The federal charges being levied against Goldman Sachs for conduct prior to the 2008 financial crisis have been resolved with the Justice Department imposing a $5.1 billion dollar fine on the company. Acting Associate Attorney General Stuart Delery delivered the news in a statement that outlined the charges against Goldman Sachs and the securities sold before the financial crisis. Goldman Sachs assured investors that the securities the company sold were backed by strong mortgages when in actuality employees knew a number of lenders were likely to default.
Company executives admitted that “significant percentages” of the securities sold from 2005 to 2007 contained mortgages that were not as sound as they had led investors to believe. During that time period, every residential mortgage-backed security (RMBS) that had gone before the company’s Mortgage Capital Committee had been approved. This committee was required to review every RMBS Goldman Sachs issued.
The deal reached with the federal department requires Goldman Sachs to pay $1.8 billion to homeowners and borrowers who are in distress, plus $2.4 billion in penalties and $875 million to settle other claims. While the bank may deduct the amount of money it will pay out in relief fees to homeowners and borrowers (about $2.7 billion), it will have to take full financial responsibility for the $2.4 billion in penalties. Borrowers and homeowners who qualify for relief will be notified by Goldman Sachs.
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