Category: Tourre, Fabrice


Watching the SEC victory celebration last week, one may think that Fabrice Tourre, a 34-year old Frenchman, now a Ph.D. student at the University of Chicago, almost single-handedly caused the 2008 global financial crisis. In reality, Tourre was a minor player merely trying to advance his career. He was one of many employees in the structured finance division of Goldman Sachs. If Tourre did not follow orders, he was likely to be fired.

Abacus, the toxic security at the center of the civil suit brought by the SEC, was designed in cooperation with John Paulson, the hedge fund billionaire. Tourre described it as a “monstrosity.” The security blew up as intended, to the benefit of Mr. Paulson, with IKB Deutsche Industriebank of Germany as one of the big losers. No senior executive at Goldman has been charged, either by the SEC or the U.S. Justice Department. In a settlement with the SEC, Goldman’s shareholders (or is it, the U.S. taxpayers?) paid $550 million to let the firm and its CEO, Lloyd Blankfein, walk free.

Goldman Sachs put Tourre in a moral dilemma. In retrospect, it seems that Mr. Tourre’s main crimes were that he was born in France, therefore an unpopular defendant, easy to bring down, and that he had some (but surely insufficient) moral scruples. In deeply sarcastic e-mails that became his downfall, the young man, still fresh out of Stanford University, repeated the sham argument that “the real purpose” of his job was “to make capital markets more efficient and ultimately provide the U.S. consumer with more efficient ways to leverage and finance himself.” So, Tourre joked with his girlfriend, he “did not feel too guilty.”

The SEC’s courtroom victory does nothing to remedy structural immorality inside too-big-to-fail U.S. financial institutions. Yet, poor regulatory oversight and enforcement have greatly contributed to the economic crisis. People around the world will also read the Tourre verdict as one more black eye for the U.S. system of “justice.” Evidently, in America, the powerful architects of evil —in business and government— are forgiven, and receive endless second chances, while the (relatively) powerless are held accountable to the full extent of the law.