Business digest: Goldman Sachs agrees to pay $3.15 billion

August 22
SETTLEMENT
Goldman Sachs agrees to pay $3.15 billion

Goldman Sachs has agreed to pay $3.15 billion to resolve claims that it misled U.S. mortgage giants Fannie Mae and Freddie Mac about risky mortgage securities it sold them before the housing market collapsed in 2007.

The Federal Housing Finance Agency, which oversees Fannie and Freddie, announced the settlement Friday with the Wall Street powerhouse.

While Goldman is paying $3.15 billion to buy back the securities from Fannie and Freddie, the FHFA said the settlement was worth $1.2 billion because of the difference between what Goldman is paying and the current value of the securities.

“We are pleased to have resolved these matters,” Goldman Sachs Group general counsel executive Gregory Palm said in a statement.

The settlement is the latest federal government settlement over actions related to the financial crisis that struck in 2008. The government rescued Fannie and Freddie at the height of the crisis in September 2008 when both were on the verge of collapse. The companies received taxpayer aid totaling $187 billion. They have since become profitable and repaid the full bailouts.

The FHFA sued 18 financial institutions in 2011 over their sales of mortgage securities to Fannie and Freddie. The total for the securities sold was $196 billion.

Goldman will pay about $1 billion to Fannie and $2.15 billion to Freddie for the securities it sold. The bank’s cost could be lower than $1.2 billion if it’s able to sell the securities at a higher price than their current value.

Other banks have opted for a cash payment to settle claims against them.

— Associated Press

FINANCIAL
Argentina: Comment by judge ‘imperialist’

Argentina on Friday accused the U.S. judge who called the country’s new debt restructuring plan illegal of making “imperialist” comments against the South American nation.

Latin America’s No. 3 economy tipped into its second default in 12 years during July after U.S. District Judge Thomas Griesa blocked payments to holders of debt issued under U.S. law that was restructured following Argentina’s record $100 billion default in 2002.

Griesa ruled that measures proposed by Argentina’s president late Tuesday to make debt payments locally and push bondholders to bring their debt under Argentine law violated past court rulings. But he stopped short of holding the country in contempt.

President Cristina Fernandez’s measures, if enacted and executed, would potentially allow Argentina to skirt Griesa’s court orders and resume interest payments on an estimated $29 billion in restructured bonds.

Argentine Cabinet Chief Jorge Capitanich said Griesa’s choice of words was “unfortunate, incorrect and even, I would say, imperialist expressions.”

Argentina defaulted after Griesa froze a $539 million interest payment, saying restructured bonds cannot be paid unless U.S. investment funds demanding 100 cents on the dollar, plus interest, are simultaneously paid.

— Reuters

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