Courtesy of Pam Martens.
Lloyd Blankfein, Chairman and CEO of Goldman Sachs
Yesterday, in a stunning decision packed with Orwellian reverse speak, Judge Victor Marrero of the U.S. District Court for the Southern District of New York (where cases against Wall Street firms are thrown out like penny candy by a carnival barker) dismissed claims against Goldman Sachs in a case so fraught with the appearance of corruption that it had commanded an investigation by the U.S. Senate’s Permanent Subcommittee on Investigations.
Plaintiffs in the case were investors in Hudson Mezzanine Funding 2006-1 and 2006-2, synthetic bets on toxic mortgages which Goldman sold to investors while making multi-billion-dollar bets for its own firm that the deals would fail.
In writing his decision to dismiss the claims by plaintiffs, the Judge actually acknowledged that employees of Goldman Sachs had called what they were selling to their customers “crap” and “junk” in internal emails that were introduced into evidence. Judge Marrero further conceded that Goldman Sachs was aware of deteriorating fundamentals in the subprime mortgage market and needed to “flip” its risk onto the shoulders of its customers. But none of this convinced the Federal Judge – a so-called steward of the public trust – that he had an obligation to let the case proceed to trial and allow citizen jurors make their own determinations in the matter.
Judge Marrero wrote in his September 8, 2015 decision:
“Plaintiffs argue that three main categories of evidence support their argument that Defendants concealed investment risk, thereby making omissions of material fact. The Court is not persuaded that Plaintiffs have done more than make conclusory allegations or unsubstantiated speculation, even when considered in the aggregate, in arguing that Defendants made actionable omissions. First, Plaintiffs point to emails and documents from Goldman employees indicating that the Hudson CDOs were ‘crap,’ ‘junk that nobody was dumb enough to take [the] first time around,’ and consisted of ‘lemons’ that Goldman sought to ‘offload’ onto Glient investors… Other emails from employees indicated their belief that the ‘fundamentals for mortgage credit were undeniably deteriorating’ and the need for Goldman to ‘flip’its risk. Such emails are not enough to support a finding, at this stage, that Defendants made actionable omissions; those emails show, at most, that some Goldman employees, based on the same information available to the Plaintiffs, were bearish on the RMBS [Residential Mortgage-Backed Securities] market.”
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