On Tuesday, Harold Baer, the U.S. District Judge in Manhattan,
received papers for approval of
The Goldman Sachs Group Inc.
) $26.6 million settlement with investors related to the Public
Employees' Retirement System of Mississippi pension fund. The
settlement was made to compensate investors for misleading them
regarding the risks associated with mortgage-backed securities
worth $698 million.
In February 2012, the federal judge in Manhattan, Harold Baer, had
ordered Goldman to deal with the securities class-action lawsuit
filed by the pension fund, rejecting all the arguments the latter
had in its defense.
Investors, led by the Public Employees' Retirement System of
Mississippi, filed a lawsuit against Goldman in the federal court
of Manhattan, over GSAMP Trust 2006-S2 securities in 2009. The
securities, which were offered to the investors, were backed by
second-lien home loans. These loans were purchased from
California-based subprime lender New Century Financial Corp., which
was bankrupt in 2007.
The complaint accused Goldman of having deceptively sold the
sub-prime mortgage-linked securities that gradually failed. It also
claimed that the company misrepresented the value of instrument by
providing materially misleading statements.
Moreover, the Mississippi pension fund alleges that Goldman failed
to expose New Century's ignorance in meeting its own underwriting
standards and the company's use of overstated appraisals. Goldman
has been blamed for overlooking these issues while buying loans
from New Century and selling them as securities to investors.
Eventually, the market exhibited a downtrend, resulting in huge
losses for the common investors.
Most recently, in May 2012,
Bank of America Corporation
) received approval for a $315 million settlement with investors
related to the Public Employees' Retirement System of Mississippi
pension fund. Though BofA did not admit any wrongdoing, Merrill
Lynch, purchased by the investment bank in 2009, emphasized that
losses faced by investors were attributable to the downturn in the
economy and housing bubble.
Among other banks,
JPMorgan Chase & Co.
HSBC Holdings Plc
M&T Bank Corp.
) have also been accused of misrepresenting documents related to
mortgage-backed securities and other losses over the period.
With the settlement of the lawsuits, Goldman plans to move forward
with its business strategies after attempting to end issues related
to the financial crisis. Moreover, pending lawsuits can further
trigger financial hassles while tarnishing the company's image.
Therefore, it is in the interest of the company to resolve such
matters at the earliest. Also, the settlement has ensured justice
BANK OF AMER CP (BAC): Free Stock Analysis
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Goldman currently retains a Zacks #3 Rank, which translates into a
short-term Hold rating. Considering the fundamentals, we also
maintain a long-term Neutral rating on the stock.