldman set aside $1.95 billion for legal and litigation expenses in the fourth quarter, and $4.01 billion for all of 2015, more than double the totals for the two previous years combined.
In addition to the Justice Department, the deal resolves claims from authorities including New York, California 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.
The government’s mortgage-backed security resolutions stem from a working group of prosecutors and other officials that President Barack Obama ordered up in 2012 to punish Wall Street for fueling the financial crisis with bonds linked to souring mortgages. Until then, the Justice Department had been pilloried for years for not having brought significant cases against banks and their executives.