Goldman Sachs has agreed to a settlement worth $1.2 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. New York-based Goldman Sachs sold the securities to the companies between 2005 and 2007. Under the settlement, 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. That means Goldman is paying a $1.2 billion penalty. Goldman will pay about $1 billion to Fannie and $2.15 billion to Freddie for the securities it sold.
The settlement is the latest federal government agreement over actions related to the financial crisis that struck in 2008. The crisis, triggered by vast sales of risky mortgage securities, plunged the economy into the deepest recession since the Great Depression.
Goldman agreed to pay $550 million in 2010 to settle the SEC's charges, the largest penalty against a Wall Street firm in the agency's history.