One of the few Wall Street insiders to have been prosecuted for fraud related to the sale of sub-prime mortgage securities has been Fabrice Tourre, also known as “Fabulous Fab.” In 2007, just ahead of the economic collapse caused in great part by the bursting of the housing bubble, Tourre made $1.7 million largely from selling sub-prime-mortgage securities to investors — when he clearly knew that those securities were extremely over-priced and risky, if not almost certain to fail.
Worse, as an employee of Goldman-Sachs, Tourre communicated with John Paulson, who became one of Wall Street’s most prominent hedge-fund managers by promoting investments in credit-default swaps that became increasingly profitable as the housing market tanked. In effect, Tourre and Goldman Sachs identified for Paulson, then a client, which mortgage-backed securities were the most likely to fail, even as they were promoting those securities to other clients as solid investments.
Before the case could be taken to court, Goldman Sachs settled its part of it for $550 million, while asserting that the settlement agreement was not an admission of any criminal wrongdoing. Tourre, however, was tried and convicted on six counts of trading fraud.
Over this past week, “Fabulous Fab” has been in the news for two reasons. First, his appeal of his convictions to the U.S. District Court in Manhattan was unsuccessful. Judge Katherine Forrest found no basis either for summarily throwing out the convictions or for ordering a new trial. Second, he is apparently pursuing a doctorate in economics at the University of Chicago and is teaching a course there on “Elements of Economic Analysis.”
I am all for people trying to rehabilitate themselves, for giving people with criminal records every opportunity to rebuild their lives—once they have paid “their debt to society.” I think that it is absurd to stigmatize ex-convicts in a manner that makes it next to impossible for them to get on with their lives in some productive manner. We cannot wring our hands over high rates of recidivism while blocking productive alternatives to recidivism.
But I have two problems with what seems to be happening with “Fabulous Fab.”
First, I doubt that someone less prominent and less connected than he is would have found a spot at such a prestigious university. I have written in several previous posts about the deepening caste system in higher education that has resulted from increasing corporatization, and this case seems to provide another perverse illustration of how notions of “privilege” are simply going unquestioned.
Second, even if Tourre were now an ex-convict who had served his sentence, there are certain crimes that would seem to preclude one’s becoming a faculty member in certain disciplines. For instance, former judges, attorneys, and police officers convicted of corruption or other abuses of their positions should be excluded from teaching criminal justice. Architects who have cut corners with building codes and then been found criminally negligent should not be teaching architecture. Likewise, engineers who have falsified the results of tests on materials or devices should not be teaching engineering. Hackers should not be teaching computer science. Plagiarists should not be teaching writing. Physicians and nurses convicted of malpractice should not be teaching medicine or nursing. And no one convicted of any crime involving children should be given a position in education.
These suggestions don’t seem to me to be tantamount to any sort of ruinous bias. They seem, instead, to be common sense.
This past year, it was revealed that a longtime, highly regarded psychology professor at an Illinois university had been charged at age 15 with killing his parents and his sister. The murders had occurred at the family home in Texas. Before committing the crimes, he had apparently sniffed airplane glue, which had exacerbated an underlying condition that was later diagnosed as paranoid schizophrenia. He was judged mentally unfit to stand trial, remanded to a juvenile psychiatric facility, and six years later released as sane. Eventually, he legally changed his name and worked his way through college, ultimately earning a doctorate at the University of Illinois.
When his notorious past was revealed, after he had performed conscientiously as a faculty member for more than 25 years, the university at which he is employed did the right thing in issuing the following supportive statement: “Given the traumatic experiences of his childhood, ____________’s efforts to rebuild his life and obtain a successful professional career have been remarkable. The university expects [him] to teach . . . this fall.”
I have no interest in resurrecting this story, in identifying the faculty member by name or even by his institution, because I think that his continuing to teach is a non-issue.
But I also think that his case may be the proverbial exception that proves the rule.