Goldman Sachs has a little more than two months for a miracle to happen.
Otherwise, on Sept. 29, the bank will go to trial in federal court in Manhattan against the Federal Housing Finance Agency to defend claims that Goldman deceived Fannie Mae and Freddie Mac about the quality of the mortgage-backed securities it was peddling before the financial crash.
For defendants in the FHFA litigation, trying to explain to jurors — and to a deeply skeptical judge — that you’re not responsible for woefully deficient securities is so unappealing a prospect that 15 other big banks have coughed up a collective $15 billion to Fannie and Freddie’s conservator. Only Goldman and three other banks have stuck out three years of lopsided litigation in which U.S. District Judge Denise Cote has consistently ruled against them on matters large and small.
These four holdouts have only one possible advantage over the defendants that have already capitulated: the U.S. Supreme Court’s ruling last month in an environmental case called CTS Corporation v. Waldburger.
The day that decision came down, I pointed out that it was good news for securities defendants because it cast doubt on the timeliness of fraud claims by the Federal Housing Finance Agency, the Federal Deposit Insurance Corporation and the National Credit Union Administration.
Waldburger addressed whether Congress extended state-law statutes of repose along with statutes of limitations when it passed a federal environmental cleanup law in 1980. (Both of those set time limits for when injury suits must be filed, but the statute of limitations depends on such factors as when the injury was discovered and whether the parties have agreed to stop the clock. The statute of repose, by contrast, is generally longer but sets an absolute time bar on a defendant’s potential liability.)