07/17/2013 09:22 am ET | Updated Sep 16, 2013

Fabrice Tourre and the Price of Romance

I have been mulling the central role that a romantic email seems to be playing in the trial of Goldman Sachs & Co.'s Fabrice Tourre. This is a strange artifact of our deeply technical age: a romantic note that's used to reveal insight into matters of abiding complexity, subtlety and scale. The email in question involves some bubbly boasting by Tourre -- it's the source of the "Fabulous Fab" moniker, which in context seems clearly to be a kind of in-joke -- to his French girlfriend in London, also an employee of Goldman. I'm in part sympathetic with the Financial Times' Andrew Hill, who after reviewing the email in its entirety (he reprints it), came squarely down the middle in judging this clearly dashed off missive: "There is, of course, a third possibility, unmentioned on the day of the trial: that the email is neither entirely a billet doux nor wholly an admission of guilt, but a bit of both."

For well over a decade now, emails have been part of the prosecutorial kitbag when it came to imprudent, even criminal, Wall Street behavior. Sometimes it works, sometimes it doesn't; if Eliot Spitzer taught us anything, emails work better in public campaigns of character assassination, less well in court. But the Tourre email is particularly fraught with interpretative difficulties, as Hill suggests. There is nothing black and white about it. Tourre confesses to his girlfriend that he doesn't fully understand the vehicles he is assembling (this should be old hat by now: few really understood what was in those securitized vehicles stuffed with mortgages or how they would behave) but that he has a bad feeling about what the FT's Gillian Tett at least, in a column attached to the email, was, among others, calling a bubble. That said he's still pretty chipper. "Anyway," he adds, "not feeling too guilty about this..."

This, the prosecution argues reflects boastful, cold-hearted arrogance.

But why would Tourre feel guilty? He's a young guy who had done quite well at Goldman and was making more money at a relatively young age than he ever expected. His future is bright even if Goldman blew up. How much deep thought went into the composition of that email? And yet the full email suggests he's aware enough to be ironic about his position. (Warning to emailers on Wall Street: the press and prosecutors do not recognize irony.) Besides, he has a girlfriend. If you believe his last paragraph, and despite all the twists and turns, parentheses, exclamation points and passages in French, he's charmingly smitten. As foggily as I can recall those golden days of youth, this is the kind of half boasting, half-embarrassed honesty that agitate 20-somethings when they fall in love; you see it every Sunday in the New York Times wedding pages. When he talks about The Fabulous Fab he is, it seems to me, again being ironic. The email, in fact, reveals a smart, young thing half afraid and half thrilled by an overly complicated but still glittering world he finds himself in. He is impressed by himself and smart enough to know he shouldn't be.

Hill gets a little sniffy about the email, questioning why Tourre self-promotes himself instead of resorting to the classic romantic practice of flattering the desired one. Or perhaps he too is being ironic. If Hill is playing it straight, is he kidding comparing Tourre to Lord Byron? Did Hill, in his youth, never write inane letters or behave in absurd ways to impress some girl? This guy's not a 19th century aristocratic poet, he's an absurdly overpaid worker in a postmodern financial combine, a statistical nerd. It's surprising he's articulate at all. Byron never bragged about "lording it over volatile capital markets," not to say never sent a Tett column to a woman, in part because he never worked at Goldman Sachs. It's not an indictment of that firm to say that people that work there, like Tourre and his lady friend, might be interested in financial matters. Besides, Tourre is part of a generation weaned on the self-promotional tendencies of Facebook and Twitter.

All this is fun, if distracting. And that's the real problem with this email. There's actually nothing in it that would get Tourre into hot water, except by people who frown on exclamation points. Even if he was, as the Securities & Exchange Commission suggests, "arrogant," arrogance or incomprehension are not really crimes, even if they do involve big money. What the email doesn't begin to speak about is the conflict at the heart of this civil suit: Did Tourre deliberately lead investors astray by failing to tell them that John Paulson had been allowed to stuff this vehicle full of mortgages he hoped would fail, simply so he could short them? Perhaps he did, perhaps he didn't. But even then, and despite the image he conveys of himself as a sort of ironic colossus, it beggars the imagination to think that Goldman simply allowed him to assemble these collateralized debt obligations without supervision and collaboration. As we know from a number of books and articles, Paulson approached a number of firms about selecting mortgages for CDOs; he needed supply for the massive short he was putting on.

This case against Tourre is an odd one. Despite the efforts of the SEC to characterize him as another swashbuckling master of the universe, he's really not that kind of figure at all and that personality, reflected in this email, may well surface during the trial. He's no financial miscreant like Dennis Levine, Ivan Boesky, Jeff Skilling or Raj Rajaratnam; he's not even grim Martha Stewart. The fact is that the mistakes, perhaps even the crimes, which occurred during the financial crisis on Wall Street, were almost never simply the arrogant will of a smart, if junior employee. They were mistakes of policy and practice transmitted through complex networks of individuals and incentives. Focusing on an individual may be justified by the omnipresent need to make an example of someone, anyone: the deterrence argument. But it doesn't get us any closer to the problem, which is profoundly bureaucratic.

The issues here are serious, deep and important, close to the heart of a bewildering complex and amped-up financial sector made up of enormous institutions with many interests and many businesses. But the SEC has already allowed Goldman to settle, thus sidestepping an exploration not just about the appearance of conflicts on Wall Street, but into their very natures. Instead, like so much of the Spitzer campaigns against Wall Street research, we get both a cartoon and a soap opera, two genres I suspect the SEC thinks a jury can understand. Given the bumbling incomprehension of the trial so far, the prosecutors are probably wrong.