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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

Saturday, January 22, 2011

Goldman Sachs, Here is a Suggestion for You

Recently, Goldman Sachs published 63 pages of resolutions that promise to improve the bank's practice and image. The report has been called "a public relations stunt." We already know that GS committed civil fraud because of the way they selected and disclosed their CDOs, even though they never admitted to the fraud. If Goldman Sachs wishes to make changes that appear to be more than window dressing, then here is a suggestion for them: They should endeavor to understand the three propositions taken from the Black and Randall article excerpted below. If understood and taken to heart through honest practice and disclosure, then and only then, would we all be impressed with GS's desire to be an honest and less risky bank.

William K. Black and L. Randall Wray in an article in The Huffington Post discuss how to deal with the problems of the big banks of which Goldman Sachs is one.

Foreclose on the Foreclosure Fraudsters, Part I: Put Bank of America in Receivership
by William K. Black and L. Randall Wray - The Huffington Post

. . . .

We make three propositions concerning what we believe to be institutions that are run as "control frauds". To date, this situation has been ignored in the policy debates about how to respond to the crisis. The propositions rest on a firm (but ignored) empirical and theoretical foundation developed and confirmed by white-collar criminologists, economists, and effective financial regulators. The key facts are that there was massive fraud by nonprime lenders and packagers of fraudulent nonprime loans at the direction of their controlling officers. By "massive" we mean that lenders made millions of fraudulent loans annually and that packagers turned most of these fraudulent loans into fraudulent securities. These fraudulent loans and securities made the senior officers (and corrupted professionals that blessed their frauds) rich, hyper-inflated the bubble, devastated millions of working class borrowers and middle class home owners, and contributed significantly to the Great Recession -- by far the worst economic collapse since the 1930s.

Our first proposition is this: The entities that made and securitized large numbers of fraudulent loans must be sanctioned before they produce the next, larger crisis. Second: The officers and professionals that directed, participated in, and profited from the frauds should be sanctioned before they cause the next crisis. Third: The lenders, officers, and professional that directed, participated in, and profited from the fraudulent loans and securities should be prevented from causing further damage to the victims of their frauds, e.g., through fraudulent foreclosures. Foreclosure fraud is an inevitable consequence of the underlying "epidemic" of mortgage fraud by nonprime lenders, not a new, unrelated epidemic of fraud by mortgage servicers with flawed processes. We propose a policy response designed to achieve these propositions.

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Read the entire article here


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