by Keith Johnson
This should be a lesson to all those young, aggressive, upwardly mobile Wall Street wannabes who think they are somehow going to fast track their way into the stratosphere of high finance.
Sorry, kids! There’s no room left at the top, and soon you’re going to see even those old money families tearing each other apart for what’s left of a collapsing fiat money system that has just about run its course.
I submit to you the unfortunate tale of Goldman Sachs’ naïve boy protégé, Fabrice Tourre, the so-called ‘Fabulous Fab’ who is alleged to be the mastermind behind a scheme to sell toxic mortgage investments that were deliberately designed to fail in the US housing market crash.
Fabrice Tourre, 31, is the classic patsy and the kind of villain the American people love to hate. He’s foreign (French), flamboyant, young, rich and shrewd. He was only 22 and fresh out of college when he started working for Goldman Sachs in 2001. Just five years into his employment, he found himself at the center of a scheme devised by one of the world’s richest billionaires, hedge fund manager John Paulson.
Paulson had presented a roster of sub-prime mortgage deals that he was betting would fail in the housing market. He paid Goldman Sachs $15 million to find clients that would bet the other way. The scheme was packaged into what has come to be known as an ‘Abacus Deal’.
Tourre is alledged to have taken this portfolio to potential investors and sell them as favorable risks while hiding the fact that he was working with Paulson, who was betting against them.
To help with pitching these toxic investments, they employed the services of ACA Capital Holdings, Inc. and convinced them that Paulson was actually investing in these mortgages. Tourre and Paulson then used ACA’s endorsement of the mortgages as a credible and sound investment. Everything went as planned and Paulson cashed in on a cool $1 billion while the Goldman Sachs investors took it in the shorts.
Now the SEC has been called in to restore their tarnished image with the public by bringing suit against the investment giant and taking aim, in particular, at the novice Tourre. So far, the SEC has conducted five interviews including one with the now notorious ‘Fabulous Fab’. They have not elected to interview any one of the top Goldman Sachs executives, including Tourre’s manager Jonathan Egol. They’ve also apparently found no need to trouble Mr. Paulson with any of their inquiries. Goes to show you that only the little minnows get swallowed up in the cesspool of Wall Street.
Tourre is said to have been well liked and popular at Goldman Sachs. He is known for his impecible charm and biting sense of humor. Up through and including 2008, he has reportedly been pulling in over $2 million a year. He has since moved to an office on Fleet street in London and has been “living it up” and throwing loud, lavish parties out of his luxurious bachealor flat. Apparently, Tourre has been laying low and ducking media interviews. But you can bet that the boys at Sachs have already sent their best attorneys to drape an arm around his back and rub his shoulders. You can probably imagine the scene: The poor kid (boo hoo) is probably cradling his face in his hands and shaking his head as the Sachs lawyers whisper in his ear that everything is going to be O.K. “Just keep quiet” they’re telling him—“We’ll do all the talking. You’re probably going to have to take the fall on this one, but we’ll do everything within our power to make sure you’re well taken care of when this thing blows over.”
Meanwhile, back in the States, his bosses are laying the groundwork for pinning all of the blame on this minor player. The most recent statement by Goldman Sachs CEO Lloyd Blankfein should convince you of that. In response to the allegations of misconduct, Blankfein told his employees Sunday “I will repeat what you have heard me say many times in the past: Goldman Sachs has never condoned and would never condone inappropriate activity by any of our people. On the contrary, we would be the first to condemn it and take immediate and appropriate action. Our responsibility as a financial intermediary requires it and our commitment to integrity and the firm’s business principles demand it.”
If that doesn’t convince you that Goldman Sachs is setting this kid up to take the fall, I don’t know what will. So you see what I mean when I say he’s the perfect “patsy”. This kid has been served up for American consumption. Your average “Sarah Palin-Tea Party” Republican, pissed off about the Wall Street bail-outs, will unwittingly accept this burnt offering as Goldman Sachs’ sacrificial lamb and will be just enough of a token gesture for the fence-sitting Democrats to come back around to Obama when he brings the whip down on this poor, hapless dupe.
