Buyback of junk paper. How Spiegel headlined the U.S.’s Federal Housing Finance Authority’s 23 Aug 2014 announcement that Goldman Sachs will buy back overrated mortgage-backed paper it sold to Fannie Mae and Freddie Mac between 2005 and 2007. Goldman will pay $3.15 billion which is $1.2 billion more than the investments are worth today.
When the U.S.’s speculation in debt caused the global financial crisis in 2008, Fannie Mae and Freddie Mac had to be bailed out by US taxpayers for $187 billion.
$1.2 billion is apparently the biggest fine Goldman Sachs has ever paid in its >140-year history, according to the Wall Street Times.
As part of this deal, Goldman will not have to admit any wrongdoing. It can pay this fine from its reserves.
The F.H.F.A. filed a lawsuit against 18 financial institutions in 2011 for selling Fannie and Freddie $196 billion in mortgage-backed securities with inaccurate risk evaluations.
The U.S.’s Securities and Exchange Commission has meanwhile also fined banks hundreds of millions for selling Fannie and Freddie hundreds of billions in bad mortgage-backed securities.
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