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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

Sunday, December 5, 2010

Why Goldman Sachs Should Not Be Too Big To Fail

More secrecy is uncovered about bailout money that the Fed fed to the American banks (including Goldman Sachs) rather than making a plan to unwind banks that are no longer viable. There are just too many "interested" men in the government, many of them connected to Goldman Sachs, who only see Wall Street's problems and never the problems of the people upon whom they depended for the bailout--the average American. It is a travesty!

At the very least, Goldman Sachs should not be both an investment bank and a holding bank.

So That's Where the Money Went

HOW the truth shines through when you shed a little light on a subject.

Such is the message from the massive document drop the Federal Reserve made last week. The Dodd-Frank law forced the Fed to disclose the recipients of $3.3 trillion from emergency lending programs put in place during the crisis days of 2008, so the taxpayers who paid for those rescue efforts now know whom they were helping.

Not that we should expect to receive any thank-you notes from these institutions for rescuing them from themselves.

Still, it’s good to know who got what at the bailout banquet. This helps us understand how expensive it is to live in a nation where big, politically interconnected financial institutions are not allowed to fail — even after they mess up in the most catastrophic of ways.

The Fed data showed that the biggest recipient of taxpayer assistance was, naturally, Citigroup. It was followed closely by Morgan Stanley, Merrill Lynch and Bank of America. Goldman Sachs was also a large beneficiary during the darkest moments of 2008.

Remember that the Wall Street firms were imperiled by their excessive use of borrowed money, which generated huge paydays when the cost of those funds was cheap and the values of the assets they were buying were rising at a steady clip. After the bubble burst and financing evaporated, the firms were able to tap into a lending program created by the Fed in mid-March 2008 after Bear Stearns collapsed. It was called the Primary Dealer Credit Facility.

The program allowed firms to borrow at low interest rates — ranging from 3.25 percent when the program began to 0.5 percent when the last loan was made in May 2009. The firms had to post various securities as collateral when they borrowed, and some of those securities were risky indeed.

Last week, the Fed provided spreadsheets identifying the companies that used the credit facility each day. Changes in these borrowings offer a window onto how quickly panic tore across Wall Street in September 2008.

For example, there were zero borrowings during August and even in early September, when Fannie Mae and Freddie Mac collapsed. But on Sept. 17, the day after the government rescued the American International Group with an $85 billion infusion, borrowings from the facility neared $60 billion. Lending in the facility peaked at $156 billion on Sept. 29, the day the House of Representatives voted down the Treasury’s bank bailout plan.

IT is interesting to review the borrowings of specific companies. Right after Lehman failed, for example, Morgan Stanley began tapping into the credit facility every day; it didn’t stop until early March 2009. Morgan Stanley’s borrowings peaked at $61.3 billion on Sept. 29.

Between Sept. 15 and Nov. 26 of 2008, Goldman Sachs also tapped the facility each day. The company began by borrowing $2.5 billion; its peak was $24.2 billion on Oct. 15.

By Nov. 10, Goldman’s borrowings had fallen to $7 billion; that was the day the New York Fed said it would make Goldman and other A.I.G. trading partners whole on credit insurance they had purchased from A.I.G. on troubled mortgage securities. Under that deal, Goldman received $5.6 billion from the Fed.

All of the emergency lending data released by the Fed are highly revealing, but why weren’t they made public much earlier? That’s a question that Walker F. Todd, a research fellow at the American Institute for Economic Research, is asking.

Mr. Todd, a former assistant general counsel and research officer at the Federal Reserve Bank of Cleveland, said details about the Fed’s vast and various programs should have been available before the Dodd-Frank regulatory reform law was even written.

“The Fed’s current set of powers and the shape of the Dodd-Frank bill over all might have looked quite different if this information had been made public during the debate on the bill,” he said. “Had these tables been out there, I think Congress would have either said no to emergency lending authority or if you get it, it’s going to be a much lower number — half a trillion dollars in the aggregate.”

Better late with the data than never, of course. And the release of these figures just ahead of Friday’s grim employment data — the jobless rate rose to 9.8 percent in November — makes them even more compelling. Clearly, the federal government was much more willing to deliver mountains of money to big banks that made big mistakes than it was to lend a financial hand to rank-and-file Americans struggling through foreclosures.

Federal officials have always argued that plowing money into errant banks and trading shops was the best way to rescue the economy, but to Edward J. Kane, professor of economics at Boston College, details of the Fed’s largess are reminiscent of a famous Winston Churchill quotation.

“Never have so few owed so much to so many, and given them so small a return,” Mr. Kane said. “We see, for example, how little these institutions have given back to troubled homeowners whose houses are threatened with foreclosure.”

Read the entire article here


Anonymous said...

Don't let them censure all of us! They want us in the dark!

To Orwellian Governments Around the Globe, Censoring = Fortifying the Censored!

I must admit that I am quite perturbed by the sheer amount of effort concentrated at not only censoring Wikileaks, but the censoring of media outlets that meerely comment on Wikileaks! It has become truly Orwellian in stature, and the worst part is that the attempts to censor something as distributed and collective in intellectual capital as the Internet is futile. All it has done has created ample bad will for governments worldwide, and those corporations that bowed to the pressure of said governments yet refuse to admit it. The bad will has gotten to the point where even I am pulling my patronage from Amazon (that means colored Nooks from now on, not Kindles, Barnes & Nobles for books and not, and Netflix for streaming content in lieu of Video on Demand). I can understand the need to bow to the pressure of the US government if you need to stay in business, but to cowtow and lie takes it a step to far.

S, now that Amazon, the US government and a host of other entities have bandied together to censor Wikileaks and those media outlets that report on it, they have made Wikileaks more popular than Wikipedia itself! In addition, due to the distributed, collective community intelligence nature of the Internet, they have also (by pulling the plug on its conventional infrastructure) created a nearly unassailable infrastructure in the process. So, Wikileaks is banned in the Library of Congress, corporate intranets, and Amazon, but it lives everywhere else. You see, Censorship is to the Internet as Contagion is to a Host Body. The Internet (eg. the host body) moves to remove censorship as contagion.

Anonymous said...


JR said...

Nice Night Before Squidmas poem. Enjoyed it.

Joyce said...

Ben Bernanke was interviewed on 60 minutes last night. He explained about how the Fed was not "printing" more money and that the actual amount of money in the US was a stable amount. How can that be? His answer confirms that those at the top who have acquired gargantuan amounts of this money have obtained it from those at the very bottom who have nada and from those in the middle who have stagnant wages and salaries. That scenario would have to be true if the amount of money in the US is not increasing.

When the interviewer asked Bernanke what was the cause of this great discrepancy between the very rich getter richer and richer and the poor getting poorer, B's answer was that the difference was because of the education that each group had obtained! That strikes me as very weird.

He answered the question in this manner probably because if he had been truthful he would have had to admit that the Fed Reserve didn't do its job of overseeing and regulating the financial system before the 2008 meltdown. He would also have had to admit that the banks used derivatives to amass huge fortunes which began the crisis, then these same banks were bailed out again and again and again to the tune of trillions of dollars while the average homeowner wasn't helped in the foreclosure crisis.

Something is really askew here both in reality and in the answers Bernanke gave.

Joyce said...

If you want a fuller critique (thanks to Anonymous)of the 60 minutes show go to:

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