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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, December 9, 2010

Goldman Sachs and 0.0078 Interest Rate

It is hard to imagine that Goldman Sachs, who helped bring about the financial meltdown using mortgage-backed derivatives and who knows what else, had access to billions of dollars for a whole year in order to help bail out that same financial system. It seems incredible!

Money For Nothing: Wall Street Borrowed From Fed At 0.0078 Percent

By Shahien Nasiripour - The Huffington Post

NEW YORK -- For the lucky few on Wall Street, the Federal Reserve sure was sweet.

Nine firms -- five of them foreign -- were able to borrow between $5.2 billion and $6.2 billion in U.S. government securities, which effectively act like cash on Wall Street, for four-week intervals while paying one-time fees that amounted to the minuscule rate of 0.0078 percent.

That is not a typo.

On 33 separate transactions, the lucky nine were able to borrow billions as part of a crisis-era Fed program that lent the securities, known as Treasuries, for 28-day chunks to the now-18 firms known as primary dealers that are empowered to trade with the Federal Reserve Bank of New York. The program, called the Term Securities Lending Facility, ensured that the firms had cash on hand to lend, invest and trade.

The market was freezing up. Effectively free money, courtesy of Uncle Sam, helped it thaw.

The European firms -- Credit Suisse (Switzerland), Deutsche Bank (Germany), Royal Bank of Scotland (U.K.), Barclays (U.K.), and BNP Paribas (France) -- borrowed $5.2-6.2 billion in Treasuries 20 different times. The one-time fees they paid on each transaction ranged from $403,277.78 to $481,110. Deutsche led the way with seven such deals.

On each transaction, the fee paid for the 28-day loan is equal to a rate of just 0.0078 percent.

Story continues below

The first of these sweetheart deals began April 17, 2008. They ended nearly a year later on March 5. On that day, Goldman Sachs borrowed about $5.8 billion and paid just $450,000 for the privilege.

Goldman was one of four American firms that also paid that rock-bottom rate. Citigroup, defunct investment bank Lehman Brothers, and Merrill Lynch, which was gobbled up by Bank of America in a government-pushed transaction, benefited from the save-Wall-Street-at-all-costs approach. Goldman and Citi got the 0.0078 percent rate on five separate occasions, tops among U.S. banks.

The transactions highlight the extraordinary steps taken by the Fed -- and encouraged by both the Bush and Obama administrations -- to save Wall Street from its own mistakes. Households and small businesses have not been as lucky.

The Fed's crisis-era programs "provided liquidity to particular institutions whose disorderly failure could have severely stressed an already fragile financial system," the Fed said in a statement Wednesday posted on its website. A spokesman did not respond to an e-mailed request for comment.

This year, Wall Street is poised to break yet another record for employee compensation and bonuses. Thanks to near-zero percent interest rates -- also set by the Fed -- firms are able to continue making easy money with minimal risk.

*This story was updated at 8:30 p.m. ET. An earlier version of this article misstated the rate paid by the firms, the number of transactions, the amount of the fee, which varied by transaction, and incorrectly defined the rate itself. The rate, which was a fixed fee and not a traditional interest rate, was 0.0078 percent, not 0.0077 percent. There were at least 33 such transactions, not 31. And the actual fee paid ranged from $403,000 to $481,000, rather than a fee of about $384,000 for all of the transactions.

Read the article here


Anonymous said...

Goldman Implicated In CDS Price Manipulation Scandal

One of the recurring topics on Zero Hedge since inception has been
that Goldman's flow/prop operations, simply by dint of their massive,
monopolistic size, allow the firm to manipulate various securities,
among which equities, structured products, and especially CDS. And
while the firm has migrated to a more wholesale market manipulation
paradigm when it comes to equities due to the far smaller bid/ask
spreads, requiring the need for Goldman to become either an SLP on the
NYSE, or to create market manipulating algorithms, such as that it is
currently accusing Sergey Aleynikov of stealing, where the firm has
always excelled has been in the far thinner, and far more profitable,
courtesy of wide bid/ask margins, CDS market. Today, we get
confirmation from Senator Carl Levin, to whom it appears Goldman has
the same trophy value as SAC to the New York District Attorney and
Federal Task Force, that Goldman was engaged in precisely the kind of
CDS manipulation we have previously alleged the company was involved

While lacking the nuances of the firm's Abacus insider trading
scandal, in which the firm bet openly against clients, here the wager
was even more sinister: in essence while making markets in names in
which Goldman was often the only axe, it would subsequently, knowing
full well which clients has how much protection on, take advantage of
this information and create artificial squeezes in any direction it
desired. Furthermore, by controlling the variation margin on any
position, Goldman could force its own clients to collapse on their
positions, at massive losses, just so Goldman would make a profit, and
Goldman's own traders could make another record bonus.

Anonymous said...

Thursday, December 9, 2010
Treasury Bars Use of TARP Funds to Help Borrowers Facing Foreclosure

If you had any doubts about whose side the Administration is on, this story should settle all doubts. From the Nation:

Anonymous said...

Here's the deal. This financial crisis is like Shrek's onion. As you peel back layer after layer of sleaze, you find that the whole damn thing is fraud. We are talking about tens of trillions of dollars of it. Tens of thousands of individuals were involved. It was thorough. It was blatant. It was even transparent, right under the noses of regulators and supervisors. It was normal business practice. It never had any fear of prosecution or punishment. Even today, it taunts the impotent administration, daring President Obama to do anything.

And it expects to win. The fraudsters have Congress in their back pocket and plan to rush through legislation to validate ex post all of their illegal activity. It is almost a foregone conclusion that Congress will pass a law early next year to legalize everything MERS and the big banks did -- lending fraud, recording fraud, tax fraud, securities fraud, and foreclosure fraud. There will be no rule of law to protect private property in the United States. Wall Street can claim any property it wants -- no proof required. That is what President Bush meant when he proclaimed a new "Ownership Society" -- as I wrote back in 2005. The plan all along was to put the bottom four deciles of Americans into permanent indebtedness while the top fraction of one percent would transfer ownership of everything to itself. So far, President Obama has stuck with the program -- overseeing the greatest wealth transfer in human history.

Anonymous said...

Neel Kashkari Exercises In Rhetorical Hypocrisy:

Neel Kashkari, previously of Goldman Sachs, subsequently of TARP creation fame, and currently of PIMCO payroll generosity and Macroeconomic Advisors "expert network" insight, has penned a charmingly faux-heartfelt, and supremely hypocritical Washington Post op-ed in which he asks rhetorically whether "Washington can tackle the big economic issues?"

And, by the way Neel, had the US government done the right thing, and not "held up the world" letting those who deserve to fail, actually fail, then there would be no need for Washington to tackle big economic issues - ironically the market would have long been able to fix said problems on its own. But thanks to your actions we will indeed watch in terror as the government continues its exercises in supreme central planning.

Joyce said...

Thank you all for the four comments above. I read them all and became more and more depressed. There is so much funk out there that I don't know how anyone is going to clean it up.

I like Spitzer's idea below:

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