Stock Rise Despite Goldman Sachs Group Inc (NYSE:GS) $1.2 Billion Settlement Payment

Goldman Sachs Group Inc (NYSE:GS) was accused by a US regulator that the investment bank sold faulty mortgage bonds to Fannie Mae and Freddie Mac before the collapse of the housing market in 2007. However, the Goldman Sachs Group Inc (NYSE:GS) has finally agreed to pay a settlement of $ 1.2 billion to resolve this issue and put the matter to rest.

The settlement was announced by the Federal Housing Finance Agency which is the conservator for Fannie and Freddie.

Under the settlement, Goldman Sachs Group Inc (NYSE:GS) agreed to repurchase the faulty securities from the two government controlled finance companies for $3.15 billion.

The Federal Housing Finance Agency announced that after subtracting the estimated current value of the securities, the Goldman Sachs Group Inc (NYSE:GS) now owes $1.2 billion to Fannie Mae and Freddie Mac.

Fannie Mae and Freddie Mac had filed a lawsuit against Goldman Sachs Group Inc (NYSE:GS) under which the investment bank had to appear in court in September. This lawsuit was filed in 2011 and aimed to recover damages worth $200 billion from a number of financial institutions. However, now that Goldman Sachs Group Inc (NYSE:GS) has agreed to pay $1.2 billion, the company does not need to appear in court in September.

As far as other financial damages were concerned, Federal Housing Finance Agency has resolved 15 of the lawsuits and has recovered $17.3 billion for Fannie Mae and Freddie Mac. These 15 included banks like Bank of America Corp (NYSE:BAC) and Morgan Stanley (NYSE:MS). Now, only 3 cases are left to be resolved which include accusations against HSBC Holdings Plc (NYSE:HSBC) and Nomura Holdings Inc. (NYSE:NMR)

According to officials of Federal Housing Finance Agency, the case against Goldman Sachs Group Inc (NYSE:GS) was a very crucial one as the bank sold faulty securities for over $1.11 billion to a number of finance companies of US between 2005 to 2007.

Even after agreeing to pay for settlement, the investment bank has refused to admit to any of the accusations. Of the total $3.15 billion that the bank owes, $1 billion will be paid to Fannie Mae while $2.15 billion will be paid to Freddie Mac.

The costs of this deal would be covered by litigation reserves of the bank for the second quarter of the current fiscal year. Moreover, to resolve accusations of marketing faulty securities in 2010, Goldman Sachs Group Inc (NYSE:GS) has signed a settlement deal of $550 million with the U.S. Securities and Exchange Commission.

Although, the investment bank has agreed to pay, the U.S. Department of Justice has decided to continue investigation of the matter to find out the bank’s marketing strategies for selling faulty securities. Recently, the department announced a settlement worth $16.65 billion with the Bank of America Corp (NYSE:BAC) over selling of faulty bonds.

According to the General Counsel Executive of Goldman Sachs Group Inc (NYSE:GS), the resolution of this issue has been a great relief.