A recent Corporate Counsel story, “Goldman Sachs Feeling the Pain of Mortgage,” reports that Goldman Sachs Group Inc. ended 2015 with its third straight quarter of shrinking profits, and the investment bank primarily blamed legal costs associated with its role in selling shoddy mortgage securities during the financial crisis eight years ago.
In its latest financial report, released Jan. 20, the bank says noncompensation expenses were $12.36 billion for 2015, a 30 percent jump from 2014, “due to significantly higher net provisions for mortgage-related litigation and regulatory matters.”
Specifically, the financial report says net provisions for litigation and regulatory proceedings for 2015 were $4 billion, “compared with only $754 million for 2014, both primarily comprised of net provisions for mortgage-related matters.” And nearly $2 billion of that landed in the fourth quarter.
Goldman Sachs spokesman Michael DuVally says the company does not break out for the public how much was spent on outside law firms. He could offer no further details of the legal spending beyond the report.
However, the report does say that the bank set aside $1.8 billion in the fourth quarter, and a total of $3.37 billion for 2015, for a settlement with the U.S. Financial Fraud Enforcement Task Force. DuVally could not say if those amounts included outside counsel fees.
Goldman Sachs announced the tentative $5 billion settlement on Jan. 14, though the deal is subject to some further negotiation of details with various state and federal authorities.
Under terms of the proposed settlement, the bank will pay nearly $2.4 billion in civil monetary penalties, make $875 million in cash payments and provide $1.8 billion in consumer relief. Other banks, including Bank of America Corp. and JPMorgan Chase & Co., have paid billions of dollars more than Goldman Sachs in similar settlements over their mortgage activities.
Despite its legal woes, Goldman Sachs still finished well in the black in 2015. It listed net revenues of $33.8 billion.