General Electric Co. (NYSE: GE) has agreed to pay the Department of Justice a USD 1.5 Billion penalty due to accounting misrepresentations derived from its mortgage business WMC. Analysts have expected the settlement in size as the company has already set aside the cash in reserve in 2018.
The penalty comes from GE, through WMC, falsely representing the quality of its subprime loans. “The financial system counts on originators, which are in the best position to know the true condition of their mortgage loans, to make accurate and complete representations about their products. The failure to disclose material deficiencies in those loans contributed to the financial crisis,” Justice Department Assistant Attorney General Jody Hunt said in a statement.
The violations were investigated under FIRREA (Financial Institutions, Reform, Recovery, and Enforcement Act of 1989). This gives authorities permission to pursue violations regarding civil penalties by federally insured financial institutions. “This settlement contains no admission of any allegations and concludes the FIRREA investigation of WMC,” a GE spokesperson said in a statement to CNBC. “This is another step in our ongoing efforts to de-risk GE Capital. This agreement represents a significant part of the total legacy exposure associated with WMC and we are pleased to put this matter behind us.”