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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, March 13, 2010

Goldman Sachs Links and News - March13 , 2010 - With Larry's Corner

Today's Links contain Larry's Corner commentary.  Scroll down to read
Repo [Leh]men | MetaFilter
By shothotbot
The fact that the Treasury Secretary was the former CEO of Goldman Sachs
Unions Map
'Make Wall Street Pay' Blitz on Goldman (Update2 ...

TOTALINVESTOR: Is Goldman Sachs a bubble ready to burst?
By Totalinvestor
How Goldman Sachs Survived - Personal Finance Blog ...
By admin
Goldman Sachs, Detroit, Junk Bonds & RoboCop
MarketWatch (blog)
GMAC hires Goldman on ResCap sale -source
Goldman says it's never used repo 105 transactions
Goldman Sachs derivative liability = 33823% of assets « The Bankwatch
By Colin Henderson
Financial reform imploding; Dems declare War on Goldman Sachs ...
By James Pethokoukis 
Senators Target Wall Street, With Goldman Sachs In Mind
By Shahien Nasiripour
Mike Elk: Activists Win Against Goldman Sachs' Greek Style Local ...
By Mike Elk
Goldman Sachs small business project draws notice
The Star-Ledger -
Larry's Corner
  Goldman Sachs Continues In The News

Yesterday, in Larry's Corner, I wrote about American Banking News calling all the bad press about Goldman was pure fantasy with no factual basis.  Today, one of the links above provides "factual" data on the amount of derivatives held by GS and three other banks.  This data is shocking.

Another link above illustrates how the working class fares against Wall Street.  It's "factual basis" is reality.  

I have highlighted these two stories above and offer some details and commentary below.

From the BankWatch:
I have spoken at length here about the insidiousness of derivatives and Credit Default Swaps.  So this new statistical reference frankly awed me.  It is from a Levy paper on the recent shift over the last 50 years to a shadow banking system, that has largely replaced bank balance sheet lending with Money Managers.  As I read this paper, while I am also reading ‘This Time is Different – eight centuries of financial folly’, there is little to feel good about in the apparent economic rebound that the government keeps telling us about.
While Goldman is not on the chart above, the data on their derivatives comes from the same source.  But what the author of this post also talks about is a subject near and dear to my heart and one I have written on several times - the subject of "off balance sheet Items".  What I have said in the past and what this more qualified individual says is that "off balance sheet" items simply are wrong.  By keeping it "off" the balance sheet then in effect, I say, the financials are fraudulent.  They do not disclose the "truth" and actual financial status of the company.  
The data on derivatives is impressive. JPMorgan Chase, for example, held derivatives worth 6,072 percent of its assets at the peak of the bubble in 2007. The other two giants, Citigroup and Bank of America, although still far behind Chase, had 2,022 percent and 2,486 percent respectively. Goldman Sachs, the other giant, had an astonishing amount of derivatives on its balance sheets: 25,284 percent of assets in 2008 and 33,823 percent as of June 2009.(emphasis added)   Citigroup and BOA now have more of this risk on their books than before the crisis (FDIC SDI database).
Yet knowing this and knowing that there has been no fix to this issue of derivatives, it is safe to assume that the same financial institutions we bailed out are still insolvent and at some point will need to be bailed out once again in the name of saving our financial system and that of the world's as well.  The final paragraphs from this article speaks, as well, to the situation.
The part that awed me, is that BofA and Citi now have more derivative exposure than they did in 2007!  Huh!   What is Timothy Geithner being paid for?  I have to admit after TARP and the apparent hands on approach I like most assumed things were being fixed, but apparently not. 
This simply adds to the point that despite all the histrionics and efforts in Washington, nothing has been learned and the American Banking system is now at least at as much risk now as in 2007, pre crash.

Incidentally when trying to understand derivatives, simply assume off balance sheet debt.  There is all kind of rationale as to why that off balance sheet debt is not dollar for dollar, but the important point is that no-one argues that derivatives are worth zero.  There is an intrinsic liability that frankly few bankers can explain to you, so you must begin with the face value of the liability, and banks are guilty until proven innocent on that one.

