In a prepared statement released prior to todayÃ¢â‚¬â„¢s scheduled testimony to the US Senate, Fabrice Tourre, the Goldman Sachs director at the center of the SECÃ¢â‚¬â„¢s investigation into the role Goldman Sachs played in the CDO fiasco, will deny all allegations of misrepresentation. Tourre is the only Goldman Sachs employee so far included in the fraud charges against the Wall Street giant.
Referring to himself as the Ã¢â‚¬Å“FabÃ¢â‚¬Â Tourre in a number of emails released shortly after the indictment was announced, the tone of TourreÃ¢â‚¬â„¢s emails suggest that he was fully aware of the likelihood that the CDO offering would lose money. In an email dated January 27, 2007, Tourre sent the following email to a friend:
More and more leverage in the system, the whole building is about to collapse now. Only potential survivor, the Fab Tourre standing in the middle of all those complex, highly-leveraged exotic trades he created without necessarily understand all of the implications of those monstrosities.
The centerpiece of the SECÃ¢â‚¬â„¢s charge against Goldman and Tourre is that Tourre neglected to reveal the extent to which hedge fund manager Paulson & Co. was involved in engineering a CDO linked to subprime mortgages. The SEC further alleges that Tourre knew that Paulson was betting against the subprime market, and planned to short the CDO, and despite having this information, he actually told investors that Paulson was planning to take an equity position in the CDO.
In addition to Tourre, several high-ranking Goldman Sachs executives, including Chairman and Chief Executive Officer Lloyd Blankfein are scheduled to appear before the Senate Subcommittee. According to a prepared statement, Blankfein will tell the Subcommittee that Goldman Sachs did not attempt to profit by deliberately betting against its clients, and that Goldman Ã¢â‚¬Å“didnÃ¢â‚¬â„¢t have a massive short against the housing marketÃ¢â‚¬Â.