Better Markets filed an amicus brief in the U.S. Supreme Court in support of shareholders seeking compensation for Goldman Sachs’ role in the 2008 financial crisis. Oral argument is set for March 29.
Before the Supreme Court is a group of Goldman shareholders seeking to hold the bank accountable for its misrepresentations through a class action. The issue is whether the case can even be brought on a class basis. Better Markets filed an amicus brief in which we urged the Supreme Court to consider Goldman’s conflicts of interest before and during the financial crisis and the reasons why the bank’s false assurances that it was effectively managing those conflicts would be important to investors.
Background. One of the most appalling chain of events that unfolded in the lead up to the 2008 financial crisis involved Goldman Sachs’ fraudulent sale of mortgage-backed securities through the infamous “ABACUS” offering. Even as Goldman became convinced that the residential mortgage market was headed for collapse, it promoted these securities to countless investors.
At the same time, Goldman bet against those investments with its own funds, creating a powerful conflict of interest. Yet all the while, it reassured everyone in the public marketplace that it had extensive controls in place to address such conflicts and that the bank’s clients always would “come first.”
Why this matters? In our brief, we sought to help the Supreme Court appreciate the context in which Goldman’s misconduct occurred and why it was doubly important for Goldman’s shareholders to have truthful disclosures about the bank’s conflicts of interest and the way they were managed—or in this case mismanaged.
In our brief, we also drive home the point that unless banks eliminate or neutralize their conflicts of interest with strong internal controls and accountability measures, and unless they fully and fairly disclose those conflicts, investors and shareholders alike will perpetually be victimized by banks seeking to maximize their profits no matter the fallout.