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According to the Collins English Dictionary 10th Edition fraud can be defined as: "deceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage".[1] In the broadest sense, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation. Defrauding people or entities of money or valuables is a common purpose of fraud, but there have also been fraudulent "discoveries", e.g. in science, to gain prestige rather than immediate monetary gain
*As defined in Wikipedia

Saturday, September 26, 2009

Goldman Sachs & Currency Swaps

First, an update. Although Mike has said he is leaving the site, rest assured I am going to keep the site up as long as my tired, broken hands can type. I'm not going anywhere! --RobertM


I would say something smells fishy here but the truth is it smells like 6 tons of dead fish washed up on the beach.


Here we might note that the startling run of dollar strength that caught so many investors off guard (but not Goldman Sachs or JP Morgan, it should be noted) began just in front the steep, half-trillion US dollar currency swap operation that began in earnest in fall of 2008.

Note also that the double top in the USD and its subsequent slide all line up nicely with the swaps additions and withdrawals. Correlation is not causation, but this is a pretty cozy relationship, and it possibly explains one of the more unusual periods of dollar strengthening in recent history.

Speaking of cozy relationships, the one between the NY Federal Reserve and big Wall Street institutions stands out, as do the outsized trading returns that quite conveniently repaired more than a few large firms during this same period of time.

I would humbly submit that Goldman Sachs 97% trading win ratio for 2Q09 is perfectly acceptable evidence that the playing field is not level and that, at the very least, we can agree that the appearance of insider trading exists.

Even now Goldman is "struggling" with the PR nightmare of how to explain an "embarrassment" of riches:

Damage Control
For Goldman Sachs CEO Lloyd Blankfein, an embarrassment of riches has turned into embarrassing riches.

Goldman's bonus pool is expected to swell to an estimated $16 billion after what's expected to be another stellar quarter, and Blankfein is struggling to figure out how to pay his employees in a way that keeps them happy while avoiding another round of populist and political outrage like the bank experienced over the summer.

It really is up to the Fed to prove that they did not tip off a few favored struggling big banks (which magically repaired their balance sheets with magnificent winning trading-desk results over this time frame), than it is up to anybody else to prove that they did.

After all, in a supposedly free market economy, it is critical that the appearance, if not the fact, of an even-playing field be maintained.


Read the full here.


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