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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

Tuesday, December 14, 2010

Goldman Sachs's Shenanigans?

According to Mclean and Nocera's book, "All the Devils are Here," Goldman Sachs is a bank which is interested in protecting its own bottom line even at the expense of clients (p. 282). Bear Stearns made deals (Abacus and Timberwolf) with Goldman Sachs which have been characterized by the Permanent Senate Subcommittee as created to enhance Goldman Sachs but to cost its clients dearly. Goldman bought protection for itself while the buyers watched their securities dramatically decrease in value.

Goldman: We Didn't Topple Bear Stearns

Goldman Sachs Group Inc. told a U.S. panel examining the financial crisis that the company wasn't responsible for toppling two Bear Stearns & Co. hedge funds in early 2007.

In dozens of pages of documents submitted to the Financial Crisis Inquiry Commission, Goldman detailed its valuation of mortgage securities underwritten by the New York company, some of which were held in two Bear hedge funds managed by Ralph Cioffi and Matthew Tannin.

The two Bear hedge funds, which invested primarily in subprime mortgage securities and derivatives, were early victims of the crisis and a harbinger of the pummeling suffered by financial institutions and investors during the next 18 months.

The Bear hedge funds were fatally wounded by a precipitous decline in the value of mortgage securities. The funds valued their assets partly on valuations of mortgage-related securities obtained from trading partners such as Goldman. Some critics have suggested that Goldman helped push the hedge funds over the edge.

"It would be premature to make any determinations about what happened here," an FCIC spokesman said, adding that the questions responded to by Goldman "were derived from talking to a number of people, looking at documents after hearings that focused on Bear Stearns."

The documents turned over to the 10-member panel by Goldman and posted on the Wall Street giant's website show that its valuations of mortgage securities in April 2007 and May 2007 were nearly unchanged from the figures it provided to the two Bear hedge funds in March 2007.

Goldman also submitted emails sent from Goldman employees to managers at the Bear hedge funds. The messages show that write-downs by Goldman on the value of mortgage securities underwritten by Goldman and owned by Bear weren't large enough to cause the overall decline in net asset value that sank the hedge funds.

Goldman added that the steepest markdowns of Bear's holdings were triggered by other securities firms. Those firms sharply reduced their valuations of certain mortgage securities traded with the Bear hedge funds, called High-Grade Structured Credit Strategies Fund and Bear Stearns High-Grade Structured Credit Strategies Enhanced Leverage Fund. The funds were part of Bear's Bear Stearns Asset Management unit.

Messrs. Cioffi and Tannin were acquitted in November 2009 of criminal fraud charges related to the collapse. They are fighting a civil lawsuit filed by the Securities and Exchange Commission.

"We believe that, with the benefit of having these facts presented in one place, the FCIC will conclude that Goldman Sachs' April 2007 month-end marks could not have caused the revision of the Fund's NAV or the ultimate failure of the BSAM funds," Janet Broeckel, a Goldman associate general counsel, wrote in a letter to the FCIC.

Goldman posted the letter on its website last month.

The FCIC has said it will release its findings in January. For the past year, the panel, led by former California treasurer Phil Angelides, has pressed Goldman and other financial firms for documents and information, intending to write a definitive chronicle of the crisis. Earlier this year, the FCIC accused Goldman of delaying its response to a request for information by the panel. Goldman has said it has always complied with the FCIC's requests.

Read the article here


Anonymous said...

Last week, we received an invitation from some good citizens to sign onto a letter calling for criminal prosecutions of fraud as a necessary condition for national recovery. At first this idea liked us well, but then we reconsidered. If you are calling for criminal prosecutions, does this not demand a certain degree of specificity? Thus we demurred in the letter writing effort, preferring instead to conduct our own investigation. We are already on the record regarding our view of the need for prosecution of delinquents such as former Citigroup director Robert Rubin. Read the past issues of The IRA ( 'Country Risk: The World According to Robert Rubin (Updated)', June 29, 2010 ). Former Treasury Secretary Hank Paulson and Bank of America CEO Ken Lewis also come to mind.

