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You are here: Home / Economics / Free Markets Solve Everything / How the Fabulous Fab Brought Down the World

How the Fabulous Fab Brought Down the World

by John Cole|  June 1, 201110:16 am| 39 Comments

This post is in: Free Markets Solve Everything, Show Us on the Doll Where the Invisible Hand Touched You, Assholes

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It’s a mystery, really:

How Mr. Tourre alone came to be the face of mortgage-securities fraud has raised questions among former prosecutors and Congressional officials about how aggressive and thorough the government’s investigations have been into Wall Street’s role in the mortgage crisis.

Across the industry, “it’s impossible that only one person was involved with fraudulent activities in connection to the sales of these mortgage securities,” said G. Oliver Koppell, a New York attorney general in the 1990s and now a New York City councilman.

In the fall of 2009, when Mr. Tourre learned that he had become a target of investigators for helping to sell a mortgage security called Abacus, he protested that he had not acted alone.

That fall, his lawyers drafted private responses to the S.E.C., maintaining that Mr. Tourre was part of a “collaborative effort” at Goldman, according to documents obtained by The New York Times. The lawyer added that the commission’s view of his role “would have Mr. Tourre engaged in a grand deception of practically everyone” involved in the mortgage deal.

Indeed, numerous other colleagues also worked on that mortgage security. And that deal was just one of nearly two dozen similar deals totaling $10.9 billion that Goldman devised from 2004 to 2007 — which in turn were similar to more than $100 billion of such securities deals created by other Wall Street firms during that period.

While Goldman paid $550 million last year to settle accusations that it had misled investors who bought the Abacus mortgage security, no other individuals at the bank have been named. Now, however, as criticism has grown about the lack of cases brought by regulators, the scope of the inquiries appears to be widening. The United States attorney general, Eric H. Holder Jr., has said publicly that his lawyers were reviewing possible charges against other Goldman officials in the wake of a Senate investigation that produced reams of documents detailing other questionable decisions that were made in the firm’s mortgage unit.

Be nice, but I’m not counting on it. The money party in DC is too powerful.

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Reader Interactions

39Comments

  1. 1.

    LGRooney

    June 1, 2011 at 10:20 am

    In other words, the sad sacks that we have as Senators run better investigations than our nation’s Attorney General and the offices he has at his disposal… and the SEC… and who else, combined?

    Geez, it almost seems like the fix is in.

  2. 2.

    Culture of Truth

    June 1, 2011 at 10:22 am

    maintaining that Mr. Tourre was part of a “collaborative effort” at Goldman

    NO! I’m shocked.

  3. 3.

    Han's Solo

    June 1, 2011 at 10:28 am

    He is a fall guy. I’m not saying he is innocent, but the idea that one person could put together these deals is ludicrous.

    If you are an accountant or lawyer in most cases your work receives many levels of review. I’d be amazed if Mr. Tourre’s job was any different.

    I can see why the Obama administration didn’t want to jail the heads of Wall Street immediately upon taking office. The financial market was hanging from a thread; the prosecutions of Wall Street bigwigs may have made things worse.

    We are past that point now. Should the creeps and crooks that crashed the global economy be jailed now it might actually help Wall Street.

    But really, more than prosecutions, what America (and the world) needs, imo, is truly tough regulations.

  4. 4.

    cat48

    June 1, 2011 at 10:30 am

    The Countrywide scumbags don’t count? Is it b/c they didn’t go to jail? Just millions in fines?

  5. 5.

    Tim Connor

    June 1, 2011 at 10:36 am

    Well to use one of your throw-off lines, I do blame Obama. This is the executive branch’s job, and Holder works for him. The “money party” can’t stop investigations if Obama wants them to proceed.

  6. 6.

    bkny

    June 1, 2011 at 10:37 am

    Tourre …. isn’t that french for sacrificial lamb…

  7. 7.

    jo6pac

    June 1, 2011 at 10:38 am

    I truely hope no banksters are hurt in this game, they might take their ball home and were would that leave Main Street? This will be fixed as soon as congresscritters and there counterparts change the laws.

  8. 8.

    David Hunt

    June 1, 2011 at 10:41 am

    @Culture of Truth:

    NO! I’m shocked.

    This story brings whole new levels to the phrase, “I am shocked, shocked to discover that gambling is going on at this establishment!”

    Your winnings, Captain.

  9. 9.

    The Dangerman

    June 1, 2011 at 10:41 am

    Don’t complain about the JOB CREATORS! Just watch as the JOB CREATORS create jobs (in China).

