Goldman Sachs announces $5 billion government settlement

Goldman Sachs announces $5 billion government settlement
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Goldman Sachs announced Thursday that it would pay roughly $5 billion to settle a government probe.

The investment giant said the deal, if finalized, would resolve potential civil charges sought by a government task force exploring the creation and sale of securities backed by residential mortgages, an investment type central to the 2007 financial crisis. Authorities involved in the probe included the Justice Department, the states of New York and Illinois, and other regulators.

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“We are pleased to have reached an agreement in principle to resolve these matters,” said Lloyd Blankfein, the bank’s chairman and CEO.

Goldman said the settlement would cut into $1.5 billion of its fourth-quarter profits. The deal would also include a $2.4 billion monetary penalty, another $875 million in cash payments and $1.8 billion in consumer relief.

That consumer relief would come in variety of ways, ranging from principal forgiveness for underwater homeowners to the financing of construction or rehabilitation for affordable housing.

The agreement still needs to be finalized, but if it is, it would be the latest in a series of eye-popping settlements between the government and big banks. For example, in 2013, JPMorgan Chase announced a $13 billion deal to settle charges around its residential mortgage-backed securities activity.

The monetary settlement may not be enough to satisfy administration critics from the left, however, who have pushed for the government to not just assess large fines but bring criminal charges against bank executives for wrongdoing.