The Securities and Exchange Commission (SEC) not only charged Goldman Sachs with fraud Friday. The regulator also charged 31-year-old Fabrice Tourre, a VP-level firm trader who is said to have structured and marketed the CDO at the centre of the fraud accusations.
And the London-based French trader's own e-mails appear to have helped the regulator come to its view that fraud has been committed.
'More and more leverage in the system', starts one e-mail Tourre sent to a friend in January 2007, 'The whole building is about to collapse anytime now....Only potential survivor, the fabulous Fab....standing in the middle of these complex, highly leveraged, exotic trades he created without necessarily understanding all the implications of those monstruosities (sic)!!!'.
According to MarketWatch, the trader, who was working in New York at the time of the alleged offences, is also said to have e-mailed the head of Goldman's structured product correlation desk a month later, saying: 'The CDO biz is dead. we don't have a lot of time left'.
Tourre is believed to have received $2m in compensation for his work in 2007. Investors in his CDO, on the other hand, were on their way to sustaining $1bn in losses, while even Goldman itself claims to have lost $90m on the transaction.
One banker told Here Is The City: 'I don't know if these e-mails are a 'smoking gun' or not, but Tourre certainly appears to have shot himself in the foot. Goldman will be mortified over these e-mails. The last thing it needs now is a young trader boasting about how clever he is (or thinks he is). The timing of the release of these e-mails couldn't be worse for the firm. And poor old 'Fab' doesn't look quite so 'Fab' now, does he ? Hubris once again comes to mind'.
Finally, Bloomberg reports that these weren't the only Goldman-related e-mails that came to light lasted week which painted the firm in a less than flattering light. In 2007, Washington Mutual (WaMu) was looking at its options (it eventually collapsed in September 2008). And someone suggested that Goldman should be hired to provide some advice on a possible restructuring. WaMu CEO Kerry Killinger, however, was having none of it, allegedly e-mailing a colleague: 'I don't trust Goldy on this. They are smart, but this is swimming with the sharks'.