It sure sounds like Goldman Sachs bond trader Fabrice Tourre knew exactly what he was doing.
In a series of 2007 emails released over the weekend by Goldman Sachs, Tourre, who was charged earlier this month in the SEC’s civil fraud case against Goldman, comes across as a sly dealer of financial products that he seemed to know were ticking time bombs — bragging about selling them to a “widow and orphans” — but also as someone ethically conflicted about doing so.
Tourre, along with Goldman Sachs CEO Lloyd Blankfein, Daniel Sparks, a former head of the mortgages department, and a number of other Goldman executives are expected to testify tomorrow before Sen. Carl Levin’s (D-MI) Senate Permanent Subcommittee on Investigations. Blankfein is expected to deny betting against mortgages — although emails released by Levin over the weekend appear to show that the investment bank knowingly made money betting against the mortgage market — and mortgage securities that it was selling to investors.
Toure’s email record doesn’t look all that good either.
In a June 2007 email to his girlfriend, Tourre wrote:
Just made it to the country of your favorite clients!!! I’m managed to sell a few abacus bonds to widow and orphans that I ran into at the airport, apparently these Belgians adore synthetic abs cdo2.
Abacus is the name of the mortgage-related security at the heart of the SEC lawsuit. Last December, the New York Times reported that Tourre was “aggressive from the start in trying to make the assets in Abacus deals look better than they were.”
And it seems that at least at times, Tourre didn’t have much sympathy for those investing in Abacus. In March, Tourre had written this to his girlfriend:
According to Sparks, that business is totally dead, and the poor little subprime borrowers will not last so long!!!
However, in January, Tourre seemed to show a somewhat softer side — or at least a more self-aware one.
Anyway, not feeling too guilty about this, the real purpose of my job is to make capital markets more efficient and ultimately provide the U.S. consumer with more efficient ways to leverage and finance himself, so there is a humble, noble and ethical reason for my job ;) amazing how good I am in convincing myself !!!
It does seem that Tourre was aware of the potentially disastrous effects these financial products might have. From a 2007 email to a friend:
It’s bizarre I have the sensation of coming each day to work and re-living the same agony - a little like a bad dream that repeats itself. In sum, I’m trading a product which a month ago was worth $100 and which today is only worth $93 and which on average is losing 25 cents a day …That doesn’t seem like a lot but when you take into account that we buy and sell these things that have nominal amounts that are worth billions, well it adds up to a lot of money.
“When I think that I had some input into the creation of this product (which by the way is a product of pure intellectual masturbation, the type of thing which you invent telling yourself: “Well, what if we created a “thing”, which has no purpose, which is absolutely conceptual and highly theoretical and which nobody knows how to price?”) it sickens the heart to see it shot down in mid-flight… It’s a little like Frankenstein turning against his own inventor ;)”