London-based Goldman Sachs Vice President Fabrice Tourre and the firm which employed him are the focus of a civil lawsuit by the Securities and Exchange Commission for fraud. Fabrice Tourre allegedly packaged Credit Default Swaps (CDS) against the very same subprime mortgage-backed securities he created.
In other words, Fabrice Tourre both created a debt instrument that he allegedly knew was risky, then set up insurance - the CDS - to make money when it failed.
So if you were one of the people Fabrice Tourre convinced to buy into his securities, you were set up for a big fall while he walked away with the cash. That's the focus of the SEC's lawsuit.
But who is Fabrice Tourre? According to The Huffington Post, Fabrice Tourre's a Stanford grad from France who's worked on Wall Street in New York and for Goldman since 2001. Proud of his achievement in creating the CDS at issue, he referred to himself as "The Fabulous Fab" in an email to a friend on January 23, 2007.
Fabrice Tourre's LinkedIn profile shows he has 95 connections and received his bachelor's degree in Mathematics from Ecole Centrale Paris in 2000, then his MS in Operations Research (a cousin of systems theory and system dynamics, of which this blogger's a expert in) from Stanford in 2001.
In the interest of full disclosure, this blogger is indirectly connected to Fabrice Tourre via 68 connections on LinkedIn but as of this writing as not met or corresponded with Fabrice Tourre. (I have almost 2,000 LinkedIn connections.)
If you want to learn more about CDS and how they work from a basic perspective, look at this online slide explanation that's based on Michael Lewis' book The Big Short with a click here: CDS Scandal.
In closing, as a counter to those who may fall back on the rather empty charge that mortgage loans were given to people who should not have them, a claim that when expanded has the tinge of racism, the fact is no one can pay a loan without a job. The rise in jobs loss caused the subprime loan problem.
Stay tuned.
It makes me sick that these people got away with scaming so many people. I hope they get convictions, and those convictions lead to changes that make sure this type of thing never happens again.
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