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Goldman Finalizes $5 Billion Settlement With Feds in Financial Crisis Probe

Goldman Sachs (GS - Get Report) agreed to pay $5 billion to settle claims by the U.S. Justice Department that it misled investors about the quality of home loans included in mortgage-backed securities the firm sold before the financial crisis.

The settlement includes a $2.39 billion civil penalty, $1.8 billion in consumer relief and $875 million to resolve claims by other federal regulators and the states of California and Illinois, the Justice Department said in a statement.

The New York-based firm originally disclosed the agreement in January, just a week before reporting fourth-quarter earnings that included a charge of $1.8 billion toward the settlement amount. Residential mortgage-backed securities, or RMBS's, were a linchpin in the financial crisis since lenders nationwide used them to repackage mortgages of widely varying quality into securities, which were then sold to investors.

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That let the lenders record profits while moving the risk of default off their own books and fueled a home-buying boom, expanding the U.S. mortgage market to as much as $15 trillion. When the housing...


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