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Goldman Sachs to pay $5 billion in settlement over financial crisis

By
Andrew V. Pestano
New York Attorney General Eric T. Schneiderman said money from the $5 billion Goldman Sachs settlement will help New York residents rebuild communities as they attempt to recover from the financial crisis. File photo by a katz/Shutterstock
New York Attorney General Eric T. Schneiderman said money from the $5 billion Goldman Sachs settlement will help New York residents rebuild communities as they attempt to "recover from the financial crisis." File photo by a katz/Shutterstock

WASHINGTON, April 11 (UPI) -- New York Attorney General Eric T. Schneiderman on Monday announced Goldman Sachs will pay $5 billion to settle an investigation into the bank's practices prior to the global financial crisis.

Federal and state authorities said Goldman Sachs engaged in "deceptive practices" -- misrepresenting the quality of loans it securitized and sold to investors as mortgage-backed securities before the financial collapse in 2008.

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"Goldman made statements to investors in offering documents and in certain other marketing materials regarding its process for reviewing and approving originators, yet it failed to disclose to investors negative information it obtained about mortgage loan originators and its practice of securitizing loans from suspended originators," the New York State Office of the Attorney General said in a statement.

As with other settlements between the government and major banks, no employee of Goldman Sachs was named as bearing personal responsibility for any action or inaction that contributed to the financial collapse.

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About $670 million of the settlement with Goldman Sachs is to be used in New York state, some of it to help New York homeowners restructure their debt and some for the construction of affordable housing.

"Since 2012, my number one priority has been getting New Yorkers the resources they need to rebuild," Schneiderman said in a statement. "These dollars will immediately go to work funding proven programs and services to help New Yorkers keep their homes and rebuild their communities. We've witnessed the incredible impact these programs and services can have in helping communities recover from the financial crisis."

The Goldman Sachs announcement follows similar multi-billion-dollar settlements previously reached with other financial institutions in connection with the 2008 financial collapse. J.P. Morgan Chase reached a $13 billion settlement, while Bank of America reached a $16.6 billion settlement, Citibank a $7 billion settlement and Morgan Stanley a $3.2 billion settlement.

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"This settlement, like those before it, ensures that these critical programs -- such as mortgage assistance, principal forgiveness, and code enforcement -- will continue to get funded well into the future, and will be paid for by the institutions responsible for the financial crisis," Schneiderman said.

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