An investor named Paulson came to Goldman Sachs and said he would like to have a bond fund created that was certain to fail. A Goldman Sachs VP named Fabrice Tourre was given the task. Tourre turned to a lot of bonds that Goldman owned and stripped out the worst crap in them and bundled it all into a new bond he called Abacus. He then helped Paulson sell Abacus widely. Of course it failed and Paulson made millions of dollars.
But here is the part I like. In an email to a friend, Tourre said this about Abacus, it is "a product of pure intellectual masturbation that has no purpose" except of course to make Tourre rich. He was being paid over $2 Million at Goldman Sachs at the time, and he was just short of thirty years old.
Is it possible to believe that nobody at Goldman Sachs knew what this guy was doing? Try to imagine a scenario where that would be possible. Not likely.
So the alternative is Goldman Sachs management knew of this fraud and approved of it.
Take your choice.
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