We want to fail them means we are going to issue a failure to deliver because it turns out that the stock we thought was available is not. If you fail on a trade, you don't cancel the trade, a trade is binding, it means you require the customer to buy the stock back to cover the short sale since the stock wasn't actually available. Since in this case the Goldman rep had told the client they could get the stock even though the client thought the stock was likely to be available, issuing a fail to deliver and requiring the client to buy the stock back would lead to egg on the face for whoever the client spoke to at Goldman. The other option for Goldman of course was to buy the stock to lend the customer and hedge out their risk maybe with a put option or to keep looking somewhere else for stock to borrow.