Wall Street has increasingly taken up its old habit of blaming junior bankers and traders for what goes wrong, despite the fact that the goal at every firm is always to make more money in any way that is legally defensible – by selling more mortgage-backed securities, by doing bigger and bigger mergers-and-acquisition deals, or by making a larger and larger bet on the direction of an obscure debt index.
When things go well, there is no shortage of people around to claim credit. Of course, when something goes terribly wrong, the senior executives disappear from the scene faster than cockroaches when the light is turned on. In return, employees get paid more working on Wall Street than they can at almost any other job on the planet.
And yet, we are now supposed to believe that many things that went wrong leading up to the financial crisis were caused by a handful of junior bankers and traders supposedly acting on their own. Goldman Sachs Group Inc. and the Securities and Exchange Commission continue to blame Fabrice Tourre, a former Goldman Sachs vice president, for the botched manufacturing and selling of the Abacus 2007-AC1 synthetic collateralized debt obligation. The firm paid $550 million – one of the largest fines in Wall Street history – to avoid an SEC civil suit. Tourre, meanwhile, faces a civil trial set for July. While Goldman Sachs pays his legal bills, he is studying for a doctorate at the University of Chicago and doing humanitarian work in Rwanda.
This month, the Commodity Futures Trading Commission zapped Matthew Marshall Taylor, another former Goldman Sachs vice president, for allegedly concealing an $8.3 billion trading position in 2007 that cost the company $119 million. The CFTC alleged that Taylor fabricated trades and then obstructed Goldman Sachs’ “discovery of his scheme.”