Goldman Sachs settles subprime case for $60M

Massachusetts says it has reached a deal with the bank over home loans given to buyers with poor credit.

EMAIL  |   PRINT  |   SHARE  |   RSS
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all RSS FEEDS (close)

What percentage of new contributions to your retirement account is going into stocks?
  • Zero
  • Less than 25%
  • 25% - 75%
  • More than 75%

BOSTON (Reuters) -- Goldman Sachs Group Inc. agreed to pay up to $60 million to settle Massachusetts' complaints about the investment bank's role in the subprime mortgage business, state officials said Monday.

The agreement includes up to $50 million for holders of the mortgages - which were made at often high rates to people with poor credit - and a $10 million payment to the state, a spokeswoman for state Attorney General Martha Coakley said.

The settlement follows an investigation into how Wall Street banks originated mortgages and then packaged them into bonds. It is the first such accord with a bank to focus on securitization of subprime mortgages, spokeswoman Amie Breton said.

Reworking the terms of securitized mortgages - which have been resold to other investors - has been a major sticking point for government officials looking to prevent foreclosure for homeowners.

Goldman (GS, Fortune 500) spokesman Michael DuVally said the company was "pleased" to have settled the matter.

Subprime mortgages played a major role in the creation of the U.S. housing bubble earlier this decade. The deflation of that bubble was a major contributor to the global recession.

Wall Street firms generated enormous profits during the boom years, but lawmakers and other critics have argued their pressure on mortgage brokers to generate loans needed to feed their securitization business helped lower standards and pumped up the bubble.

Goldman has long insisted they were a minor player in the mortgage-backed business, relative to rivals like Bear Stearns and Lehman Brothers.

Industry league tables showed they climbed to as high as No. 7 in issuing subprime mortgage-backed securities and sixth in underwriting in 2006, but quickly fell out of the top 10 by the following year. To top of page

They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Copyright 2009 Reuters All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.