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Goldman warns of federal lawsuit risk over mortgage bond sales


(Reuters) — Goldman Sachs Group Inc. said it could face a federal civil lawsuit after a government probe concluded that the bank had violated laws related to sale of residential mortgage-backed securities before the financial crisis.

The bank said in a regulatory filing on Monday that it received a letter from the U.S. Attorney for the Eastern District of California in December in connection with the probe, and that it was cooperating with regulators.

Goldman also raised the top end of its estimate of “reasonably possible” legal losses to about $3 billion from $2.5 billion.

The bank, however, said the loss estimate does not include any future claims stemming from U.S. government investigations into misconduct in the pooling and sale of residential mortgage-backed securities that contributed to the financial crisis.

Last year, Citigroup Inc. agreed to pay $7 billion to resolve claims it misled investors about shoddy mortgage-backed securities in the run-up to the financial crisis.

JPMorgan Chase & Co. also reached a $13 billion agreement with the regulator to settle similar government agency investigations, while Bank of America Corp. settled mortgage probes with U.S. government for $16.65 billion.

Goldman also said on Monday that its risk management and controls, trading activities and communications in connection with the establishment of benchmark rates, such as currency rates, were being investigated.

In November, U.K. and U.S. regulators fined six banks, including JPMorgan and Citi, a total of $4.3 billion after a global investigation of their failure to stop traders from trying to manipulate the foreign exchange market.

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