Our friend Yves Smith over at Naked Capitalism has been sorting out the foreclosure documentation mess for some months and her work suggests some additional culprits. In a December 2, 2010 post, Smith skewers American Securitization Forum executive director Tom Deutsch for giving "one of the most outrageously dishonest presentations I can recall ever seeing." Click here to read "American Securitization Forum Tells Monstrous Whoppers in Senate Testimony on Mortgage Mess."

Anonymous said...

If you can't beat them, might as well get paid by them. Such were the prevailing thoughts in the head of New York Fed veteran Theo Lubke, who after 15 years at Liberty 33, most recently as head of reform efforts in the private derivative market, famous due to its size of roughly €583 trillion which may or may not take the financial system down with it during the next market meltdown. And so, after realizing the derivatives reform is impossible, and further realizing that getting paid a grossly exaggerated government salary for what is basically a lobby job, Lubke has instead decided to get paid an even more exorbitant amount by everyone favorite monopolistic bloodsucking parasite. What is most ironic is that during an ISDA conference in Beijing in April 2009, Ludke said: “It is simply unacceptable in today’s environment that the design and structure of the OTC derivatives market can be controlled by a handful of large dealers.” Oh well - an average government salary is $119,982, an average Goldman Sachs salary is about 4 times greater, an infinite amount of hypocrisy - priceless. For everything else there is the taxpayer bailout debit card.

Anonymous said...


“Great is truth, but still greater, from a practical point of view, is silence about truth. By simply not mentioning certain subjects, by lowering what Mr. Churchill calls an ‘iron curtain’ between the masses and such facts or arguments as the local political bosses regard as undesirable, totalitarian propagandists have influenced opinion much more effectively than they could have done by the most eloquent denunciation, the most compelling of logical rebuttals.”
–Aldous Huxley

Anonymous said...

This pathetic development shows how deeply this country is in thrall to lobbyists. But these so-called commissioners, who are really no more than financial services minions out to misbrand themselves as independent, look to have overplayed thier hand. This stunt shows more than a tad of desperation on the part of banks and their operatives in their excessive efforts block any remotely accurate, and therefore critical, report on the industry.

Perversely, this development may be a positive indicator on several fronts. First, the FCIC report may be tougher and more probing than I dared hope. The New York Times indicates, for instance, that it highlights the role of CDOs, an area our research (both here and in ECONNED) indicates was rife with abuses and also central in the crisis.

It may also suggest that the banking industry is feeling more cornered than its continued high-handed posture might suggest. I continue to receive reports from industry insiders confirming that the biggest banks in the US are insolvent. The only sensible resolution of the mortgage mess involves deep principal mods, which will force the top four banks to write down their second mortgage books, blowing big holes in their balance sheets, and raising numerous, embarrassing questions (how could they and the Treasury defend paying back the TARP, much the less the level of 2009 and 2010 bonuses?)

Anonymous said...


Firms Assail Whistleblower Plan by SEC

More than 260 companies warned the Securities and Exchange Commission that plans to pay bounties to whistleblowers will turn financial fraud into a "gold mine" for employees.

In a letter to the SEC, top legal officials at companies such as Delta Air Lines Inc., FedEx Corp., Gap Inc. and Pfizer Inc. told the agency that proposed rules for an enhanced whistleblower system required under the Dodd-Frank Act will undermine internal compliance programs already in place at companies.

Joyce said...

Lubke is the perfect example of the way Goldman Sachs gets and spreads its power. Lubke ~ Fed Reserve Bank ~ OTC Derivatives ~ Bank for International Settlements ~ National Economic Council at the White House~ Goldman Sachs. What a perfect circular number of relationships Lubke brings to Goldman Sachs.


Anonymous said...

Whistleblower plan out the window,

financial engineering rampant,



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