Goldman Trader Fires Back at SEC

Fight disinformation: Sign up for the free Mother Jones Daily newsletter and follow the news that matters.


Fabrice Tourre, the Goldman Sachs trader at the heart of the Securities and Exchange Commission’s blockbuster lawsuit, will outright reject the SEC’s allegations that he misled Goldman clients and committed securities fraud in a 2007 mortgage-related transaction, according to prepared remarks for a Senate hearing on Tuesday. The SEC’s suit alleges that Tourre and Goldman let a hedge fund trader betting heavily against the mortgage markets, John Paulson, pick the bonds underlying a complex product peddled by Goldman called a synthetic collateralized debt obligation (CDO). More importantly, the suit says Tourre failed to disclose to the CDO’s two investors—an American institutional investor named ACA and German bank IKB—that Paulson had picked the bonds, which were of such poor quality that they were essentially rigged to fail. (The SEC said 83 percent of the bonds in the deal had been downgraded six months later by rating agencies, and 99 percent had been downgraded a year later.)

Testifying before the Senate investigations subcommittee Tuesday, Tourre will reject the notion that Paulson, who made $3.7 billion in 2007 by betting against the housing market, picked the bonds. Instead, Tourre will say Paulson had input, but that ACA “ultimately analyzed and approved every security in the deal.” He adds, “ACA had sole authority to decide what securities would be referenced in the transaction, and it does not dispute that point… If ACA was confused about Paulson’s role in the transaction, it had every opportunity to clarify the issue.”

Tourre, set to face a barrage of questions during Tuesday’s hearing, concludes his remarks by defending himself in the deal, one of several dozen deals called Abacus. “I wish to repeat—I did not mislead IKB or ACA, two of the most sophisticated investors in these products in the world,” he will say.

 

We've never been very good at being conservative.

And usually, that serves us well in doing the ambitious, hard-hitting journalism that you turn to Mother Jones for. But it also means we can't afford to come up short when it comes to scratching together the funds it takes to keep our team firing on all cylinders, and the truth is, we finished our budgeting cycle on June 30 about $100,000 short of our online goal.

This is no time to come up short. It's time to fight like hell, as our namesake would tell us to do, for a democracy where minority rule cannot impose an extreme agenda, where facts matter, and where accountability has a chance at the polls and in the press. If you value our reporting and you can right now, please help us dig out of the $100,000 hole we're starting our new budgeting cycle in with an always-needed and always-appreciated donation today.

payment methods

We've never been very good at being conservative.

And usually, that serves us well in doing the ambitious, hard-hitting journalism that you turn to Mother Jones for. But it also means we can't afford to come up short when it comes to scratching together the funds it takes to keep our team firing on all cylinders, and the truth is, we finished our budgeting cycle on June 30 about $100,000 short of our online goal.

This is no time to come up short. It's time to fight like hell, as our namesake would tell us to do, for a democracy where minority rule cannot impose an extreme agenda, where facts matter, and where accountability has a chance at the polls and in the press. If you value our reporting and you can right now, please help us dig out of the $100,000 hole we're starting our new budgeting cycle in with an always-needed and always-appreciated donation today.

payment methods

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate