Goldman Sachs (NYSE:GS) said in a filing that they are exposed to up to $3.4 billion in losses in relationship to underwriting securities which they are being sued over for the recovery of losses.
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. (NYSE: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 banks reporting so far. Citigroup estimated losses of $4 billion last week, while Bank of America put its worst-case number at $1.5 billion and Wells Fargo & Co. estimated $1.2 billion above reserves.
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