  10. 10.

    jeffreyw

    June 1, 2011 at 10:47 am

    Tourre Syndrome–Sufferers stare at (scape)goats and shout “Guilty“.

  11. 11.

    gypsy howell

    June 1, 2011 at 10:48 am

    I’m sure they can find some administrative assistants to round up. Because, you know, it’s the secretaries who really run the place.

  12. 12.

    Linda Featheringill

    June 1, 2011 at 10:49 am

    @bkny:

    Tourre …. isn’t that french for sacrificial lamb…

    :-)

  13. 13.

    JGabriel

    June 1, 2011 at 10:50 am

    If we’re not nice to the banksters, their feelings may get hurt. And then they’ll go to Galt’s Gulch and never hire a maid to clean up after them ever, ever again! And the economy will collapse!

    Oh Noez!

    .

  14. 14.

    Failure, Inc.

    June 1, 2011 at 10:51 am

    All I can hear in my brain is the little laugh and the guy saying “wipeout” – over and over again.

  15. 15.

    Biff Longbotham

    June 1, 2011 at 10:52 am

    Do as Hal Holbrook suggested and follow the money. Some bankster got a $30 million bonus for pushing bad paper? Shine the DOJ’s light of inquiry on that mofo. An ill- fitting DOC jumpsuit and some jailhouse lovin’ is what these criminals deserve.

  16. 16.

    JGabriel

    June 1, 2011 at 10:52 am

    @efgoldman:

    Pitchforks.

    And: Torches, Gibbets, and Hangman’s Platforms. These are a few of my favorite things.

    .

  17. 17.

    Villago Delenda Est

    June 1, 2011 at 10:52 am

    If this species is to survive, we must rid ourselves of the Ferengi among us.

    We will soon not have an option on this.

  18. 18.

    Southern Beale

    June 1, 2011 at 10:52 am

    Anyone watch “Too Big To Fail” on HBO? The line of the movie comes from Cynthia Nixon playing Treasury Dept. policy advisor Michele Davis. She begs Paulson to “take the stink” off the TARP bailout somehow, put some restrictions on how the money can be spent, anything. And Paulson (played by William Hurt) says they can’t, because the banks might not take the deal. And Nixon/Davis says something to the effect of: “We’re talking about saving the biggest banks in the country from going under by giving them $700 billion but we can’t put any restrictions on what they do with the money because THEY MIGHT NOT TAKE IT?!”

    Fucked up country we’ve got.

  19. 19.

    beltane

    June 1, 2011 at 10:54 am

    For your enjoyment, Calculated Risk has just posted some more very ugly economic data http://www.calculatedriskblog.com/2011/06/ism-manufacturing-index-declines-to-535.html

    It really does feel like 1914 in some ways, an arrogant old order unaware that they are dooming themselves. Who will be this century’s economic Gavrilo Princip?

  20. 20.

    Villago Delenda Est

    June 1, 2011 at 10:54 am

    @Biff Longbotham:

    In addition, be sure that every asset they have, to include any trust funds set up for their spawn, is confiscated.

  21. 21.

    bkny

    June 1, 2011 at 10:55 am

    Shine the DOJ’s light of inquiry on that mofo.

    not a chance under eric holder’s doj. however, the whistleblowers who reveal the criminal ongoings, er, business as usual…

  22. 22.

    BO_Bill

    June 1, 2011 at 10:58 am

    Mark Patterson, Goldman Sachs lobbyist, is Tim Geithner’s Chief of Staff, personally named by Barack, who will have no lobbyists in his Administration, because he is not like a puppet or anything (don’t tell him). Now, behold Arithmetic.

    $14 trillion used to be the value of American residential real estate. One half was mortgages, the other homeowner equity. Now there is less equity, but that is ours, so it is not that important. So anyway, $7 trillion in mortgage securities. Goldman Sachs was the primary originator, probably yielding 10% in fees.

    Goldman Sachs pays $550 million in fines. 10% of $7 trillion is $700 billion. Now $550 million divided by $700 billion is 0.0007, or about one tenth of one percent. Or maybe my Mathematics are really bad and it works out to a full percent or maybe two. Compare with your withholdings.

    Go Ron Paul.

  23. 23.

    4tehlulz

    June 1, 2011 at 11:00 am

    @beltane: We’ll never know. It will be some hedge/retirement/etc. fund manager that is the first to believe that default is inevitable.

    After that, the computers take over.

  24. 24.

    Pliny

    June 1, 2011 at 11:02 am

    @beltane:

    What we need is this century’s Pecora Commission, but we have about zero chance of getting it (under this President, at least).