The American people are a predictable bunch. As long as you frame everything in the context of a Hollywood script you could have them believing just about anything. It reminds me of the Neo-con (Jerry Bruckheimer) produced film Enemy of the State where rouge elements in the NSA cover up the killing of a US Congressman. In the end, the integrity of the NSA is upheld as we see the young agents held to answer for their crimes by our heroic government. You’re bound to see that same scenario unfold here. Goldman Sachs will throw this kid under the bus and claim that they were duped right along with the rest of their investors. Goldman Sachs will let this play out in a long, drawn-out court battle until it is all but forgotten in the American public’s mind. They’ll end up paying a fine, that sounds like a lot of money to most people, but in reality amounts to nothing more than a slap on the wrist. As for Tourre? Well, he’ll be flushed down the memory hole of oblivion after a royal screwing in the press as the rouge villain who besmerched the good name of Goldman Sachs.
But the more enlightened of us will know the real truth. It was Tourre’s superiors who really engineered this debacle. Anyone with half a brain knows that a novice like Tourre would never be left unattended to make deals with heavy hitters like John Paulson. Schemes of this magnitude don’t go forward without first being signed off by the guys upstairs. On Monday, the New York times cited eight confidential sources who made this point clear. The article stated that: “According to interviews with eight former Goldman employees, senior bank executives played a pivotal role in overseeing the mortgage unit just as the housing market began to go south. These people spoke on the condition that they not be named so as not to jeopardize business relationships or to anger executives at Goldman, viewed as the most powerful bank on Wall Street. According to these people, executives up to and including Lloyd C. Blankfein, the chairman and chief executive, took an active role in overseeing the mortgage unit. It was Goldman’s top leadership, these people say, that ended the dispute on the mortgage desk by siding with those who, like Tourre and Egol, believed home prices would decline…By early 2007, Goldman’s mortgage unit had become a hive of intense activity. In addition to Blankfein, Gary D. Cohn, Goldman’s president, and David A. Viniar, the chief financial officer, visited the mortgage unit frequently.”
This whole scandal couldn’t come at a better time for Goldman Sachs’ choice for President, Barrack Obama. He and the Democratic Party are reeling from public outcry against his sell out to the health insurance industry and the never ending bail-outs to their friends on Wall Street. This fiasco will help push through a regulatory bill that will actually concentrate more power to the FED (Goldman Sachs Alumni) and will only serve to make smaller firms vulnerable to absorption by the likes of Goldman Sachs and other giants. Obama will shake his fist, yell at Republicans who come to Wall Street’s defence, and come out looking like a maverick who took on those nasty ‘special interests’ that he loves to claim he’s a crusader against.
This is also an opportunity for the SEC to come out looking tough after their disgraceful conduct in the Bernie Madoff affair. Taking on Goldman Sachs will be a great boost to their image. But that could only happen under unusual circumstances like these. Right now, Goldman Sachs actually wants to be made to look like they’re no different from anybody else. They need to convince the American people that they are just as vulnerable and subject to public scrutiny as any other legitimate business. In other words, Goldman Sachs has given the SEC permission to take them on. Otherwise, the SEC would be just as ineffective and bias as they have always been.
The SEC is actually a public relations device for the FED. They go after the little guys to look like they’re doing something while turning a blind eye to the big investment firms that their agents hope to someday work for. Never was this more apparent than during the Madoff scandal. Madoff whistleblower Harry Markopolos repeatedly warned the Securities and Exchange Commission that Madoff was perpetrating a massive investment fraud and said that the regulatory agency that the SEC is inept, “financially illiterate” and far too cozy with the financial titans it is supposed to be regulating. Markopolos said “The SEC is also captive to the industry it regulates and it is afraid of bringing big cases against the largest most powerful firms. Cleary the SEC was afraid of Mr. Madoff.” It was also reported that agents who were dispatched to interview Madoff were so enamored with his lavish offices and lifestyle that they were tripping over themselves trying to get their resumes onto his desk. Such is the true reality of the SEC.
This is not to say that the bright and rosy future of Goldman Sachs is etched in solid granite. As the fractional reserve system of banking starts to collapse, we are bound to see the connoisseurs of fine dining resort to cannibalistic practices as they scramble to loot and plunder what’s left of the American economy. Bon Appétit.