Fabrice Tourre: "I Did Not Mislead" Investors

Fabrice Tourre, the lone Goldman Sachs employee named in the SEC fraud suit against the investment bank, stepped into the spotlight Tuesday, telling lawmakers that "I did not mislead" investors involved in the case.

"I deny - categorically - the SEC's allegation," Tourre said. "And I will defend myself in court against this false claim."

For Tourre, 31, Tuesday's appearance before the Senate Permanent Subcommittee on Investigations represented his first public appearance to personally answer the charges against him. Since the SEC unveiled its civil suit against Goldman Sachs, Tourre has been heavily scrutinized, thanks to emails released by the SEC and later, Goldman.

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In a brash January 2007 e-mail released by the SEC, Tourre called himself "The fabulous Fab ... standing in the middle of all these complex ... exotic trades he created without necessarily understanding all of the implications of those monstrosities!!!"

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Tourre's "fabulous" moniker provided fodder for protesters before the hearing, who chanted in a chorus that "Fabulous Fab is not so fab when he takes from the poor" adding that "We want to see these guys behind bars."

Tourre, who appeared calm during the appearance, testified that he does not recall telling investors that a Goldman hedge fund client was betting against an investment that soured. The hedge fund, Paulson & Co., profited handsomely from the deal.

Testimony of Fabrice Tourre

Tourre said the other investors in the deal, ACA Management LLC and German bank IKB, were "sophisticated" and were ultimately responsible for the outcome of their investments.

The investment in question was a collateralized debt obligation backed by subprime mortgage securities. ACA was chosen to select the mortgages that made up the security, but had input from Paulson.

Tourre said that while Paulson made suggestions as to the mortgage securities, ACA had "sole authority to decide what securities would be referenced in the transactions"

"So, while Paulson, Goldman Sachs and IKB all had input into the reference portfolio … ACA ultimately analyzed and approved every security in the deal. Thus, when Goldman Sachs represented to investors that ACA selected the referenced securities, that statement was absolutely correct," Tourre said.

In e-mails released by Goldman Sachs over the weekend, Tourre appeared slightly more conflicted about his role in e-mails to his girlfriend, Marine Serres, though his tone was often joking.

"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 !!!"

In one note, he mused that the complex investments he helped create were becoming like "Frankenstein turning against his own inventor."

"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 ;)"

His tone could be dismissive at times, at one point joking that he sold risky bonds to "widows and orphans."

In June 2007, Tourre wrote in an e-mail to his girlfriend: "Just made it to the country of your favorite clients!!! I'm managed (sic) to sell a few abacus bonds to widow and orphans that I ran into at the airport, apparently these Belgians adore synthetic abs cdo2,"

Referencing colleague Daniel Sparks, who managed the mortgages department at Goldman, Tourre wrote in a March 7, 2007, that "according to Sparks, that business is totally dead, and the poor little subprime borrowers will not last so long!!!"

During the testimony, Tourre said he regrets sending those e-mails.

More Coverage:

Testimony of CEO Lloyd Blankfein
Testimony of Michael Swenson
Testimony of Josh Birnbaum
Testimony of Daniel Sparks
Testimony of Craig Broderick
Testimony of David Viniar

[nh20016]

What is bothersome is that this guy is arrogant and French. He is not American, so he doesn't care he stiffed American families with selling them failing mortgages.

[askagain]

correction

Crooks, thieves, and con men come in every shade and color. A few weeks ago, I locked my self out of the house. We called a company my son found on the internet. They told us that the service call would be $29 and that the technician would have to look at the lock before telling us how much it would cost. The technician quoted $195 and drilled two holes which took 30 seconds. Once in the house, we called two more companies. Each quoted $85 including the service call. Each time we call the company that charged $195. we are told that there is no one in the office to talk to and to call back. A retired mechanic told me that he would replace the whole braking system of a car when someone had a brake problem. When I questioned him about replacing parts that didn't need replacing, he justified it by saying that he did the customer a favor by giving him all new parts. He was not bothered by the fact that he charged a $1,000 for a $100 job.

[askagain]

Crooks, thieves, and con men come in every shade and color. A few weeks ago, I was locked my self out of the house. We called a company my son found on the internet. They told us that the service call would be $29 and that the technician would have to look at the lock before telling us how much it would cost. The technician quoted $195 and drilled two holes which took 30 seconds. Once in the house, we called two more companies. Each quoted $85 including the service call. Each time we call the company that charged $195. we are told that there is no one in the office to talk to and to call back. A retired mechanic told me that he would replace the whole braking system of a car when someone had a brake problem. When I questioned him about replacing parts that didn't need replacing, he justified it by saying that he did the customer a favor by giving him all new parts. He was not bothered by the fact that he charged a $1,000 for a $100 job.

[RoboBlogger]

It will only be a matter of time Immigration stocks will hit the Wallstreet.

[TJphoto]

11 Trillion Dollars in the hole, Congress is for sale, the financial institutions are creating more ways to screw us. Greed will destroy this Country. Simple Solution, imagine that not one incumbent in Congress was re-elected. It's a message that can be sent and heard

[dnamj]

That guy has the expression of someone who knows the system is rigged in his favor. I heard that the top 6 banks in the USA now control 60% of GDP. At what point is it too late to control them? Frankenstein indeed.

[DongWork4Yuda]

Wallstreet has to be very strictly regulated.

Wallstreet = Money

Money controls our government

Money won't support laws that doesn't allow money to make more money quick and easily.

I have no faith in Wallstreet more so then my lack of faith in this countries government

[noloyalisti]

Less government, the free market and the libertarian ideas are an utter failure. They were always bad ideas but these right wing criminals have shown the privatization conspiracy to be the fiasco disaster that it is.

[TVO1CITW]

Well, if you do it all the time and you only get caught once, then it was ok all along. Right?

[bradkt1]

You lie!