ow could a single broker destabilise the world oil market?’ asked Liam
Clancy.’
The rumour is going around he was pissed.
‘It seems like he bought seven million barrels of crude oil from his laptop.’
‘Five hundred and twenty million dollars’ worth!
‘Whatever he did he pushed the price to an eight-month high.’
They all laughed and ordered another bottle of champagne.
‘He’s from Brentwood in Essex.’
That brought more howls of laughter.
Barton wasn’t amused, he had regularly played the market buying and selling oil
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futures and to learn a drunken broker, from Essex, could destabilise trade was
worrying to say the least.
He was familiar with the kind of brokerage that traded in oil futures. His own
broker in New York ran a small highly experienced team, discretely buying and
selling up to a hundred million barrels a day for their customers; oil companies,
refiners and producers, government agencies, trading houses, banks and individual
investors.
Most of those present, with the exception of Barton, were used to the kind of
drunken night out on the town traders were famous for.
After such a night out the rogue trader in question was unable to explain how he
had bought over five hundred million dollars’ worth of crude in the middle of the
night, causing the market price to jump by one dollar fifty, the kind of swing that
only happened after an event of geo-political significance.
By the time the brokerage unwound its positions, losses totalled almost ten
million dollars, equivalent to the firm’s annual trading margin.
‘Needless to say the stupid bugger was given the boot!’
Barton knew exactly how the system worked; buying and selling futures, betting
on the rise and fall of oil prices, but what astonished him was a drunken trader had
at one point been trading seventy percent of the global market volume.
‘It cost him his job and a one hundred and fifty thousand dollar fine.’
‘No, it was reduced by half because of potential financial hardship!’
They were now almost hysterical with laughter, as Barton wondered what kind of
chaos they were capable of provoking, considering the trader had been able to take
positions on such huge volumes with so little cash up front and no limits.
It was reminiscent of Fabrice Toure ‘Fabulous Fab’, a Goldman Sacs trader, who
testified before a Senate committee in 2007, to reply to questions linked to one of
the bank’s CDOs named Abacus, a product which he had been responsible for
trading. Toure was replying to allegations he had defrauded his own clients
following accusations that Abacus, a complex mortgage-backed bond, was
designed to fail. According to the SEC, Toure had been responsible for the creation
and sales of a series of such mortgage-backed bonds, which had cost investors
large sums of money.
Fabrice Toure, a Frenchman, was a graduate of France’s prestigious engineering
school: the École Centrale in Paris. After graduating in mathematics, he went on to
obtain a Masters in science and engineering management at Stanford. He then
joined Goldman Sachs in New York, where in 2007, as a vice president he was
responsible for Abacus.
‘Fabulous Fab’ created his own nickname after writing an email to a colleague:
‘The whole building is about to collapse anytime now...Only potential survivor, the
fabulous Fab...standing in the middle of all these complex, highly leveraged, exotic
trades he created without necessarily understanding all of the implications of those
monstrosities!!!’
The Wall Street Journal reported Goldman Sacs had paid Toure more than two
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million dollars in 2007, the year of the so-called Abacus deals. The trader, known
for his expensive tastes, lived in a New York apartment that cost him four thousand
five hundred dollars a month, where his frequent and noisy parties were the source
of frequent complaints from neighbours.
The trader boasted of selling Abacus bonds to ‘widows and orphans that I ran into
at the airport’ in Belgium; ‘poor little sub-prime borrowers won’t last long’; and
describing ‘Frankenstein’ CDOs as ‘a product of pure intellectual masturbation’
that ‘had no purpose...were absolutely conceptual and highly theoretical and which
nobody knows how to price.’
Toure quite naturally denied all of the allegations. His arrogance, according to the
Washington Post, ‘bested previous displays of hubris by the automotive, oil, and
tobacco industries’. Provoking the question of whether Toure and his colleagues
were ‘criminals or merely a big bunch of jerks.’
The mortgage trader became the embodiment of Wall Street’s mind-set following
a sensational report in the New York Times. The newspaper recounted how
Toure’s emails became public. It seemed that his laptop, containing the damming
emails, was given to a New York artist and filmmaker by a friend who explained
he had stumbled on it in the garbage room of a downtown apartment building.
At the end of 2009, after two years of high drama, bonuses were back at Goldman
Sacs. The mega bank, said to be the most international bank in the world, was
again in control of the situation. It was described by its detractors as an octopus
with tentacles reaching deep into the White House. In 2010, even Lloyd
Blankenfein, the bank’s head, publicly described it as a casino.