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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

Monday, August 16, 2010

Another Classic Goldman Screwup

Another peek behind the curtain reveals more trouble for Goldman. Well, not really as past crimes have resulted in a wrist slap.

It sounds like the plot to a dozen movies: Picture a corporation so powerful that its tentacles circle the globe and reach into the highest corridors of power. Yet a single sentence on an ex-employee's obscure website forces it to move into action. That sentence is so important that it leaves the corporation with no choice but to make that employee ...

No, not disappear. They just made him delete it. (This is where the movie comparisons end.) But the question is, why? The sentence described the Goldman Sachs risk system, SecDB (which stands for securities database). It read: "Unbeknownst to most of the non-strategists, you could see basically every position and holding across the company, whether you were supposed to or not."


First, consider the effect a revelation like this would have on Goldman's already-battered client relationships. The firm is struggling to overcome the now-public knowledge that it bet against some of those clients, causing them financial harm while claiming at the same time to "serve their needs." Personal relationships can influence a business deal even more than the corporation's reputation, which is probably one reason Goldman's still around. A corporate exec may continue to place his business with them even after he's heard the bad stuff, as long as he likes and trusts hiscontact there.

But what if our exec knew that his trusted "friend" at Goldman was aware of every position Goldman or its clients were taking against him (or had taken in the past), and that the guys betting against him knew instantly what he was doing? He might not want too much to do with his "friend" after that.

Then there's the question of market manipulation. Goldman has approximately 15% of the entire derivatives market. If its traders can immediately cross-check any deal they negotiate against what's happening across 15% of the market, in real-time, that could raise serious legal issues. And it could seriously undercut statements like these, in which Goldman's senior management tried to defend itself from accusations of fraud:


Read the rest here


Anonymous said...

Too cozy for comfort?

But as a political matter, the secretary continues to have some explaining to do. At a time of populist anger over Washington’s bailout of big, resurgent banking institutions, Geithner has consistently fueled the perception that he’s a clubby insider too cozy with Wall Street to police its excesses. After all, several of his closest aides at the Treasury Department are also veterans of the large Wall Street banks that the government was forced to rescue after the economic meltdown of 2008. Geithner raised eyebrows shortly after arriving at Treasury when he hired a newly departed Washington lobbyist for Goldman Sachs as his chief of staff.

Against that backdrop, the valuable freebie he took from the once and future JP Morgan exec raises questions about whether he’ll need to recuse himself anytime Treasury rules on issues of material interest to the bank that in any way involve Zelikow and his clients—or risk charges of favoritism.

Read more:

JR said...

I have just received the September 2010 issue of Harper's Magazine in which Frederick Kaufman responds to Steve Strongin's (Goldman Sachs) letter about "The Food Bubble." GS posted their letter on their website at

After I get permission to reproduce Kaufman's response, I will post it.

JR said...

Here's an article on the Obama White House:

Anonymous said...

"I feel as if America has suffered the greatest theft and cover-up -- ever, ... where banks created a pile of garbage, that they paid themselves billions of dollars in personal compensation, and then stuck the trillions of dollars worth of garbage with the American taxpayer. That, to me, is stealing." (7:05)

RobertM said...

re:Too cozy for comfort?

Nothing surprises me anymore about the incestuous relationships these people have. It's all just one big fuckin' happy club, ain't it?

Anonymous said...

Allegedly, the two daytraders found a weakness in the Timber Hill algo on the Oslo Stock Exchange back in 2007 and 2008, and used it to outsmart the market maker and make a few hundred thousand NOKs in the process. The punchline is that the charge against the two is market manipulation with an intent of "using buy- and sell-orders that were not intended to be traded on, but to move the prices." The irony is that as we have demonstrated repeatedly by showing prima-facie evidence from Nanex, quote stuffing patterns by thousands of HFT algos running amok across various US exchanges, ATS and other trading venues, is precisely what happens every single day in the US -

So when humans do it (and make peanuts compared to the billions the HFTs collect domestically), they end up going to jail; when our own system, which is geared to push stocks ever higher, does it - it is perfectly ok, and possibly even encouraged. After all, the HFTs provide liquidity, remember? Just ask Mary Schapiro.

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