Goldman Sachs Group Inc (NYSE:GS) may be getting off lightly as it pays off the US$5.1bn settlement for miss-selling mortgages prior to the global financial crisis.
The US bank could end up paying ‘hundreds of millions’ of dollars less than agreed, according to a report in the New York Times. It says Goldman could even save as much as US$1bn, not including any tax benefits are factored in.
According to one example put forward by the New York Times, Goldman has to spend some US$240mln on US affordable housing but it could pay only 30% of the figure to fulfil that requirement due to tax credits related to such properties.
The New York Times says Goldman has negotiated a ‘sweeter deal’ than some of the other American banks which previously agreed miss-selling settlements.
Goldman initially agreed the settlement, which has a US$5.1bn headline value, back in January and the US Department of Justice has now confirmed that the settlement has now been formally agreed.
In a statement the DoJ said Goldman Sachs is required to pay US$2.38bn in civil penalties, and it must provide US$1.8bn of relief for ‘underwater’ homeowners, distressed borrowers and affected communities.
The relief is to be provided in the form of loan forgiveness and financing for affordable housing.
“This resolution holds Goldman Sachs accountable for its serious misconduct in falsely assuring investors that securities it sold were backed by sound mortgages, when it knew that they were full of mortgages that were likely to fail,” said Stuart Delery, acting associate attorney general.