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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

Thursday, May 13, 2010

Goldman Sachs and Helicopter Ben

From the Daily Capitalist comes this piece on why Goldman had a perfect trading record:

Goldman Sachs and Helicopter Ben


You may ask: how is that possible? Are they that good? The reason is that they are taking advantage of free money from the Fed:

“The trading profits of the Street is just another way of measuring the subsidy the Fed is giving to the banks,” said Christopher Whalen, managing director of Torrance, California-based Institutional Risk Analytics. “It’s a transfer from savers to banks.”

The trading results, which helped the banks report higher quarterly profit than analysts estimated even as unemployment stagnated at a 27-year high, came with a big assist from the Federal Reserve. The U.S. central bank helped lenders by holding short-term borrowing costs near zero, giving them a chance to profit by carrying even 10-year government notes that yielded an average of 3.70 percent last quarter.

The gap between short-term interest rates, such as what banks may pay to borrow in interbank markets or on savings accounts, and longer-term rates, known as the yield curve, has been at record levels. The difference between yields on 2- and 10-year Treasuries yesterday touched 2.71 percentage points, near the all-time high of 2.94 percentage points set Feb. 18.

Read the rest here

And then there's this

Rigged-Market Theory Scores a Perfect Quarter:

Of course, no matter what the question is these days, it seems the answer from Goldman always is: We’re a market maker. When senators ask about e-mails that show Goldman telling its sales army to dump crappy mortgage bonds from its warehouse on its clients? Market maker. When the e-mails show Goldman created the crappy deals? Market maker. By Goldman’s definition, an Amway salesman pitching energy drinks to old ladies in nursing homes would qualify as a market maker. It’s all just matching buyers and sellers to create liquidity, you know.


Here's Nathan's view on the above piece:

What’s pretty clear to me right now is that the markets are completely controlled by very few entities – they have been captured. And let’s think about the implications of this, because to me it plays like some James Bond (ridiculous) or Austin Powers (funny) movie, you know there’s always the evil villain in the background whose mission is to RULE THE WORLD, ba, ha, ha! Let’s just say it’s not a coincidence they called him “Goldfinger.”

Well guess what? It’s happened – only sadly this is no movie, it’s for real.

And just think about this. Those four banks that had perfect records are so powerful that should any of the managers of those companies simply turn off their trading computers, the removal of that liquidity would set off a chain of events that could literally collapse the markets of the entire world – just like the taste we got last Thursday but was quickly reversed.

Is this not nearly the power the President of the United States has? We have allowed the power to concentrate into so few hands that we have in effect given them the power to devastate the globe in nearly an instance. The people running these firms did not go through a public vetting process and they do not work on behalf of the people. Think about that – it never should have been allowed to happen and now that it has, we absolutely need to take action.



JR said...

Max Keiser has some interesting things to say about how the financial crisis may end:


JR said...

That Max Keiser site is:

Anonymous said...

The fed, goldman, jpm, imf,...they all are power structures with no accountability. Max's guest is right we need government that serves the people not corporate interests:
Jim Rickards

Anonymous said...

They'll gut the U.S. with a smile on their face.

Goldman Sachs are experts at this.

There is one other flaw in the EU plan. In 1992, when George Soros attacked the Bank of England, he did so by selling Sterling and buying dollars. This forced the Bank of England to do the opposite which was to buy Sterling and sell dollars. Since the Bank of England had a finite amount of dollars to sell, Soros knew he could beat them by buying more than they had. However, he needed real money to do this and he was perhaps the only speculator in the world at that time with that much money. Today you do not need money to destroy national finances, you can do this by the creation of synthetic short positions in Euros through the use of credit default swaps (CDS) and other derivative instruments. Goldman Sachs are experts at this. And they can create CDS in potentially infinite amounts since there is no regulation and no margin requirements. In effect, Goldman could create a short position equal to ten times the amount of Euros in the guarantee fund. Goldman can create synthetic short positions faster than the ECB can print money. Therefore, the ECB's plan is doomed to fail because they cannot beat the speculators who can use CDS instead of real money.

Anonymous said...

Like the last Samurai said...perfect!

How Wall Street Can Win Back Confidence

Prosecute wrong-doers. There have been many. Blatant and obvious insider trading on various news events, unlawful front-running, allegations of firms selling securities to customers as "good investments" while in emails claiming they're "crap", "trash", "turds" and similar and more. All of these are frauds of various sorts. If I bilk the little old lady next door out of $2,000 I am prosecuted and might go to prison. These firms bilked investors out of trillions over the last 20 years and few if any of them have faced any sort of criminal or civil sanction. The public cannot trust Wall Street until the cops show up.

You want ordinary investors back in the market? Do the above.

Anonymous said...

Trading Machines Gone Wild

What makes markets interesting and so challenging is that no one knows in advance exactly where the “value” assigned by this collection of buyers and sellers will be on any given day. That is why good traders plan in advance a level or price at which they are willing to admit that their judgment of the “value” of a stock was wrong. If they are prudent, limit their losses and can maximize their winning trades, they will take 3 steps forward for every step backward. But the fact is even the best traders sometimes err.

Not so in the brave new world of the high frequency algo crowd. You see, they never have a plan for getting out of a trade that goes south because in the world in which they live, there exists no such thing. Up until now, I had believed that only God was omniscient (knows all things particularly in advance because He decrees them). Suddenly however, this new breed of mortals has achieved “godlike” status with perfect foreknowledge and flawless insight and can claim to stand on the same level with the Almighty in the realm of future knowledge.

Here is the truth – these huge firms have now become the market. It exists only to serve them.

JR said...

Cuomo Subpoenas Goldman...

Anonymous said...

A little dated but interesting:

Of ideology, recession, and policy paralysis

The fact is, even today, although they all are not entirely in thrall to St. Milton, the country’s principal economic advisors remain mostly committed to the “free market” model of modern capitalism. The influence of St. Milton remains strong. That includes most of President Clinton’s economic advisors such as Robert Rubin and Lawrence Summers, George W.’s advisors Henry Paulson and Bernard Bernanke, and now with President Obama, we have Summers and Bernanke again along with Tim Geithner (not to mention the unofficial influence of Goldman Sachs’ Lloyd Blankfein). These savants have extended the theology of “free markets” to the financial sector, where it never had been considered wise for governments to yield regulatory oversight.

Can there be anything more revealing about the insider, banker/trader outlook of Paulson, Geithner, Bernanke, & Summers, Inc., than the massive bailout with taxpayer money to AIG which then promptly paid off at 100 percent on the dollar its $12 billion debt to Goldman, Sachs. Which in turn reported record profits the next quarter, an achievement that owed not to its role as a newly-chartered bank that generates loans but to its extensive and murky trading business. (How murky? We now know that Goldman, Sachs was/is among the conspirators that concealed the true fragility of the Greek government while encouraging investors to buy Greek government bonds; and at the same time, speculating in Credit-Default Swaps that will greatly profit G,S when/if the Greek Government defaults. Similarly, the federal government bought at 100 cents on the dollar Bank of America’s worthless loans so that B of A could buy the foundering Merrill, Lynch, another high roller in the financial casinos of the globe, at the same time concealing from its own shareholders (1) just how loaded with debt Merrill Lynch was, and (2) that M,L was about to award its top executives more than a billion dollars in bonuses!

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