Goldman Sachs to Pay $5.1 Billion in ‘Toxic Mortgage’ Settlement

Better Investing

What's Hot

How to Cut the Cable TV Cord in 2017Family

8 Major Freebies and Discounts You Get With Amazon PrimeSave

Study: People Who Curse Are More HonestFamily

8 Creative Ways to Clear ClutterAround The House

15 Things You Should Always Buy at a Dollar StoreMore

Pay $2 and Get Unlimited Wendy’s Frosty Treats in 2017Family

5 Reasons to Shop for a Home in DecemberFamily

This Free Software Brings Old Laptops Back to LifeMore

Should You Donate to Wreaths Across America? A Lesson in Charitable GivingAround The House

6 Reasons Why Savers Are Sexier Than SpendersCredit & Debt

Resolutions 2017: Save More Money Using 5 Simple TricksCredit & Debt

10 Free Things That Used to Cost MoneyAround The House

7 New Year’s Resolutions to Make With Your KidsFamily

10 Simple Money Moves to Make Before the New YearFamily

The 3 Golden Rules of Lending to Friends and FamilyBorrow

The settlement puts to rest a probe of the investment bank's role in bundling and selling shady mortgage-backed securities in the years leading up to the financial crisis.

Goldman Sachs has agreed to pay nearly $5.1 billion in a deal to settle state and federal government investigations of its role in creating and selling toxic residential mortgage-backed securities from 2005 to 2007.

The investment bank had been accused of cobbling together home mortgage securities it knew would implode and then selling them to unsuspecting investors. Those deals helped fuel the 2008 financial crisis.

“We are pleased to have reached an agreement in principle to resolve these matters,” Goldman Sachs Chairman and CEO Lloyd Blankfein said in a statement announcing the deal.

The $5.1 billion settlement includes a $2.4 billion civil monetary penalty, $875 million cash payment and $1.8 billion in consumer relief in the form of loan forgiveness for some underwater borrowers, financing and construction of affordable housing, and other relief programs.

“This cleans up a piece of the company that took eight years to clean up. It’s finally gone,” Dick Bove, a veteran banking analyst at Rafferty Capital, told CNN Money.

The tentative settlement needs the approval of the U.S. Department of Justice, the attorneys general of Illinois and New York, and other regulators, who are all part of a joint state-federal task force that President Barack Obama created after the financial meltdown, according to the Associated Press.

Other big banks, including Chase, JP Morgan, Citigroup and Bank of America, have already reached similar multibillion-dollar settlements for their part in creating and selling mortgage-backed securities in the years leading up to the economic crisis.

New York City-based Goldman Sachs said its fourth-quarter earnings will be reduced by $1.5 billion after tax as a result of the settlement.

What do you think of the Goldman Sachs settlement? Has justice been served? Share your thoughts below or on our Facebook page.

Stacy Johnson

It's not the usual blah, blah, blah

I know... every site you visit wants you to subscribe to their newsletter. But our news and advice is actually worth reading! For 25 years, I've been making people richer without making their eyes glaze over. You'll be glad you did. I guarantee it!


Read Next: The 6 Worst Mortgage Mistakes You Can Make

Check Out Our Hottest Deals!

We're always adding new deals and coupons that'll save you big bucks. See the deals to the right and hundreds more in our Deals section.

Click here to explore 1,768 more deals!