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April 27, 2010

Goldman's Fab Fabrice: Schemer or dreamer? | Reuters

Goldman's Fab Fabrice: Schemer or dreamer?

Mon, Apr 26 2010

By Lionel Laurent and Nina Sovich

PARIS (Reuters) - Goldman Sachs banker Fabrice Tourre stands accused of being the latest scheming, morally bankrupt face of the banking industry. The 31-year-old Frenchman may in fact be much more ordinary.

Tourre will testify before the U.S. Senate on Tuesday. He is the only Goldman employee named in a fraud charge against the bank itself over the way a complex financial product was created and marketed.

The way he presents himself could have a lasting impact on the future of the world's most powerful investment bank and help set the tone for the financial reform currently winding its way through Congress.

A product of France's elite schooling system, Tourre made clear in emails to his girlfriend as the financial crisis took shape that he was conscious of the destructive power of the complex credit products he peddled.

The 2007 emails, some released by his accusers the Securities and Exchange Commission (SEC) and others by his employer, show the then 28 year-old Fabrice mixing love talk with the prospects for the subprime lending on which the products he sold were based -- often in a mix of French and English.

In one series, in which he entreats Frenchwoman Marine Serres to "wake up gently my love," Tourre also predicts that "les pauvres petits (poor little) subprime borrowers vont pas faire de vieux os" -- which means they won't last long.

He also considers in sober terms the prospect of moving from New York to a new job in London as a way to avoid the total collapse of the sector.

The words of "Fab Fabrice" -- as he calls himself in one email released by the SEC -- might as easily be those of a cautious, if ambitious, young man as those of the high-rolling risk taker characterized by tabloid newspaper reports.

NO PARTY ANIMAL

Friends say the Tourre who made his way out of middle class Parisian suburbs into Ecole Centrale de Paris, one of the elite universities of France, was modest and diligent.

He rarely went to parties and was not sure whether he wanted to enter finance. He played football and studied hard.

"Other people, when they get into Centrale, take their foot off the accelerator. Not Fabrice Tourre," said one.

Tourre entered the highly competitive Louis-le-Grand school in Paris in his late teens. Louis-le-Grand churns out students who go on to pull France's political, intellectual and economic levers. Alumni include the 18th century revolutionary Maximilien de Robespierre, writer and libertine the Marquis de Sade, and former president Jacques Chirac.

The school, targeted by Goldman Sachs for trainee programs according to one source close to the establishment, was strictly for the very hard working.

"(Louis-le-Grand) is to this day the most stressful, intense and terrifying experience of my life," said one former student.

"No-one had a social life. No-one had a girlfriend. No-one thought you would ever have a job where you talked to another human being."

Tourre went from there to the Ecole Centrale, one of the country's top "Grandes Ecoles" which turns out students focused on concepts and mathematical equations -- ideal fodder for the financial sector.

"Look at the profile of French financiers in the City of London or in New York, in general they have all studied at a "grande ecole', whether an engineering school, business school or Sciences Po (political science)," said Stephane Rambosson, managing partner at advisory and search firm Veni Partners.

This focus on quantitative skills is evident too in Tourre's emails. Even as he seems aware that he has created a financial instrument that could come crashing down, he marvels at its conceptual applications.

In one email he calls the product "pure intellectual masturbation" and "something absolutely conceptual and highly theoretical."

Still, his emails reveal flashes of humor and humanity.

"It's like Frankenstein turning against his own inventor," he writes of the products he was selling.

NICE, BUT NOT THAT NICE

Tourre was raised in a comfortable but obscure suburb of Paris. His parents' white stucco house lies in a gated enclave in a leafy suburb a short drive outside the city.

His last known address, a non-descript two bedroomed London flat, was described in a British newspaper article by Tourre's own landlord as "nice, but not that nice."

Friends say that even after Tourre went to Goldman Sachs he retained loyalty to his parents and his home.

"Some would have spent their bonus from Goldman Sachs on a Porsche to show off, but Fabrice instead spent it on buying a house for his parents," said one person who was Tourre's neighbor in the student residence at the Ecole Centrale.

(Additional reporting by Sudip Kar-Gupta, Laurence Fletcher, Douwe Miedema, Christian Plumb, Steve Slater, Clara Ferreira-Marques, Julien Ponthus and Tim Hepher; editing by Marcel Michelson and Andrew Callus)

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Goldman's Fab Fabrice: Schemer or dreamer?
| Reuters

April 8, 2010

FT.com / Capital Markets - Venezuela heads debt default risk list


Venezuela heads debt default risk list

By Anousha Sakoui
Published: April 7 2010 18:59 | Last updated: April 7 2010 18:59FT.com / Capital Markets -
Venezuela has topped a list of the most risky sovereign borrowers, with Lithuania, Lebanon and Romania dropping out of the top 10 riskiest nations to be replaced by Pakistan, Egypt and Iraq.
The report by CMA Datavision is based on the default risk of countries as determined by the price at which their credit default swaps trade in the market. At the end of the first quarter of 2010, the data provider estimated Venezuela had a 48.5 per cent chance of default over the next five years, while Greece which ranked 9th, had a 25.4 per cent probability.
On Wednesday, worries around Greece pushed up the cost of protection against default on its bonds above that of Iceland for the first time, according to data provider Markit.
“It is not a surprise that Venezuela tops the list,” said Nigel Rendell, senior emerging markets strategist at RBC Capital Markets. “What is surprising is that western European countries like Greece and Iceland are now in the top 10. It is a reminder that these regions do have sovereign risk and that just because a country is ‘developed’ does not mean that circumstances cannot change drastically.”
Jerome Booth, head of research at Ashmore Investment Management, thinks the markets are starting to price in the underlying default risk of developed nations. He believes Greece has a greater default risk than Venezuela and expects CDS markets will start to price in a greater risk of default for Greece.
Norway led the list of safest sovereign borrowers. The US fell three spots to rank as the 10th safest sovereign borrower. Analysts at CMA said in the report that spreads on US CDS had increased slightly since the successful passing of the healthcare bill, which commits the government to significant financial investment in health infrastructure and services.
But the UK failed to make the top 10 of the safest sovereign nations. It ranked 21st with a probability of default of 6.7 per cent, according to CMA.
Globally, Portugal saw the greatest deterioration in its creditworthiness as determined in CDS markets over the past quarter.
However, some analysts cautioned against reading too much into the data.
“While I would agree with the ordering of the countries in the top 10, there are other countries that are far more likely to default than Greece that do not appear in the top 10,” said Willem Buiter, chief economist at Citi.
“The implied probabilities of default over the next five-year period, however, are overstated – a 25 per cent chance of Greece defaulting, close to that of Iraq, is ludicrous. It is a useful report, but it reflects the fact that financial markets are driven by nervous investors who invariably over-react in one direction or another.”
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