Goldman Sachs, Morgan Stanley Close To Mortgage Probe Settlement

By Mani
Updated on

Goldman Sachs, Morgan Stanley and a few other banks are reportedly nearing settlements with federal and state authorities over billion-dollar payments related to sourced mortgages. Citing people familiar with the developments, The Wall Street Journal reports that up to nine banks are about to finalize the details of their settlement agreements.

Goldman Sachs nearing $2 billion settlement

According to The Wall Street Journal report, the banks are expected to pay from a few hundred million dollars to $2 billion or $3 billion each, depending on their size and the level of misconduct they allegedly employed in arranging the securities.

Citing people familiar with the matter, the report adds that settlements with Goldman Sachs and Morgan Stanley could be finalized as early as late June. However, the negotiations with most banks are still in the early stages. The Justice Department could pursue settlements with large U.S. regional banks when these settlements are over. Prosecutors are bringing the cases through the RMBS Working Group, which includes state attorneys general, U.S. attorney’s offices and other government officials.

As reported by ValueWalk, Morgan Stanley already reached an agreement in principle last February to pay $2.6 billion to the Justice Department and the U.S. Attorney’s Office of North California. We highlighted that Goldman Sachs, which was in preliminary talks with the government, was the only remaining mega-bank that hadn’t settled with the government yet.

It is now believed that Goldman is expected to pay a similar sum of around $2.6 billion in the coming weeks.

Justice Department reaped over $35 billion

The reported accord is part of a broader push by the government to hold more Wall Street firms accountable for the 2008 crisis after authorities pressed the three biggest U.S. banks – JPMorgan, Bank of America and Citigroup – to pay over $35 billion in cash and consumer relief.

Thus, the reported accord represents a new parade that will follow the pacts reached with the three largest banks. As reported by ValueWalk, last July, Bank of America reached a $13 billion settlement in connection with the probe into mortgage securities sold by the bank. In 2013, JPMorgan Chase paid a record $13 billion for its actions in the run-up to the financial crisis, while Citigroup announced last year that it will pay $7 billion to resolve the investigation of its mortgages.

According to the latest Wall Street Journal report, other banks expected to settle in coming months include Barclays, Credit Suisse, Deutsche Bank, HSBC, the Royal Bank of Scotland, UBS and Wells Fargo.

Earlier, HSBC disclosed that it received a subpoena from the U.S. Attorney’s Office of Colorado, while Deutsche Bank indicated it has received subpoenas and requests for information from regulators and government entities, including the RMBS Working Group, on these matters. Wells Fargo too revealed in its filings that it is responding to requests for information from government agencies related to the origination, underwriting and securitization of certain mortgages.

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