Three states received payouts, with NY winning the most at $190 million.
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NY state will get $670 million of the settlement, which will be used to develop affordable housing and help people restructure their debt.
“In April 2006, while Goldman was preparing an RMBS backed by Countrywide loans for securitization, a Goldman mortgage department manager circulated a “very bullish” equity research report that recommended the purchase of Countrywide stock”, the agency said. That settlement included an agreement to repay almost $300 million to the California Public Employees’ Retirement System and the California State Teachers’ Retirement System – more commonly known as CalPERS and CalSTRS.
Investors, including federally-insured financial institutions, suffered “billions of dollars in losses” from investing RMBS issued and underwritten by Goldman between 2005-2007, the DOJ said in a statement issued Monday morning. “These dollars will immediately go to work funding proven programs and services to help New Yorkers keep their homes and rebuild their communities”.
This is the fifth settlement reached by a panel President Obama put in place in 2012 to look into the lending practices of the country’s largest financial institutions.
Goldman Sachs looming at dusk.
In one example, Goldman gathered together a pool of loans from originator New Century Mortgage Corp. Still, Goldman didn’t examine approximately 70 percent of the total pool of loans to determine whether there were similar problems, according to the statement of facts.
“If they only knew…” responded Goldman’s due diligence chief who had overseen the six problematic loan pools. Issuers like Countrywide provided thousands of mortgages for Goldman to review before selling to clients as safe investments. The Federal Home Loan Bank of Des Moines, the successor to the Federal Home Loan Bank of Seattle, will receive $37.5 million, and the Federal Home Loan Bank of Chicago will receive $37.5 million.
Goldman also acknowledged a Justice Department statement of facts describing how the firm misled investors. Likewise, Goldman identified issues with Countrywide’s origination practices.
Wagner noted that, in addition to the Goldman investigation, his office pursued a case against JPMorgan Chase, the nation’s largest bank, that led to a $13 billion settlement in 2013, the largest settlement with a single entity in USA history. Attorney General Schneiderman refused to agree to such sweeping immunity for the banks.
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That exchange, and several other details on how Goldman packaged and sold securities backed by mortgages before the credit and financial crisis culminating in 2008, were unveiled Monday in a final settlement between the Wall Street bank and the Justice Department in which Goldman agreed to pay $5 billion. $280 million will be paid out by Goldman pursuant to an agreement separately negotiated with the state of NY.
