The Real Deal New York

Goldman Sachs may only have to pay about $4B in fines

Megabank negotiated even bigger tax incentives than other financial crisis-linked institutions that settled

April 12, 2016 08:40AM

Lloyd Blankfein Goldman Sachs

From left: Lloyd Blankfein and 200 West Street in the Financial District

Goldman Sachs agreed to pay a huge fine over its alleged misdeeds leading up to the 2008 financial crisis, but not quite as huge as you might have heard.

The global investment bank agreed to pay $5.1 billion to settle accusations of wrongdoing in its RMBS business with the U.S. Justice Department and state agencies including the New York Attorney General’s Office.

But tax incentives in the deal could reduce the firm’s outlay by as much as $1 billion, the New York Times reported.

Goldman agreed to pay $2.4 billion in civil penalties, another $1.8 billion in funds to homeowners whose mortgages are underwater, and $875 million to settle claims with state governments, the National Credit Union Administration and other bodies.

“We are pleased to put these legacy matters behind us,” a Goldman spokesperson said in a statement. “Since the financial crisis, we have taken significant steps to strengthen our culture, reinforce our commitment to our clients, and ensure our governance processes are robust,” the spokesperson said.

But Goldman, like other banks that have been fined, negotiated sweeteners in the agreement that allow it to save money through tax credits and government incentives, according to the Times.

For example, the firm said it would pay $240 million towards affordable housing, but fine print in the deal shows Goldman will only have to pay about 30 percent of that in practice because of large per-dollar tax credits on the payment.

“They appear to have grossly inflated the settlement amount for P.R. purposes to mislead the public,” Dennis Kelleher of advocacy group Better Markets told the Times, “while in the fine print, enabling Goldman Sachs to pay 50 to 75 percent less.” [NYT] – Ariel Stulberg

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