I haven’t been following Fabrice Tourre’s trial all that closely but I gather that the main evidence against him is that a Goldman saleswoman, Gail Kreitman, told her client ACA Capital Management that Paulson & Co. was going to be a long investor in a CDO called Abacus. That turned out to be false, and arguably in a material and fraudy way. So: why isn’t the SEC suing Gail Kreitman? Well, because someone told her that that it was true, and there’s at least, like, a 60/40 chance that that someone was Fab. Because he was pretty competent: Read more »
The decision to call former Goldman saleswoman Gail Kreitman out of order comes a day after a combative back and forth between the SEC and one of its top witnesses: Paolo Pellegrini, a former lieutenant to billionaire hedge-fund manager John Paulson. Her testimony is important because she may be the first witness to link Mr. Tourre to statements made to ACA Financial Guaranty Corp., which acted as the portfolio-selection agent on the transaction. The SEC has alleged that Mr. Tourre hid from ACA that Mr. Paulson’s hedge fund, Paulson & Co., planned to bet against the deal. As part of her testimony, the SEC is expected to play a tape recorded by ACA’s phone system in which Ms. Kreitman reportedly says that Paulson was taking a “hundred percent of the equity” in the deal, implying it was betting the instrument’s value would rise, not fall…Matthew Martens, a SEC lawyer, said Thursday that the regulator decided to change the order of its witnesses in an effort to speed the presentation of its case. The SEC is considering limiting the testimony of or not calling at all David Gerst, one of Mr. Tourre’s closest colleagues at Goldman, Mr. Martens said. Mr. Gerst had been expected to testify as early as Thursday. The late notice didn’t make the defense happy: they said the parties had reached a handshake agreement to give the other side 48 hours notice before a witness was called. [WSJ]
Goldman Sachs Director Who Waited But 23 Second Before Passing On Material Non-Public Information About Bank To Hedge Fund Manager Not Allowed To Be A Director AnymoreBy Bess Levin
Which seems fair? Read more »
Everybody Wants Somea This
Harvey Schwartz, Goldman’s CFO, said the firm is suddenly experiencing some “recruiting tailwinds”, with more people wanting to work there…At the same time, Schwartz said Goldman’s staff are still very much in demand to work elsewhere, claiming that “Goldman Sachs people are always in high demand and our competitors are always looking to take them over to their firms.” [eFinancial]
GS had earnings today and I guess they weren’t that good but all anyone ever wants to talk about on earnings calls these days is leverage ratios. That I suppose is a sociologically interesting fact: is banking a business of selling stocks and bonds and loans and whatnot, or is it a business of optimizing yourself around regulation? You can tell what the analysts think, though I suppose that’s like a second derivative; they want to add value to whatever was already obvious to the market. The stock price dropped on, like, not selling enough stocks and bonds and whatnot. Or rather: on making too much money from owning stocks and bonds with Goldman’s own capital, and too little on doing more obviously Volcker-compliant-y things. So: still sort of a regulatory question I guess.
But, yeah, all the analysts want to talk about is leverage ratios, and you know who does not want to talk about leverage ratios is Harvey Schwartz. Delightfully someone at Reuters counted the number of times he was asked to quantify Goldman’s leverage ratio (eight1) and the number of times he did (zero). He said he was “comfortable” with it, which presumably means that GS will be above 5% by 2018 assuming some rates – possibly at, above, or below the current rates – of capital generation and capital return. But they haven’t done the math yet.
Which is curious? Read more »
The firm probably employs at least a handful of people who drink themselves into oblivion multiple nights a week as a coping mechanism for dealing with professional unhappiness but the unidentified male who knocked back a few too many last Friday night, took a stroll through the West Village, chatted up a young lady outside Benny’s Burritos, stumbled into some outdoor tables, and reportedly acted like a racist prick toward the person offering him help before getting himself knocked out apparently isn’t one of them. Read more »
Fabulous Fab Tourre is on his way to trial in the SEC’s securities-fraud lawsuit over the Abacus synthetic CDO he built at Goldman Sachs for John Paulson, and Andrew Ross Sorkin has a column today about all the things that the SEC doesn’t want him to be allowed to say to the jury. You should read it, it’s enraging, though who you get enraged at is entirely up to you.1 But I’ll give you a quick and tendentious summary, which is:
- The SEC’s main argument is that Fab deceived ACA, the “portfolio selection agent” on the Abacus deal, and
- ACA were sort of stupid scumbags, and
- the SEC understandably doesn’t want the jury to find that out.