Goldman Sachs has become the first bank to settle a legal investigation into the credit derivatives at the heart of the financial crisis, agreeing to paying $60m to the state of Massachusetts.

Martha Coakley, the state's attorney-general, had been examining if there was fraud or negligence when Wall Street traders packaged sub-prime loans into securities that could be sold on to other investors. Many sub-prime borrowers were never likely to be able to afford to pay back the loan, it has since become clear, and the insatiable demand for mortgages on Wall Street is blamed in part for the collapse in lending standards and the encouragement of fraudulent mortgage applications.

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