Fabrice Tourre, the Goldman Sachs Group Inc. executive director who predicted in 2007 he would be “standing in the middle” as subprime securities collapsed, will be the center of attention on Wall Street today.
Equities volume may suffer as investors tune in for Tourre’s appearance before the Senate Permanent Subcommittee on Investigations sometime after 10 a.m. in Washington. Tiger Woods’ Feb. 19 press conference on his marital troubles pushed New York Stock Exchange trading to the lowest level of the day.
Tourre’s testimony will be even more compelling for markets because he works for the world’s most-profitable securities firm, said Frank Ingarra, a Stamford, Connecticut-based money manager at Hennessy Advisors Inc. The Securities and Exchange Commission sued New York-based Goldman Sachs and Tourre for fraud on April 16, saying they misled investors about a collateralized debt obligation sold in 2007 as the subprime- mortgage boom was ending.
“It will be a very interesting spectacle,” said Ingarra, who helps oversee about $1 billion. “If you’re a betting person, you have to give Goldman Sachs an advantage. It’s going to be very challenging for the government.”
The saga has mesmerized Wall Street since the suit was publicized April 16. Trading volume on all U.S. stock exchanges jumped to 13.9 billion shares that day, the most since May, boosted also by the expiration of options contracts.
U.S. Senator Carl Levin, a Michigan Democrat who leads the Senate panel, released e-mails and other documents yesterday that he said show “Goldman repeatedly put its own interest and profit ahead of the interests of its clients.”
Tourre, Blankfein Speak
The documents set up a showdown on Capitol Hill today between Levin’s panel and seven current and former Goldman Sachs employees. Chief Executive Officer Lloyd Blankfein, 55, and Tourre, 31, are among those set to answer questions.
The subcommittee estimated that Goldman Sachs generated $3.7 billion from its short bets on a declining mortgage market in 2007, Levin said. The figure doesn’t take into account losses they suffered on mortgage-related securities they held, he said.
Blankfein will tell the committee that the firm didn’t wager against clients and didn’t make a big bet against the housing market, according to the prepared text of his remarks.
“As hard as Lloyd Blankfein tries to put Goldman in a good light, it’s going to end up being pretty negative for their reputation,” said Michael James, a managing director at Wedbush Morgan Securities in Los Angeles. “The stock’s been under pressure since the news came out, and don’t expect that to change in the short term.”
$17.5 Billion Lost
Goldman Sachs plunged 13 percent to $160.70 on April 16, the biggest drop since January 2009, and closed yesterday at an 11-week low of $152.03. The lawsuit wiped out $17.5 billion from the company’s market value.
As other banks struggled throughout the financial crisis, Goldman Sachs posted record earnings of $11.6 billion in 2007 and set a new all-time high of $13.4 billion in 2009. Blankfein, whose $67.9 million bonus in 2007 was a record for a Wall Street CEO, received a $9 million all-stock bonus for last year.
In the minute that Woods began his speech to apologize for infidelity on Feb. 19, NYSE volume fell to about 1 million shares, the lowest level of the day at the time. Trading shot to about 6 million shares when the golfer’s appearance ended, the highest for any period except just after exchanges opened, data compiled by Bloomberg show.
“My TV will be on,” Joseph Saluzzi, co-head of equity trading at Chatham, New Jersey-based Themis Trading LLC, said of today’s hearings. “It may be interesting and funny.”