The Feds vs. Goldman

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Goldman even kept its own collateral manager – a well-known and respectable company called ACA – in the dark. The bank hired the firm to approve the bad mortgages being selected by Paulson, but never bothered to tell ACA that Paulson was actually betting against the deal. ACA thought Paulson was long, when actually he was short. That led to the awful comedy of ACA staffers holding meeting after meeting with Goldman and Paulson, and continually coming away confused as to why their supposedly canny financial partners kept kicking any decent mortgage out of the deal. In one ACA internal e-mail, the company wonders aloud why Paulson excluded mortgages issued by Wells Fargo – a bank that traditionally created high-quality mortgages. "Did [they] give a reason why they kicked out all the Wells deals?" the quizzical e-mail reads.

The climactic scene of this absurd vaudeville came on February 2nd, 2007, when Goldman vice president Fabrice Tourre – a French-born slimeball who would be the only Goldman individual named in the suit – showed up with Paulson & Co. at ACA's New York offices. At this meeting, both Paulson's people and Tourre presumably pretended, for the benefit of their sucker partner ACA, that they were putting together a deal they actually believed in. One has to imagine Tourre and the Paulson contingent overacting with Shatnerian intensity to convince the numbskull ACA guys that they really, really thought subprime mortgages lent out to exurban Floridians with shit credit scores were awesome investments. During the meeting, Tourre sent a damning e-mail to another Goldman staffer: "I am at this aca paulson meeting, this is surreal."

Tourre would brag in other e-mails that while the housing market was about to blow up, his fabulous French self would be left standing in a pile of money when it was all over. "More and more leverage in the system," he wrote. "The whole building is about to collapse anytime now. . . . Only potential survivor, the fabulous Fab . . . standing in the middle of all these complex, highly leveraged, exotic trades he created!"

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These flighty Tourre e-mails boasting of cashing in on a disaster and chuckling over the "surreal" experience of power-lying right in the face of a business partner are Goldman's very own Ben Roethlisberger drunken dick-waving moment. It is hard to imagine any company from now on doing business with Goldman and not picturing its fruitcake executives text-boasting to each other about the pleasures of screwing over their own clients.

Goldman has issued three denials with regard to the SEC charges. The first was a very curt "this is all bullshit" press release, issued on the day the complaint came out, in which it called the charges "completely unfounded in law."

Then, after their PR people had a few minutes to think about things, Goldman issued a second release claiming that it lost $90 million on the deal, and therefore couldn't have been doing anything wrong. While this may be true – and we only have their word for it that it is – who the hell cares? What Goldman is being accused of is lying to its clients. How much money they did or didn't make is totally irrelevant. In fact, if Goldman really did lose money knowing what they knew about this deal, all that proves is that they're morons as well as sleazebags.

The third press release paved the way for the inevitable deployment of the Dr. Richard Kimble/one-armed-man defense – i.e., that Fabrice Tourre did it all, acting alone. "Goldman Sachs would never condone one of its employees misleading anyone," the release insisted. "Were there ever to emerge credible evidence that such behavior indeed occurred here, we would be the first to condemn it and to take all appropriate actions."

So within the space of a few days, Goldman issued three different explanations, which progressed from (a) we absolutely, positively didn't do it, to (b) if we did do it, we didn't make any money doing it, and finally on to (c) if somebody did it, it was only that French cat Tourre, and here's his head if you want it. These guys couldn't find the truth if it was sitting in their
lap playing the ukulele, and that's the basic problem that the entire financial-services sector – an industry that requires trust and confidence to thrive – is struggling to overcome.

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Matt Taibbi

Matt Taibbi is a contributing editor for Rolling Stone. He’s the author of five books and a winner of the National Magazine Award for commentary. Please direct all media requests to taibbimedia@yahoo.com.