Fabrice Tourre has led a life most mathematicians can only dream about – ski trips to fancy resorts, a $2-million annual salary and at least a couple of girlfriends in exotic European cities.
Until last week, few people had ever heard of Mr. Tourre, a 31-year old executive at Goldman Sachs GS-N who is based in London and spends most of his time constructing complex investment products for institutional investors.
But he has now become the face of everything politicians, regulators and critics find wrong with Goldman Sachs and what they say is the firm’s role in the economic meltdown.
Mr. Tourre’s conduct has been called “intolerable” and “unethical” by a host of critics, including several powerful U.S. senators, and he is at the centre of a lawsuit filed by the U.S. Securities and Exchange Commission involving allegations Goldman misled investors about a mortgage-backed security Mr. Tourre created in 2007.
Mr. Tourre said he categorically denies the SEC’s allegations and stands by Goldman’s actions.
“I firmly believe that my conduct was correct,” he told a Senate committee hearing yesterday. “I take full responsibility for my actions. I am saddened and humbled by what happened to the [housing] market in 2007 and 2008. … But I believe my conduct was proper.”
Mr. Tourre grew up in Paris and has been at Goldman since 2001, joining the firm after studying mathematics at France’s prestigious École Générale de Paris and Stanford University. He rose quickly through the ranks and landed at the centre of the firm’s mortgage-backed security business in 2004 – just as the U.S. housing market was taking off.
His job was fairly straight forward. He helped large institutions take positions in the housing sector by creating customized collateralized debt obligations, essentially collections of residential mortgages. The institutions could then take long or short positions on the products.
The CDOs “permit sophisticated institutions to customize the exposures they wish to take in order to better manage the credit and market risks of their investment holdings,” Mr. Tourre told the committee.
But Mr. Tourre was much more than a faceless math whiz toiling away in the rarefied world of synthetic CDOs, at least according to stacks of internal e-mails released by the SEC and the Senate committee. Those e-mails portray a romantic high roller who questioned his work and had doubts about his future.
In one e-mail sent to a girlfriend in January, 2007, he lamented that he had to “mentor others, in view of the fact that I am now considered a ‘dinosaur’ … I feel like I’m losing my mind and I’m only 28!!! OK, I’ve decided two more years of work and I’m retiring.”
In another e-mail to her sent at around the same time, Mr. Tourre called his work “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?”
In a March, 2007, e-mail sent to another girlfriend he mentioned that his boss, Daniel Sparks, the former head of Goldman’s mortgages department, believed “that business is totally dead, and the poor little subprime borrowers will not last so long!!!”
Many of the e-mails go on at length about his love for the women and his problems at work. His signed some “Kisses” and others “Fab.”
Yesterday, Mr. Tourre said he regretted sending the e-mails, many of which were released by Goldman Sachs.
“They reflect very bad on the firm and myself. I wish I hadn’t sent them,” he said.
When asked how he felt about Goldman releasing some of them, Mr. Tourre simply repeated that he wished he’d never sent them.
For much of yesterday’s hearing, Mr. Tourre looked calm and confident, even as a group of protesters called for him to be jailed and as senator after senator criticized his actions.
He became briefly flustered when committee chairman, Senator Carl Levin, picked apart some of his e-mails about the CDO at issue in the SEC case, pointing out several inconsistencies. Mr. Tourre acknowledged that he could have been “more accurate” in some of the e-mails and that he wrote one e-mail too quickly, leaving out key details. But he kept up his defence of the CDO and denied any wrongdoing.
As the back and forth continued, Mr. Levin became increasingly frustrated. He finally ended one round of questioning by cutting off Mr. Tourre and snapping: “I think you’ve not answered the question the best you can.”
