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Goldman Sachs to Pay $5B in Securities Dispute Settlement

  • Ken Bredemeier

FILE - Goldman Sachs world headquarters, left, neighbors One World Trade Center, in New York, Oct. 28, 2015.

FILE - Goldman Sachs world headquarters, left, neighbors One World Trade Center, in New York, Oct. 28, 2015.

One of the biggest U.S. investment banks, Goldman Sachs, agreed Monday to pay the government $5 billion in penalties for selling financially questionable mortgage-backed securities leading up to the country's financial crisis in 2008.

A Justice Department official, Stuart Delery, said the agreement, "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."

The deal requires the New York company to pay $2.4 billion in civil penalties, $1.8 billion in relief to homeowners hurt by the economic downturn and $875 million to settle other claims. The company admitted it did not share information with investors regarding troubling information it had received about the business practices of the banks that had originated the loans with homeowners.

The penalties against Goldman are the latest of several multi-billion-dollar settlements imposed in the last two years on Wall Street firms for their role in selling investment securities supported by home loans that depended on homeowners continuing to make monthly mortgage payments. The government already settled cases against Bank of America, Citigroup and JPMorgan Chase.

As the country's economic downturn worsened in 2008, millions of U.S. workers lost their jobs and many of them their homes when they no longer had the money to repay loans, making worthless many of the securities that the big banks were selling to investors.

Critics of U.S. financial regulators have attacked the monetary settlements against the banks as insufficient accounting for the damage caused by the financial crisis. While the institutions have been penalized, it is believed that only one financial executive has been imprisoned for actions linked to the country's worst financial meltdown since the Great Depression of the 1930's.

The Justice Department is now focusing on individuals and decisions they made, but it is not clear whether any new criminal charges will be filed.