Goldman Sachs’ $5 billion penalty is great, but score isn’t settled

The Justice Department announced a $5 billion settle ment with Goldman Sachs over the sale of mortgage- backed securities leading up to the financial crisis.
The Justice Department announced a $5 billion settle ment with Goldman Sachs over the sale of mortgage- backed securities leading up to the financial crisis. The Associated Press

Aftershocks still strike California, a decade after the mortgage meltdown. The U.S. Justice Department announced Monday that Goldman Sachs would disgorge $5 billion stemming from actions that helped bring about the nation’s worst economic crisis since the Great Depression.

U.S. Attorney Benjamin Wagner of Sacramento and Assistant U.S. Attorneys Colleen Kennedy and Kelli Taylor, who spearheaded the investigation, deserve high praise for their tenacity.

Goldman Sachs will pay a $2.4 billion civil penalty; $1.8 billion to help underwater homeowners and affected communities by forgiving loans and financing affordable housing; and $875 million to resolve state and federal claims, The Bee’s Sam Stanton and Denny Walsh reported.

At least $30 million will flow to California in consumer relief. It ought to be far more, given the pain this state suffered. To some, it might seem as if California has recovered. Unemployment is 5.5 percent statewide and is lower in the Bay Area. But many Central Valley counties struggle with double-digit unemployment.

And there is the matter of housing. Home ownership, integral to the American dream, keeps Central Valley homeowners tossing and turning at night.

Analysts at the state Board of Equalization recently reviewed housing prices, and found Bay Area housing prices are insanely high. In the Central Valley and Inland Empire, prices are stuck in the doldrums.

The 2015 median home price in San Francisco was $1.25 million, and $1.22 million in San Mateo County. In Merced, Kings, Tulare and Glenn counties, median home prices are below $200,000.

Prices in 2015 were at 63 percent of their 2006 level in Merced County, lowest among all counties surveyed. Median prices were 74 percent of what they were in 2006 in Fresno County, and 77 percent in Sacramento County.

So we welcome the announcement that Goldman Sachs must part with some money it made, while millions of homeowners bought houses they couldn’t afford with loan terms they failed to grasp, and suffered financial calamity.

Goldman acknowledged making false representations to investors about the loans it securitized and sold. Goldman knew, for example, about lender Countrywide Financial Corp.’s questionable practices, but issued a bullish research report on Countrywide stock in 2006.

“Goldman’s head of due diligence, who had just overseen the due diligence on six Countrywide pools, responded, ‘If they only knew …’ ” Wagner said.

The settlement preserves the government’s ability to bring criminal charges against Goldman. We won’t hold our breath. Nor will we delude ourselves into thinking Goldman Sachs will suffer undue pain.

In November 2008, Goldman Sachs stock sunk to $53. On Monday, Goldman’s shares closed above $152. Some people withstood the financial temblor fine.

Related stories from Sacramento Bee