Goldman Sachs Settles Lawsuit but No “Mea Culpa”

Goldman Sachs (GS) settled a lawsuit that alleged that it rigged bond prices. Meanwhile, while the company agreed to pay a fine, it did not admit any wrongdoing on its part. Also, in September, Deutsche Bank agreed to pay a fine of $15 million to settle the lawsuit.

The bond rigging lawsuit

Reuters reported that “Goldman Sachs Group Inc agreed to pay $20 million to resolve claims by investors that it conspired to rig prices of bonds issued by Fannie Mae and Freddie Mac.” Also, the report added that it is a preliminary settlement and still requires the approval of a judge.

Notably, Goldman Sachs is the third company to settle the lawsuit. In September, Deutsche Bank and units of Tennessee’s First Horizon National Corp. agreed to pay $15 million and $14.5 million to settle the lawsuit.

The lawsuit is about the price rigging of Fannie Mae and Freddie Mac bonds. The litigants allege that big banks used their market dominance to rig Fannie Mae and Freddie Mac bond prices in a bid to increase their profits between 2009 and 2016. Notably, while Goldman Sachs agreed to pay a fine, it hasn’t admitted its culpability.

BRK owns a stake in Goldman Sachs

Earlier this year, Wells Fargo (WFC) also agreed to settle a lawsuit that alleged that it forced customers into auto insurance. However, the company did not admit to any wrongdoing. Notably, Wells Fargo is amongst Berkshire Hathaway’s (BRK.B) biggest holdings. Also, Berkshire holds stakes in Goldman Sachs as well as J.P. Morgan Chase (JPM) and Bank of America (BAC).

However, Berkshire chair Warren Buffett has gradually sold Wells Fargo shares while adding more Bank of America and J.P. Morgan shares. Last month, Berkshire filed for a request to hike its stake in Bank of America beyond 10%. Read How Berkshire Hathaway’s Holdings Changed in Q3 for a detailed analysis of the company’s third-quarter 13F.

Banking rules for Goldman Sachs and others

The banking and financial sector is vital to the economy. Uncontrolled risks in the financial sector can cause a domino effect on the broader economy. After the 2008 financial crisis, the regulations for financial institutions were tightened. However, they have been gradually eased amid lobbying by companies like Goldman Sachs. Read Could Volcker Rule Reforms Hurt in the Next Recession? to analyze how easing regulations might be a risk.