Goldman Sachs, one of the most powerful investment banks on Wall Street, agreed on Monday to pay $5.06 billion to settle allegations that it sold packages of shoddy mortgages to investors during the period leading up to the financial crisis.
But, similar to other massive settlements reached with large banks over the last few years, no individual bank employee is being held responsible for the alleged bad behavior that led to the settlement.
Instead, the settlement includes a $2.385 billion civil penalty and $1.8 billion for distressed borrowers and communities affected by the housing crisis.
Between 2005 and 2007, Goldman Sachs repeatedly discovered problems with the mortgages it was selling to investors but didn't tell investors, according to a statement of facts agreed to by the bank.
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In a statement, Goldman Sachs said it was pleased to resolve the issue. "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," the statement said.
But advocacy groups quickly pounced on the deal as too lenient, noting that the $5 billion settlement is dwarfed by Goldman Sach's recent profits. Also, they note, Goldman Sachs will be be able to deduct some of the cost of the settlement from its taxes.
Judge approves Wells accord
A judge in New York has given final approval to a deal calling for Wells Fargo to pay $1.2 billion to the government to settle claims of improper mortgage practices.
U.S. District Court Judge Jesse Furman approved the settlement Friday. Wells Fargo & Co. says the previously announced deal lets it put the legal process behind it.
U.S. Attorney Preet Bharara says the settlement came after Wells relied on government insurance as it utilized reckless underwriting for years. He says the company was driven to maximize profits by driving up loan volume at the expense of quality. Associated Press