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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, May 15, 2010

Goldman Sachs and the Blind 'Experts'

Here's James K. Galbraith on the financial fraud that is pervasive throughout our society.

Why the 'Experts' Failed to See How Financial Fraud Collapsed the Economy


Thus the study of financial fraud received little attention. Practically no research institutes exist; collaboration between economists and criminologists is rare; in the leading departments there are few specialists and very few students. Economists have soft- pedaled the role of fraud in every crisis they examined, including the Savings & Loan debacle, the Russian transition, the Asian meltdown and the bubble. They continue to do so now. At a conference sponsored by the Levy Economics Institute in New York on April 17, the closest a former Under Secretary of the Treasury, Peter Fisher, got to this question was to use the word "naughtiness." This was on the day that the SEC charged Goldman Sachs with fraud.


Control frauds always fail in the end. But the failure of the firm does not mean the fraud fails: the perpetrators often walk away rich. At some point, this requires subverting, suborning or defeating the law. This is where crime and politics intersect. At its heart, therefore, the financial crisis was a breakdown in the rule of law in America.

Ask yourselves: is it possible for mortgage originators, ratings agencies, underwriters, insurers and supervising agencies NOT to have known that the system of housing finance had become infested with fraud? Every statistical indicator of fraudulent practice – growth and profitability – suggests otherwise. Every examination of the record so far suggests otherwise. The very language in use: "liars' loans," "ninja loans," "neutron loans," and "toxic waste," tells you that people knew. I have also heard the expression, "IBG,YBG;" the meaning of that bit of code was: "I'll be gone, you'll be gone."

If doubt remains, investigation into the internal communications of the firms and agencies in question can clear it up. Emails are revealing. The government already possesses critical documentary trails -- those of AIG, Fannie Mae and Freddie Mac, the Treasury Department and the Federal Reserve. Those documents should be investigated, in full, by competent authority and also released, as appropriate, to the public. For instance, did AIG knowingly issue CDS against instruments that Goldman had designed on behalf of Mr. John Paulson to fail? If so, why? Or again: Did Fannie Mae and Freddie Mac appreciate the poor quality of the RMBS they were acquiring? Did they do so under pressure from Mr. Henry Paulson? If so, did Secretary Paulson know? And if he did, why did he act as he did? In a recent paper, Thomas Ferguson and Robert Johnson argue that the "Paulson Put" was intended to delay an inevitable crisis past the election. Does the internal record support this view?

Read the rest here


This is off-topic to Goldman but I just got through watching the movie "The One Percent", about the disparity of wealth and it occurred to me that (besides the fact that Milton Friedman is an idiot and a stumpy little weasel ) that the one percenters have left out this minor calculation- as they destroy America and the world by concentrating wealth into ever fewer hands, what will they do when society breaks down and people start hijacking food trucks? There won't be anywhere they can run or hide at that point and will see first hand the suffering they have brought on others. They'll starve like every one else. What makes this all so pathetic is the solution is so easy and this suffering is needless.


Anonymous said...

Is the Financial System Corrupt?

Rigged games are doomed to fail. Eventually, everybody realizes the only money walking out the door is in the pockets of the house. In this case, the house is the big Wall Street banks. In my mind, the negative headlines all point to one thing–the rigged game is coming to an end.

JR said...

There are a few people like Galbraith, Taleb and Black who are raising alarm bells but this fine President of the United States has people around him who, according to many commentators, are part of the problem in the financial system. What to do?

See the following advice about investing in Goldman which is so full of cynicism and ill-will. How can the adviser be so evil?

Anonymous said...

what about the secret meetings in Moscow in June 2008

JR said...

Money is flowing into politician's pockets at an even greater rate. How can politicians not be influenced by the large amounts of money being given them? Politicians appear to be bought by big corporations and the only way we could be sure they aren't is to limit the amount of money that lobbyists can give. Then we would probably get politicians working for the people---what a concept!!

JR said...

Warren Buffett Is All Wrong About Goldman by Shaun Rein:

Anonymous said...

An Updated List of Goldman Sachs Ties to the Obama Government Including Elena Kagan

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