“Recently Goldman Sachs reached a settlement with the federal government for $5 billion because they were selling worthless packages of subprime mortgages,” Bernie Sanders shouted (as he does) in the last Democratic presidential debate. “If you are a kid caught with marijuana in Michigan, you get a police record. If you are an executive on Wall Street that destroys the American economy, you pay a $5 billion fine, no police record.”



This lack of accountability for Wall Street and the perception of a two-tiered justice system gnaws away at Americans’ trust. But now that the Goldman Sachs settlement Sanders referred to has been finalized, I’m sorry to say that he was wrong. If you are an executive on Wall Street who destroys the American economy, you don’t pay a $5 billion fine. You pay much, much less. In fact, you can make a credible case that Goldman won’t pay a fine at all. They will merely send a cut of profits from long-ago fraudulent activity to a shakedown artist, also known as U.S. law enforcement.

The Justice Department announcement in the Goldman case states that between 2005 and 2007, the investment bank marketed and sold mortgage-backed securities to investors that were of lower quality than promised. As a result, Goldman will pay a $2.385 billion civil penalty to the Justice Department, $875 million resolving claims from other state and federal agencies, and $1.8 billion in so-called “consumer relief” measures, like forgiving principal on loans and providing financing for affordable housing. That’s where the much-touted $5 billion figure comes from.

In The New York Times, Nathaniel Popper took a careful look at the consumer relief provisions, finding that Goldman Sachs could pay up to $1 billion less than advertised, because the company gets extra credit for spending in certain hard-hit communities or for meeting its obligations within the first six months. I appreciate Popper’s precision, but it’s unnecessary. None of this consumer relief represents a penalty on Goldman at all.

That’s because Goldman Sachs doesn’t own any of the loans it’ll be modifying. They were sold to investors years ago. Goldman will quite literally pay that fine with someone else’s money; in fact, the money comes from the very investors Goldman victimized, by selling them toxic securities under false pretenses.