In the second installment in our foray into amusing and amazing government documents, let’s look at two of the more jaw-dropping quotes from the months surrounding the financial crisis. The first is detailed in a series of 2010 hearings held by the Senate Permanent Subcommittee on Investigations.
“Ratings agencies continue to create and (sic) even bigger monster “the CDO (collateralized debt obligations) market. Let’s hope we are all wealthy and retired by the time this house of cards falters ;o”
That quote (winking emoticon in original) is from an internal Standard and Poor’s email from December 2006, Exhibit 27 on page 124 of the exhibits file [large PDF] from the subcommittee’s April 23, 2010 hearing, and also appears at footnote 8 of the SEC’s Summary Report of Issues Identified in the Commission Staff’s Examinations of Select Credit Ratings Agencies [PDF].
In his opening remarks, Subcommittee Chairman Carl Levin said that the documents showed that credit rating agencies had violated the public’s trust in the months and years prior to the financial meltdown:
“We used as case histories the two biggest credit rating agencies in the United States, Moody’s and Standard & Poor’s, and the ratings they gave to the key financial instruments that fueled the financial crisis: residential mortgage backed securities, or RMBS, and collateralized debt obligations, or CDOs. The Subcommittee investigation found that those credit rating agencies allowed Wall Street to impact their analysis, their independence, and their reputation for reliability. And they did it for the money.”
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Not to be outdone….
“More and more leverage in the system, l’edifice entier risqué de s’effondrer a tout moment {trans. – the whole structure about to collapse at any moment}… Seul survivant potentiel {trans. – Only potential survivor}, the fabulous Fab (as Mitch would kindly call me, even though there
is nothing fabulous abt me, just kindness, altruism and <redacted>), standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstruosities (sic) !!! Anyway, not feeling too guilty about this, the real purpose of my job is to make capital markets more efficient and ultimately provide the US consumer with more efficient ways to leverage and finance himself, so there is a humble, noble and ethical reason for my job
amazing how good I am in convincing myself !!!”
That was Fabricio “Fabulous Fab” Tourre of Goldman Sachs, as quoted in Exhibit 62, page 267 of the same exhibits file (winking emoticon again in original), and also in the Securities and Exchange Commission complaint [PDF] alleging that Goldman committed securities fraud by misleading investors in early 2007, in violation of the Securities Act of 1933 and the Securities Exchange Act of 1934.
On August 1, 2013, Tourre was found liable for fraud on six of the seven charges brought by the SEC. The case is SEC v. Tourre, U.S. District Court, Southern District of New York, No. 10-03229. Background information on the case is available on the SEC website.
Photos by Quinn Dombrowski, sculpture on display at the University of Chicago in 2010
