Goldman's Stooge


Let’s put the fraud charges against Goldman Sachs and its employee, Fabrice Tourre, in perspective. Because unlike Fabrice, I think it stinks.

Mr. Tourre is a trader and vice president in London for the bank. He is one of many hundreds of vice presidents sitting in cubicles around the world for Goldman Sachs.

To believe this 31-year-old trader was acting alone within the firm that created this scheme is unbelievable.

Similar to Mr. Jerome Kerviel of Société Générale and his rouge $3.7 billion stock trades in late 2007.

Mr. Tourre is being hung out by the firm as the force behind the trade. It is alleged that Mr. Tourre set up a fund with subprime derivatives in collabration with hedge fund maven John Paulson for investors.

Mr. Paulson is the subject of a book, “The Greatest Trade Ever: The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial History,” by Gregory Zuckerman, detailing how he made a killing in the market by going short on these same subprime derivatives.

So the fraud was that Goldman was setting up an subprime investor fund with a person who choose the derivatives in the fund and who was going to short this same fund.

And all this was set up by a 31-year-old trader from London who just happen to have Paulson’s contact information and conspired with him to set up this house of cards, with no Managing Directors or other management being aware.

Sounds very incredulous to me.

Additional context: This week Washington is revving up its financial reform circus, what better way for the Securities and Exchange Commission to prove its worth then by trotting out a big fraud case against the new Anti-Christ, Goldman Sachs.

Rumors were also rife in the market on Friday morning that Goldman had huge short positions in the S&P futures and its own stock as word filtered through the firm that the SEC charges were about to be filed.

The prop desk guys would score huge on the firm’s indictment, which is a further indictment on the firm.

Gold fingers

As whistleblower Andrew Maguire told me last week, JPM and HSBC will use news events to take down the precious metals markets.

Well Friday was a banner day for that. Gold lost more than $23 and silver was down more than $0.75. Now with the possible exception that John Paulson has a large Gold ETF position, there really should have been little downward movement in the precious metals.

But it appears the SEC’s action was good for the dollar and the 10-year yield moved lower which had a cascading effect in the metals pits. It just gets curiouser and curiouser.

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