    Pretty sad that basically our only chance is Eric Schneiderman, New York’s Attorney General, who appears to be actually interested in investigating and prosecuting, unlike the AG’s of EVERY OTHER STATE who were ready to strike up a deal with relatively miniscule fines.

  25. 25.

    beltane

    June 1, 2011 at 11:02 am

    @4tehlulz: Greece will also be very interesting to watch. The German banks seem to think they can repo the whole country to make good on the unpaid debt. As I said, it will be very interesting to watch.

  26. 26.

    kdaug

    June 1, 2011 at 11:04 am

    @Han’s Solo: 2nd term. Nothing to lose, baby.

    ETA: FDR served 12 years. Until he died. Term limits are a bitch in that they limit your options on the front end, but a blessing on the back end.

  27. 27.

    beltane

    June 1, 2011 at 11:06 am

    @Pliny: It’s really a global issue at this point. Goldman Sachs is the equivalent of the mighty Austro-Hungarian empire. Orderly change was possible back in 2008. Today, it will be of such a nature as to tear whole societies apart.

  28. 28.

    chopper

    June 1, 2011 at 11:11 am

    @BO_Bill:

    oh, baby.

  29. 29.

    Pliny

    June 1, 2011 at 11:12 am

    @beltane:

    Well since the next inevitable crash will happen sooner rather than later, maybe a worldwide depression will convince people to vote for someone who has an interest in regulating banks. Hell, maybe they’ll vote for someone who wants to nationalize them.

  30. 30.

    beltane

    June 1, 2011 at 11:17 am

    @Pliny: I have recently taken to browsing left-of-center European blogs. It seems they have abandoned their sosha-list parties and are moving on to demands for an Up Against The Wall party. Fun times.

    Our media can only go so far in distracting people with images of Anthony’s Weiner. Eventually, reality will overtake their stupid whorishness.

  31. 31.

    Nemesis

    June 1, 2011 at 11:21 am

    The Vampire Squid owns Capital Hill.

    Expect little more than tepid rhetoric.

  32. 32.

    Southern Beale

    June 1, 2011 at 11:41 am

    @BO_Bill:

    Go Ron Paul.

    Snort. Yeah, the guy who’s against any regulations of any kind, imagining the glorious free hand of the market will somehow make everything alright! Free market fairies save the day!

    There truly are no idiots more delusional than Libertoonian idiots.

  33. 33.

    Failure, Inc.

    June 1, 2011 at 11:42 am

    It seems they have abandoned their sosha-list parties and are moving on to demands for an Up Against The Wall party.

    @beltane: Going to have to start reading those, as that’s where I’m at now.

  34. 34.

    gypsy howell

    June 1, 2011 at 11:49 am

    @beltane:

    Got any links to the ones you like best? (In english would be most helpful)

  35. 35.

    central texas

    June 1, 2011 at 12:49 pm

    What are you complaining about? The AG is going after the truly important cases that you care so much about; John Edwards, for example.

  36. 36.

    JoeG

    June 1, 2011 at 1:06 pm

    US: meaningless corporate fines.

    China: semi-meaningless corporate fines and individual firing squads.

    why can’t we outsource this to China too?

  37. 37.

    AAA Bonds

    June 1, 2011 at 6:01 pm

    How?

    1) They needed someone to deflect attention, and
    2) this is America, so
    2) they picked the flamingest Frenchman they could find.

    I’m in love with

    he protested that he had not acted alone.

    You have to admit, if somehow he had done all of this without the help of the most important people on the Street, it would be pretty astounding. Completely unbelievable, even.

  38. 38.

    AAA Bonds

    June 1, 2011 at 6:06 pm

    @Pliny:

    Pretty sad that basically our only chance is Eric Schneiderman, New York’s Attorney General, who appears to be actually interested in investigating and prosecuting, unlike the AG’s of EVERY OTHER STATE who were ready to strike up a deal with relatively miniscule fines.

    Personally, I’m glad that this might become an enshrined responsibility of New York’s AG. I thought it was gone with Spitzer but Schneiderman stepped up.

  39. 39.

    AAA Bonds

    June 1, 2011 at 6:13 pm

    @Southern Beale:

    I couldn’t contain my rage at that point in the game. I was actually for as big a bailout as the government could muster – because I believed, and continue to believe, that the situation was analogous to the banks holding a gun to the head of the world economy.

    My plan was to give them everything they “needed” and then start handing out bench warrants on these obvious flight risks.

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