Goldman Sachs and the “Fabulous Fab”

by Jacob Zamansky on April 16th, 2010 at 5:03 pm : Comments 000

Goldman Sachs’ first day of reckoning may be dawning.  Today the SEC filed charges that a hedge fund seeking to short the mortgage market helped Goldman Sachs build a product so toxic, it would collapse in the matter of months…a plan executed with precision.  The arrangement was not disclosed to investors, who are otherwise known as Goldman Sachs’ customers.

Though the victims in this case are institutional investors, the SEC’s allegation that Goldman Sachs withheld material information from its clients is as much about fraud as it is restitution for the millions of families whose nest eggs were destroyed because of Wall Street’s greed.

I’m heartened the SEC is finally taking a critical look at Goldman Sachs’ activities, but it’s noteworthy the only person named in the complaint is a pretty small fry, albeit one with an outsized ego.  His name is Fabrice Tourre, or the “fabulous Fab” as the 31 year-old banker likes to call himself.  ‘Fabulous Fab’ was a lowly vice president, and he was likely following the ethical direction and guidance of his superiors.

Nevertheless, the allegations against Goldman Sachs are devastating in that it confirms what everyone suspected: the firm has little regard for disclosure rules and thinks nothing of ripping off customers if the price is right.  So let’s hope the SEC is up to the challenge. Indeed, it’s one thing for the SEC to bring charges, but the real test will be if the agency has the talent, resources and resolve to take on the mighty and politically connected Goldman Sachs.

Regardless, a bigger worry for Goldman Sachs are the inevitable private lawsuits from investors.  Institutions that purchased Goldman Sachs’ allegedly fraudulent securities will be seeking recourse for billions in damages of investment losses.

On cue, Goldman Sachs’ much ridiculed PR apparatus responded to the SEC’s charges by saying that, “The SEC’s charges are completely unfounded in law and fact and we will vigorously contest them and defend the firm and its reputation.”

We’ll see about the charges, but as far as Goldman’s reputation, there’s not much to defend there.

Filed under SEC, Wall Street, fraud
and goldman sachs