In his first public appearance since being charged with fraud for failing to disclose information to investors, Fabrice Tourre said he categorically denies regulators' allegations.
When asked if Goldman has a duty to tell clients when it is betting against them, Tourre said the firm has a duty to buy and sell securities from clients, adding "We do not have a duty to be investment advisors."
The Senate subcommittee fired a broad fusillade against investment banks, but focused on Goldman Sachs, one of the oldest investment banks on Wall Street.
Goldman has become a lightning rod for criticism for traders' behavior before and during the worst economic decline since the Great Depression. Legislators are working on financial reform laws now, and trying to learn from past mistakes in crafting new rules.
The Goldman officials ran into a wall of bipartisan wrath before the panel, which is investigating Goldman's role in the financial crisis and the Securities and Exchange Commission fraud suit against it and one of its traders. Democratic Sen. Carl Levin of Michigan accused Goldman of making risky financial bets that "became the chips in a giant casino."
Tourre, a 31-year-old trader at Goldman and the only company official directly accused in the SEC suit—testified that he does not recall telling investors that a Goldman hedge fund client had bought into an investment that soured. Instead, the hedge fund, Paulson & Co., bet against the security—and profited handsomely.
"I deny—categorically—the SEC's allegation," Tourre said. "And I will defend myself in court against this false claim."
Federal regulators said Tourre marketed an investment designed to lose value. In a brash January 2007 e-mail, one of many by him that have come to light, Tourre called himself, "The fabulous Fab standing in the middle of all these complex, highly leverage exotic trades."
Tourre told the panel under questioning: "I regret the e-mails. They reflect very bad on the firm and myself. I wish I hadn't sent them."
About a half dozen protesters were in the committee room, dressed in prison stripes with names on signs around their necks of Tourre and Goldman CEO Lloyd Blankfein, who was also scheduled to testify. "Fabulous Fab is not so fab when he takes from the poor," the protesters spoke as a chorus before the hearing started. "We want to see these guys behind bars."
Ten days after the SEC action, the panel is looking into allegations that Goldman used a strategy that allowed it to profit from the housing meltdown and reap billions at the expense of clients.