Americans have a decided knack for transforming news into grand film spectacles. Dollars by the billion, a hair-raising cast: The battle that for several days has pitted the Securities and Exchange Commission (SEC), the police of the American stock exchange, against the directors of Goldman Sachs, the most powerful bank in the world, is already number one at the box office of the biggest political-financial deals.
This Tuesday’s audition of the CEO of the bank, Lloyd Blankfein, and five other leaders, including the Frenchman Fabrice Tourre, by the Senate subcommittee charged with investigating the financial crisis, seems very promising. Since last weekend, the Senate has upped the tension by making public some emails that are embarrassing for the leaders of Goldman Sachs. To simplify, let’s say that the leaders of the bank are accused of considerably enriching themselves to the detriment of their clients by encouraging them to invest in a real estate market that they knew was on the brink of collapse. They bet on the fall of derivative products that they nonetheless sold to their clients.
What’s fascinating about reading these emails is the simple fact that they exist: that nobody warned these bankers, reputed to be the world’s most powerful, most intelligent and best informed, that what they wrote risked ending up one day in the hands of American justice.
“Of course we didn’t dodge the mortgage mess. We lost money, then made more than we lost because of shorts,” noted Mr. Blankfein in November 2007. What to say of Fabrice Tourre’s emails, the famous “Fabulous Fab” who, for several days now, has been making headlines? On Jan. 29, 2007, he wrote this: “It’s bizarre I have the sensation of coming each day to work and re-living the same agony — a little like a bad dream that repeats itself…In sum, I’m trading a product which a month ago was worth $100 and which today is only worth $93 and which on average is losing 25 cents a day…That doesn’t seem like a lot but when you take into account that we buy and sell these things that have nominal amounts that are worth billions, well it adds up to a lot of money. When I think that I had some input into the creation of this product (which by the way is 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?’) it sickens the heart to see it shot down in mid-flight…It’s a little like Frankenstein turning against his own inventor ;)”
Instructive, isn’t it? The latest news is that in most of the big international banks, instructions have been given to be very vigilant about the content of emails…
Nicely said, I do tend to like the french articles a bit more 😉