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Tess Vigeland: While the federal government was busy with health care and antitrust issues today, the state of Massachusetts announced a settlement with investment giant Goldman Sachs over the firm’s role in the foreclosure crisis. It appears to be the first settlement of its kind, though likely not the last as the state goes after investment banks that knew the loans were bad and bought them anyway. Abigail Beshkin reports from WBUR in Boston.
ABIGAIL BESHKIN: When Massachusetts attorney general Martha Coakley started investigating the foreclosure crisis she zeroed in on the role that Goldman and other investment banks played in creating the market for these bad loans.
MARTHA COAKLEY: We’ve made the determination, and our courts have agreed, that many of these loans were unfair. They were destined to fail at the inception.
Under today’s settlement, Goldman will spend about $50 million to write down loans for about 700 homeowners whose mortgages are held by Goldman. It also orders a Goldman-owned company, Litton Loan Servicing, to modify thousands of other mortgages.
Attorney General Coakley won’t say if she’s going after other investment banks, but Vincent Valvo, the editor of Banker and Tradesman newspaper says they should beware.
VINCENT VALVO: If you’re one of the other major investment banks that were handling these kinds of loans you probably ought to be getting ready to write a check to the Commonwealth of Massachusetts.
Goldman Sachs says it’s happy to have the case resolved. It won’t say whether other states have similar cases pending. However, Valvo says it’s unlikely.
VALVO: Martha Coakley has been agressive at going after the players in the subprime debacle. Interestingly, not a lot of other states have been following her lead.
Attorney General Coakley says so many things about this economic crisis are unprecedented it’s hard to know what today’s Massachusetts settlement could mean for other states.
In Boston, I’m Abigail Beshkin for Marketplace.
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