Goldman Sachs finally confesses to mortgage fraud during the 2008 financial crisis.
It took nearly a decade, but Goldman Sachs finally named itself as the fraudster that it is. The investment bank accepted the Department of Justice’s conclusion that it “misled investors.” Goldman Sachs admitted that it deceived investors by not informing them of their risks. Basically, Goldman Sachs withheld vital information from investors for its own financial gain.
The bank was aware that there was a higher percentage of loans that were less safe. These were mortgage loans of individuals with low credit scores and less stability. Despite this knowledge, the bank failed to mention any of this to investors. Investors had no idea that their securities could be backed by risky mortgage loans. A security is a type of agreement that has a value attached and can be sold. So a package of mortgage loans that are given a value is a mortgage-backed security. Unbeknownst to investors, many of their mortgage-backed securities were filled with risky mortgages. This resulted in major losses once the holders of those “subprime” loans defaulted on their loan payments. Because investors were unaware of what was in their securities, they didn’t have the information to protect themselves.
With admitting this crime, Goldman Sachs has paid $5 billion in restitution. According to Fortune, it is the fifth bank to pay into the billions over the 2008 financial crisis scam. “Other bank settlements include $13 billion with J.P. Morgan Chase; $16.6 billion with the Bank of America; $7 billion from Citigroup; and $3.2 billion from Morgan Stanley.”