As an accountant, the notion of off balance sheet debt is a contradiction in terms.  Is it a liability?  If yes, it should be on the balance sheet.
I highlighted the last paragraph above for the simple reason that what he is saying is basic accounting 101 - or at least it was when I took it.  How do you keep an asset or a liability "off" the books?  Is tis not a crime - especially for public companies?  But then again, it is apparently a new form of accounting which is evidently condoned and encouraged by our law makers.  I now one thing, if you or I "hid" information like this from our books, we would be sitting in a jail cell somewhere. 

Now this article has no charts or statistics but makes a good point about the disparity between Wall Street and the average working peron on Main Street. 

From Bloomberg:
AFL-CIO President Richard Trumka listened to Andres and Esteban Contreras tell how Andres moved back home to help with rent and medical care after their father lost his job and their mother had her hours cut. Did they realize, Trumka asked, that Wall Street bankers gave their employees $16.2 billion in bonuses?

“How can you look in the face of a real working man,” Esteban Contreras said.
My answer to that question is simply, "they don't care about you or me".  In fact, they look down on us as servants of the elite (them) and the source of funds to be ravaged.  They are modern day pirates with no morals, ethics, patriotism or respect for anyone.  They operate above the law and truly believe that they are doing God's work because they are gods.

Again, to answer American Bankers News from my post yesterday, the hatred and bad publicity against Goldman Sachs is NOT going away any time soon as you say it will.  It will not become a non issue, in fact, it may become more of a major issue creating even a greater outpouring of press and negative publicity.  Here is the beginning of a major "bad hair day" for Goldman's head of PR, Mr. Lucas van Praag.
Trumka, head of the nation’s largest union organization, is hoping to tap into that kind of anger at Wall Street with two weeks of protests aimed at Goldman Sachs Group Inc.
I personally applaud the AFL-CIO for taking this pro active position. "The AFL-CIO says it plans 200 events covering all 50 states, starting March 15."  These rallies are called "Make Wall Street Pay".
“Wall Street has become a symbol of greed run amok, and what labor is doing here is seeking to demonstrate that it is speaking for working families generally, union member or non- union member,” said Harley Shaiken, a labor professor at the University of California at Berkeley.
At the “Make Wall Street Pay” rallies, which the AFL-CIO announced today, union members will push for a transaction tax on securities trading to help pay for the $900 billion they want the government to spend on creating new jobs. That’s 60 times the $15 billion approved by the Senate last month. The House of Representatives last week passed an $18 billion measure.
I happen to agree with this and the figure mentioned.  I said when the TARP money was first announced that that money would have been better used if put directly on Main Street creating jobs by funding small business and even many large - productive - business as well.

TARP funds if you remember, were issued almost overnight with money created by The Fed.  Money that we have seen went not to help end the Recession or the average working person but to enrich hose very same people that created this mess to begin with.  Those individuals who have enriched themselves at the expense of every working person in this country.

The money the union is seeking is not created money from the Fed, carries no debt to our economy and to our future generations.  It simply redirects, if you will, some of the ill gotten gains from the Bankster Cartel -  a "Reverse Transfer of Wealth".

Timothy Geithner and the U.S. Chamber of Commerce have spoken up against such a tax which is not surprising.  Interestingly enough, Goldman's Lucas van Praag - the article says - "declined to comment on the AFL-CIO’s plans".  That is surprising.  I would have expected him to put down the AFL-CIO as he does most media. 
“SEIU believes that big banks played a central role in crashing the economy,” said Stephen Lerner, who directs the union’s financial reform project. “We are calling on them to be part of the solution instead of increasing their own pay while making problems worse for the rest of the country.”
.There were other comments as well.  Click Here to read this article in full


Anonymous said...

Great interview.

On OTC Derivatives: Interview With Bill King

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