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Goldman Sachs:Litigation Losses Up To $3.4B 'Reasonably Possible'

Wall Street Journal - Mar 1, 2011

Goldman Sachs Group Inc. (GS) could lose as much as $3.4 billion in damages and other litigation-related matters involving securities it underwrote in the last few years for which the purchasers are now suing to recover losses or to force the firm to buy them back.

In a securities filing Tuesday, Goldman estimated that the figure, in the upper range of estimates, was "reasonably possible."

The Wall Street giant disclosed this worst-case scenario to comply with new rules from the Securities and Exchange Commission regarding contingent liabilities. The accounting standard demands that companies state what is less than likely, but has more than a slight chance of happening. These potential legal losses are on top of what companies have already set aside.

Banks face a mountain of lawsuits related to the financial crisis, particularly from investors who bought mortgage-backed securities that later tumbled in value.

J.P. Morgan Chase & Co. (JPM) said Monday it faced up to $4.5 billion in legal losses in its own worst-case scenario, the highest estimate of any of the six financial institutions reporting such an estimate so far. Citigroup estimated losses of $4 billion last week, while Bank of America (BAC) put its worst-case number at $1.5 billion and Wells Fargo & Co. (WFC) estimated $1.2 billion above reserves.

Read Full Article from Wall Street Journal

- Posted: 2011-03-01 13:36:43

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