THE BLOG
07/15/2013 05:23 pm ET Updated Sep 14, 2013

Fabrice Tourre Trial To Reveal Complete Lameness Of Government's Post-Crisis Crackdown

The trial this week of Fabrice "Fabulous Fab" Tourre is almost guaranteed to accomplish nothing but highlighting the weakness of the U.S. government's response to the financial crisis.

Tourre is the former mid-level Goldman Sachs banker who did what several other bankers did in the lead-up to the crisis, only he was dumb enough to discuss what he was doing in a series of incriminating emails. What he did was help bundle junky subprime mortgages into toxic securities, handpicked for failure by hedge-fund manager John Paulson, who was betting against them, and sold them to investors -- allegedly misleading those investors about the fact that Paulson had designed the securities to fail.

This sort of thing happened with some frequency before the financial crisis. But Fab Tourre was the rare soul who took to company email to declare his creations "monstruosities [sic]!!!"

Therefore the Securities and Exchange Commission is taking Tourre to trial, starting on Monday, in what the agency has inexplicably declared to the world is a make-or-break test of its ability to do stuff with its computers besides Google porn all day.

The agency could have, as blogger Barry Ritholtz recently suggested, sued Tourre quietly, as they do all the time with other brokers that run afoul of securities laws. Instead, they are making a big deal out of this case, using it to seek "validation," according to the New York Times. Given Tourre's relative unimportance in the grand scheme of things, the SEC has all but drilled the scapegoat horns into the top of Tourre's head. Suddenly we are supposed to hang all of our hopes for post-crisis catharsis on the civil trial of this guy, which, as many observers have already noted, is utterly ridiculous.

Sure, if there is evidence that Tourre did in fact defraud Goldman's muppets, then by all means let us civil-trial to death his (already defunct) career on Wall Street. As ridiculous as the whole thing is, the best that we can hope for is that the SEC wins the case, which might embolden it to give the old college try to winning even more cases in the future. But we will probably gain at most a thin wisp of catharsis -- or, more importantly, deterrence -- in a civil-court victory over Tourre. As Bloomberg View's William Cohan notes, we will certainly not have laid a glove on the bigger actors in the run-up to the crisis, the Fulds, Caynes and Mozilos.

The big risk is that, having made everybody pay attention to its fight against Tourre, the SEC loses the case and then feels too embarrassed to bring big cases forever.

Of course, what the SEC and the Justice Department and the rest of the government should be embarrassed about is their failure to hold anybody accountable for the actions that led to the crisis, aside from weak settlements in which banks neither admitted nor denied wrongdoing. If nailing Fab Tourre is the best the government can do, then that is a sad indictment.