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Fabrice Tourre: Goldman Investments Like "Frankenstein"


Fabrice Tourre, the Goldman Sachs bond trader embroiled in the SEC fraud case against the bank, sent a number of conflicted emails to his girlfriend about his role in creating ultimately doomed securities, referring to them as "like a little Frankenstein turning against his own inventor."

Goldman released the emails ahead of Tourre's appearance on Capitol Hill Tuesday, where he will join CEO Lloyd Blankfein in testifying before a Senate investigative panel.

Special Section: Wall Street Under Fire

The SEC charges Goldman and Tourre, the only individual named in the civil suit, misled investors when it created a mortgage-backed security in 2007 for a hedge fund client looking to bet against the housing market. In the bank's marketing material for the investment, a collateralized debt obligation backed by subprime mortgage assets, there was no mention of the client, Paulson & Co.'s, role in selecting some of the assets or its short position against the portfolio.

In his emails to his girlfriend, Marine Serres, the London-based Tourre appeared somewhat conflicted about his work, but his tone could also be dismissive, at one point joking that he sold risky bonds to "widows and orphans."

In June 2007, Tourre wrote in an email 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!!!"

The emails, released by Goldman over the weekend, were reported on by Reuters. When the SEC unveiled the charges earlier this month, it released selected excerpts of emails in which Tourre referred to himself as "fabulous Fab" who was "standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstrosities!!!"

The SEC chose not to release the other notes, which portrayed him as more dubious about his job.

Tourre's messages show he was aware of the coming crisis in the subprime sector and the effect it would have on Goldman securities. He also reflected on the convoluted nature of the investments he created, which he wrote had "no purpose."

"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," Tourre wrote earlier in 2007. "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."

He added, "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 ;)"

In a January 2007 e-mail, Tourre seemed to half-heartedly rationalize his job function.

"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 !!!"

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