General Electric will pay $ 1.5 billion to settle the Justice Department case that the industrial giant has misrepresented the quality of subprime loans, the agency said Friday, losing billions of dollars dollars to some investors.
These charges are a result of GE's purchase of WMC Mortgage in 2004. The subprime mortgage provider has provided more than $ 65 billion in loans over the next three years. The majority, however, did not finally adhere to published underwriting guidelines, the DOJ said.
Despite this, the company would have continued to misrepresent loan quality and launch an aggressive campaign to approve more loans to meet volume targets and generate higher profits. At the same time, WMC's quality control protocols did not have enough weight to prevent the sale of fraudulent loans.
"The lack of disclosure of the material deficiencies of these loans has contributed to the financial crisis," said Deputy Attorney General Jody Hunt, adding that the Justice Department would continue to seek civil sanctions to prevent the financial markets to hit each other.
While the three major stock market indices on Wall Street were up on Friday, GE's shares were down.
|GE||GENERAL COMPANY OF ELECTRICITY||9.00||-0.12||-1.32%|
The Boston-based firm is trying to fix the situation with its CEO Larry Culp. The company sold its key divisions, including the sale of its biopharmacy business to Danaher for $ 21.4 billion. GE is also planning an expensive overhaul of its struggling energy sectors, which produce turbines for power plants.
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Culp in March said profits would decline more than expected in 2019, but would become positive over the next two years.