Wall Street's Mr. Fabu-less

By Dana Milbank
Wednesday, April 28, 2010; A02

Fabulous Fab was having another less-than-fabulous day.

Goldman Sachs whiz kid Fabrice Tourre is fast becoming the poster boy of the financial crisis, a Michael Milken for the current times. Last week, the SEC filed fraud charges against Goldman Sachs and the 31-year-old Frenchman who calls himself Fabulous Fab. And on Tuesday, Fabulous sat before a Senate panel that wanted to know how he helped a hedge-fund tycoon make a billion dollars by dumping worthless mortgage securities on unsuspecting Goldman customers and then betting against those same securities -- all the while accelerating the burst of the housing bubble and the downfall of the world economy.

"The whole building is about to collapse anytime now," Fabulous wrote in one of the e-mails that have come to light. "Only potential survivor, the fabulous Fab . . . standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstruosities!!!"

Fabulous, in an e-mail from 2007, described the mortgage business as "totally dead, and the poor little subprime borrowers will not last too long!!!" Yet two months later, he boasted that he had managed to dump some more of the worthless mortgage securities on "widows and orphans that I ran into at the airport."

Now Tourre is a triple-exclamation-point "monstruosity" himself -- and, in true Goldman form, he made few apologies as he testified before the Senate investigators on Tuesday. "I deny categorically the SEC's allegations," said Fabulous, short, slight and looking as though he were on a break from prep school. "I will defend myself in court against these false claims."

Yes, the e-mails were problematic. "I regret these. . . . I wish I hadn't sent those." In his French accent, it came out more like "regret zeez" and "sent doze."

But that was the extent of Fabulous Fab's regrets. "I firmly believe that my conduct was correct," he testified.

Fab's arrogance, and that of his Goldman colleagues who also testified, bested previous displays of hubris by the automotive, oil and tobacco industries. Goldman won't be done in by new congressional regulations or the SEC claims (though both will have more sympathy after Tuesday's performance), but the firm will be in big trouble if customers realize how brazenly Goldman has been abusing them.

The testimony was so maddening that Sen. Carl Levin (D-Mich.), chairman of the Senate Permanent Subcommittee on Investigations, was moved to utter phrases not suitable for a general audience. Twelve times he used a word that rhymes with "ditty" and has to do with what would be called "la merde" in Fabulous Fab's native tongue.

"Look what your sales team was saying about Timberwolf: 'Boy, that Timberwolf was one [censored] deal,' " Levin quoted. "They sold that [censored] deal. . . . How much of that [censored] deal did you sell to your clients?" Pardon his French.

One of the Goldman masters of the universe, Michael Swenson, couldn't even be troubled to learn the pronunciation of the ranking Republican's name. He called Sen. Tom Coburn (Okla.) "Cobourne."

Coburn asked who made the decision on one of Goldman's bets against mortgage securities.

"We worked as a team," replied former Goldman official Joshua Birnbaum, another insolent young man on the panel.

"Who led the team?" Coburn asked -- twice.

"Are you implying," Birnbaum said haughtily, "that you can only have one person leading teams?"

After another tangle, Coburn told Birnbaum his answer was "inappropriate, and it's also discourteous to us. We're not that stupid."

The Goldman men found themselves blameless in the bursting of the bubble they helped to inflate.

"I do not think that we did anything wrong," Swenson said.

"I don't have regrets about doing things that I think were improper," said Daniel Sparks, head of the mortgage unit.

Sen. Jon Tester (D-Mont.) asked when they became "convinced that there was a housing bubble on the verge of collapse."

"I don't believe I used those words," Birnbaum replied with disdain. "That's how you put it," he added.

Senators on both sides were appalled by Goldman and its witnesses. The usually mild Sen. Susan Collins (R-Maine) spoke of "unscrupulous operators who seek to profit from the public's misfortune."

"You think you're so smart?" challenged Sen. Claire McCaskill (D-Mo.). "Any street gambler would never place a bet with a bookie or a house with the record that is revealed in the documents."

"I'd like to avoid the betting analogy," Sparks said reproachfully.

And Fabulous wanted to avoid the whole thing. The poor misunderstood millionaire complained that "the last week has been challenging for me and my family, as I have been the target of unfounded attacks."

Unfounded? Did he tell the clients he sold the worthless mortgage securities to that the portfolio had been designed by somebody who was shorting those same securities?

"I don't specifically remember the words I used," Fabulous said.

How much of the worthless portfolio was selected by the man who was shorting it?

"I don't remember," he said.

What about his previous claim that the doomed portfolio had been "selected and mutually agreed" with the client that bought it?

"It's not very accurate," he admitted.

The SEC probably will not rate that a fabulous answer.

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