Goldman Sachs to pay $5B to settle mortgage probe

Goldman Sachs will pay more than $5 billion to settle charges that it engaged in “serious misconduct” when selling risky mortgages leading up to the 2008 financial collapse.

The $5.06 billion civil settlement also saw the Wall Street giant admit it failed to properly inform investors of the risks in the subprime mortgage securities the bank was selling.

{mosads}“This resolution 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,” acting associate attorney general Stuart Delery said in a statement.

One of the government charges, which Goldman has now acknowledged, was that the bank kept internal concerns about the strength of the mortgage market hidden from potential investors.

Under the terms of the settlement, Goldman Sachs agreed to pay a $2.4 billion civil monetary penalty, and another $875 million to a host of federal and state regulators. The bank also agreed to pay another $1.8 billion in consumer relief, primarily through providing housing relief to struggling neighborhoods or underwater homeowners.

The bank informed investors of the potential settlement in January, saying the deal would cut into $1.5 billion of its fourth-quarter profits.

The government noted that the civil settlement does not rule out potential criminal charges in the future, nor does the deal provide immunity to anyone from future criminal charges. Goldman also agreed to cooperate fully with any potential future probes as part of the settlement.

Monday’s deal is just the latest in a long-running series of high-dollar civil settlements the government has struck with major financial institutions in the wake of the subprime mortgage collapse.

On Friday, Wells Fargo agreed to pay $1.2 billion for improper mortgage lending practices, after the government charged that the bank misled the government on the stability of some of its mortgages, which went on to carry a government guarantee from the Federal Housing Administration.

This post updated at 3:01 p.m.