How Do You Say Scapegoat In French? “Fabulous Fab” Still The Only Target Of SEC Investigation Into Goldman Sach’s Mortgage Trading Operations

by:  Peter J. Gallagher

Several years after the start of the financial crisis, and the mortgage meltdown that caused it, only one individual, Fabrice Toure – a/k/a “Fabulous Fab,” his self-imposed moniker — has been sued by the SEC for selling the mortgage backed securities that created, or at the very least exacerbated, the crisis.  According to a recent piece in the New York Times,"SEC Case Stands Out Because It Stands Alone," Toure was an obscure trader for Goldman Sachs who was thrust into the national spotlight in 2010 when the SEC sued him for his role in creating and marketing Abacus, one of the many mortgage backed securities created by Goldman during the irrational exuberance of the early to mid 2000s.  (Abacus is interesting in its own right because it is one of the securities that was devised with the help of John Paulson, the hedge fund manager who famously made billions shorting mortgage backed securities like Abacus.)  As the article notes, the question many have raised is why Toure and why only Toure?

According to at least one former co-worker, Toure was a “junior” and “insignificant” member of a larger team at Goldman responsible for developing mortgage backed securities.  In their response to the SEC, Toure’s lawyers emphasized this point, identifying all of the other members of the team, and arguing that “singling Mr. Toure out for criticism regarding the content of this clearly collaborative effort is unreasonable.” For its part, the SEC has not explained why it focused on just one member of one team at one bank, and further on just one deal created by that bank.  However, as the article notes, recent increased interest from other regulators, including New York’s attorney general, indicates that this may not be the case for long, and the banks may soon be called upon to answer for their role in the crisis. 

 Finally, as interesting as Toure’s story is, equally interesting is the story behind how many of the documents that tell the story – including Toure’s non-public response to the SEC lawsuit – came to light.  The Times received them from an artist and filmmaker named Nancy Cohen who found the materials on a laptop given to her by a friend in 2006.  The friend told her that he found the laptop in a garbage can downtown.  Apparently, emails to Tourre continued “streaming into the device.”  While Cohen ignored them for years, she began paying attention when she learned about the SEC’s lawsuit, and subsequently gave the documents to the Times.