Goldman Sachs pays $5 billion over toxic bond sales
Wall Street giant Goldman Sachs has agreed to pay the largest settlement in its 147-year history to end a flurry of legal claims over the sale of toxic bonds which helped contribute to the global financial crisis.
The bank, led by veteran chief executive Lloyd Blankfein, has struck a deal with a number of US agencies — including the US Department of Justice and the Attorney Generals of New York and Illinois — to pay up to $5.1 billion (£3.54 billion) to stop ongoing civil claims that it mis-sold mortgage-backed securities between 2005 and 2007.
Around $1.8 billion of the settlement will be used to write off payments owed by homeowners and help build affordable housing in the US.
The settlement underscores the ongoing headache faced by big banks nearly a decade on from the start of the global financial meltdown.
It will slash Goldman’s quarterly after-tax profits due on Wednesday by $1.5 billion.
The US government’s Financial Fraud Enforcement Task Force led the probe into whether Goldman knowingly misrepresented the credit-worthiness of bonds it sold. Goldman has neither admitted nor denied wrongdoing.
The settlement includes about $2.4 billion of civil penalties and $875 million of cash payments.
