Investment bank Goldman Sachs Group is set to settle a government probe into how it handled mortgage-backed securities to the tune of $5.1 billion dollars.
The bank will pay a civil penalty of $2.39 billion, $1.8 billion in consumer relief, and another $875 million in cash payments. The consumer relief will include principal forgiveness for distressed borrowers and underwater homeowners. This agreement would resolve claims by several state attorneys general and the Department of Justice.
The deal, which has yet to be finalized, is part of an effort to hold Wall Street companies responsible for their part in the 2008 global financial crisis, which is considered by economists to be the worst financial crisis since the Great Depression. During this time, stock markets dropped worldwide, large banks were threatened with collapse, key businesses failed, and consumer wealth in the U.S. declined by trillions of dollars. Perhaps most significantly of all was the unprecedented dive of housing markets across the country, resulting in foreclosures, evictions, and prolonged unemployment. The burst of the housing bubble had a devastating impact on home valuations, mortgage markers, real estate, homebuilders, Wall Street hedge funds, and foreign banks.
In other settlements with the government, Bank of America, Citigroup, and JPMorgan Chase have agreed to pay $37 billion in cash and relief to consumers. Meanwhile, Morgan Stanley has proposed an agreement totaling $2.6 billion to halt the Justice Department’s probes into its own mortgage-backed securities dealings. This case has yet to be resolved.