Goldman Sachs to pay $5B fine for RMBS activities

Agreement resolves civil claims tied to firm’s practices in lead-up to financial crisis

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

Investment banking giant Goldman Sachs is set to pay more than $5 billion to settle civil claims tied to the firm’s securitization, underwriting and sale of residential mortgage-backed securities in the lead-up to the global financial crisis.

The Battery Park City-based institution will pay nearly $2.4 billion in civil monetary penalties, as well as $875 million in cash payments and $1.8 billion in consumer relief, for its RMBS practices between 2005 and 2007, it said in a statement Thursday.

The consumer relief will include principal forgiveness for underwater homeowners and distressed borrowers, as well as financing for housing construction and support for debt restructuring and foreclosure prevention, Goldman said

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The deal — agreed in principle and still subject to final approval — will resolve both “actual and potential” claims against the bank by the U.S. Department of Justice, the attorneys general of New York and Illinois, the National Credit Union Administration and the Federal Home Loan Banks of Chicago and Seattle.

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

The firm said the agreement will reduce its fourth quarter earnings to the tune of $1.5 billion after tax. – Rey Mashayekhi