What does he mean by surreal?

Presumably It means he can't believe what he's watching: A Paulson rep and an ACA rep discussing the CDO portfolio, and the ACA rep having no idea what Paulson's true intentions are.

It's not obvious that this is fraud, but it is obvious that Tourre was on the side of one client, as that client, apparently worked against the interest of another client. That's the part that shows
horrible faith, and it's hard to imagine anyone feeling comfortable
working with Tourre again.

Blankfein's Toast

http://www.businessinsider.com/blankfein-fired

It's unlikely that Goldman CEO Lloyd Blankfein knew anything about "Abacus" or any of the specific conduct the SEC just cited while hammering Goldman with fraud charges.

It's also remarkable that Goldman has come through the financial crisis

and scapegoating period as well as it has -- a feat that is probably at least somewhat attributable to Blankfein's leadership.

But he's still toast.

Why?

Because as the universal jubilation and chop-licking that greeted the Goldman fraud announcement illustrated, the world still wants blood.  It wants Goldman Sachs punished for what it did in the years
leading up to the financial crisis.  It wants Goldman spanked for how
well it has done while the rest of the country has tanked.  It wants
the cosmic unfairness of the average Goldman partner making more than
100X the average US family rectified.  It wants Goldman to pay for all
of Wall Street's sins.

Until Goldman surrenders its pound of flesh, this hatred and resentment will linger.  And, right now, unfairly or not, Lloyd Blankfein embodies the hated Goldman of the financial-crisis years.

For now, Goldman is making very tough-sounding noises about how the SEC's allegations are bogus and how it will fight to the death to prove the SEC wrong and defend its reputation.  This will be an uphill
battle, one it will likely reconsider.

Regardless of whether Goldman's disclosures met a specific legal hurdle, the Abacus deal feels wrong.*  As a result, if Goldman were to press forward with the defense and win, the victory would not be perceived as vindication.  It will be
perceived as a miscarriage of justice.  And in the intervening two or
three years before the trial, Goldman will have its name associated
with the fraud charges every time it is mentioned in the press.

So Goldman will probably reconsider.  It will probably settle the charges, pay a big fine, and announce that it is making changes to the firm that ensure that this regrettable era is forever behind it.  And,
to put a new face on this apparently new firm, Goldman will likely ship
Blankfein off to comfortable early retirement.

Only when the pound of flesh has been sacrificed and the symbolic leader sacked, will the public and regulatory blood-lust be satisfied.  And wiser heads at Goldman will probably quickly realize that.

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* The mistake Goldman made here is the "perception of impropriety."  When the public's hackles are up, falling back on legal technicalities won't help preserve the firm's reputation.  There is no way the firm
can explain in plain English how it is okay for a client that wants to
bet against the housing market should have a hand in creating a
security sold to other investors

as a way to go long the housing market.  That dog just don't hunt, and Goldman should have recognized that at the time.