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Goldman Sachs Will Pay $1.1 Billion For Fraudulent Practices
Summary: Goldman Sachs will join Bank of America and other financial institutions that have recently settled claims of fraudulent conduct by paying $1.1 billion to the Federal Housing Finance Agency as early as next week.
Reuters reports that Goldman Sachs Group Inc. is the latest financial entity lined up to pay a massive settlement to settle claims alleging it sold bad mortgage-backed securities. Goldman Sachs could pay a whopping $1.1 billion to the Federal Housing Finance Agency for selling these securities. The settlement could be finalized as early as next week. The sale of such weak mortgage-backed securities by Goldman Sachs and other entities such as Bank of America contributed to the housing bubble burst of 2007, which quickly set the recession in motion.
Wall Street bank paid about half of what Goldman Sachs faces in 2010 to the Securities and Exchange Commission over similar claims. Just Thursday, Bank of America settled with U.S. regulators for $16.65 billion for claims that it misled investors for buying low quality mortgage-backed securities.
However, the settlement won’t bring Goldman Sachs out of the woods just yet. Goldman Sachs and Morgan Stanley have begun discussions with the U.S. Department of Justice in hopes of settlings claims that they mis-sold mortgage-backed securities.
The Federal Housing Finance Agency makes allegations in its lawsuit that Fannie Mae and Freddie Mac bought $11.1 billion of mortgage-backed securities from Goldman Sachs. Both Fannie Mae and Freddie Mac were, of course, unaware that “significant percentages of the underlying mortgage loans…had materially poorer credit quality than was represented in the registration statements.” The weaknesses unfortunately only became apparent after the housing bubble burst.
Photo credit: Wikimedia.comGoldman Sachs to Pay $1.1 Billion to Settle Claims with Federal Housing Finance Agency by Noelle Price