A Message to Wall Street’s Fabulous Fabs.doc

A Message to Wall Street?s Fabulous Fabs BusinessWeek, April 26, 2010 If you happen to be sitting on theGoldman Sachs bond-trading floor, lifemust feel horribly unfair. You did noth-ing worse than live by the ethical as-sumptions of your market-any mon-ey-making event short of obviously ille-gal is admirable-and now your owngrandfather thinks you’re some kind ofmonster. Your world feels upside down.What was right is now wrong, what wasgood is now bad, what once felt likewinning now feels like losing. You’reprobably wondering: What next? Whatwill the angry rabble-all those ordinarypeople who can never really understandyour business-now demand that youexplain to them, so they can disapproveof you all over again? Here, for a start, is what the worldbeyond Wall Street is entitled to: Full knowledge of the inner work-ings of your proprietary trading desk. Inparticular, the moment-to-moment deal-ings of your correlations traders fromlate 2004, when they first exploitedAIG’s idiotic willingness to sell cheap in-suranee on pools of subprime mortgageloans, until the end of 2007, when theywould have taken most of their profitsfrom the total collapse of the subprimebond markets. Your bosses claim to have lost $100million or more on the Abacus trade forwhich your firm is being sued. Thisseems, to put it mildly, disingenuous. InMarch 2007, the time of this particularAbacus trade, your prop traders were al-ready short the subpfime market. Wouldthey really have taken a naked long posi-tion in a deal you helped to constructprecisely so that it would fail, withoutoffsetting in some other way on theirbooks? Sadly, it will not suffice to offer upFabriee Tourre as a ritual sacrifice. Noone is going to accept a then-27-year-oldFrenchman, whose job was apparently tokeep sweet the patsies on the other endof your trades, as the world’s authorityon your trading positions. His name isn teven on the top of the list of Goldmantraders on the $2 billion Abacus deal forwhich you