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August 25, 2014

Goldman Gets to Keep the Gold as it Settles Latest Case

Announced very late on a Friday afternoon in late August, presumably designed to get the least notice and attention, Goldman Sachs, yet another big Wall Street bank, will walk away almost scot-free from its role in causing the worst financial crash since 1929 and the worst economy since the Great Depression of the 1930s.  As most know, this comes on the heels of last week’s $17 billion settlement between the Department of Justice and Bank of America.

The latest settlement comes by way of the Federal Housing Finance Agency that has settled with the Wall Street behemoth after it agreed to buy back some of the $11 billion of securitized mortgages it sold to both Fannie Mae and Freddie Mac between 2005 and 2007, which helped plunge both companies into bankruptcy.  As a result, the American taxpayers had to step in with more than $187 billion to bail both of them out.

According to the settlement, Goldman Sachs will pay roughly $1 billion to Fannie and $2.15 billion to Freddie for the securities. But, as is true with all these settlements, the reality is much less than the bragging and the headlines suggest.  Here, Bloomberg News noted, “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.”

Highlighting just how little, if any, pain this settlement has caused Goldman Sachs, was the firm’s own press statement last Friday announcing the deal, stating that “the costs of resolving these matters are substantially covered by reserves as of the second quarter of 2014.”

And, of course, like all the rest of the settlements the federal government has entered into with the giant Wall Street firms, Goldman Sachs made sure neither the firm nor any of its executives or employees would be blamed or in any way held responsible for its and their roles in crashing the U.S. financial system, obliterating the housing market and evaporating retirement and college savings for millions of Americans.

The FHFA has now settled 16 of its 18 lawsuits against Wall Street banks and lenders that it alleged knowingly sold Fannie and Freddie more than $196 billion in worthless or faulty mortgage securities.  This is in addition to the Securities and Exchange Commission and the Justice Department settling lots of cases against Wall Street’s biggest banks as well.  However, once again, not a single bank was held responsible for anywhere near the amount of economic wreckage they caused through their illegal and systemically fraudulent activities, damage that is still being felt across the country today.

And once again, not a single executive was held responsible at all for their part in the crisis.  As we have said, banks don’t commit crimes; bankers do.  Until individuals are held personally and meaningfully accountable in a court of law, there will be more crime on Wall Street.  After all, if crime isn’t punished, it isn’t deterred.  In fact, these settlements have been so deficient by almost any measure, it is hard not to see them as rewarding crime and, thereby, incentivizing more crime.



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