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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 29, 2011

Goldman Sachs: You Have No Shame!

In Bethany McLean and Joe Nocera's book (page xi), "All the Devils are Here," the executives of Goldman Sachs, who either helped create the junk derivatives or stood by while their bank helped bring down the financial system, are listed. I think it is important to make that list even more public:

Josh Birnbaum, Star trader who specialized in the ABX index;
Lloyd Blankfein, Current CEO;
Craig Broderick, Current chief risk officer;
Gary Cohn, Current president and COO;
Jon Corzine, Senior partner who convinced the partnership to go public. Replaced by Hank Paulson within days of the IPO;
Steve Friedman, Co-head of Goldman Sachs with Robert Rubin;
Dan Sparks, Head of the Goldman mortgage desk from 2006 to 2008;
Michael Swenson, Co-head of the structured products group under Sparks;
John Thain, Co-COO under Paulson until 2003;
Fabrice Tourre, Mortgage trader under Sparks. Later named as a defendant in the SEC's suit against the company;
David Viniar, CFO.

And now, of course, three years after meltdown, these executives are getting very large pay raises. See also here and here. They have no shame; they have no empathy; they have no consciences.

The FCIC hints at prosecutions but we are not holding our breath for that to happen at Goldman Sachs. The world has turned into a very pestilential place. It's not too big a stretch to say that the government is a client of Goldman Sachs (see below in red).

However, here's an article that even Jonathan Swift would be proud of:

Philip Maddocks: Goldman Sachs deal lets wealthiest clients invest in themselves
by Philip Maddocks
Gatehouse News Service

The banking giant Goldman Sachs has created a “special purpose vehicle” for its high-net-worth clients that it says would further set them apart from the rest of the world by allowing the elite group an exclusive opportunity to invest in themselves.

“We just want to do our part for our business’ economy and make sure all of us are living the life we deserve,” said a Goldman Sachs spokesman. “We are capable of doing great things for this company, and if that happens to help out the country, too, then all the better. But we’re not worried about that right now and neither are our clients.”

In having its most prized customers invest billions in themselves through Goldman, the New York bank has established itself as the leading candidate to win the lucrative and prestigious assignment of its clients’ initial public offering, whenever that offering comes. It also puts Goldman in the position to reap millions of dollars in banking fees.

Goldman says it has already begun the process of wooing its wealthy clients to invest in themselves, forming an investment vehicle that seeks to raise as much $100 billion through the cabal of the super wealthy.

Although the special purpose vehicle for its special clients represents a negligible percentage of Goldman’s roughly $900 billion balance sheet, it is symbolically significant because it had been unclear whether the firm would, after the financial crisis, be using its wealthiest customers to make these types of illiquid, risky investments.

Goldman is charging stiff fees to its investors for the privilege of investing in themselves — a 4 percent placement fee and a 5 percent cut of the investor’s profits — according to two people with direct knowledge of the deal. Despite the rich price of entry, the firm has told clients it suspects the deal will be substantially oversubscribed.

Clients of Goldman will have to invest a minimum of $2 million and will be prohibited from selling their shares in themselves until 2013. The firm has warned prospective investors that if they invest, they will only be able to trade stock on themselves in a shadow marketplace managed by Goldman.

While the investment orchestrated by Goldman is being hailed as a huge coup on Wall Street, the deal — in particular, the investment pool being formed for its like-walleted clients — could come in for scrutiny by regulators and policy makers as they jealously examine the growing shadow market of rich investors.

But in a statement, Goldman said it welcomed the attention of regulators and even encouraged them to invest in the new venture, provided they could come up with the billions of dollars in fees and could show the net worth necessary to join the Goldman inner circle. The firm also encouraged newer technology companies like Facebook and Goupon to get in on the action “before the robber-baron days of the 19th century pass them by.”

“It’s time for this company and its investors to start living beyond their means again. We have to get back to basics, and until we acknowledge — and deal with — the debt we owe to ourselves, we will never get there,” Goldman said in its statement.

Goldman said it also didn’t rule out taking on the federal government as a client, provided it could get its financial act together in time and start behaving even more like one of its clients.

“We look at this as an opportunity for those who make the laws to give back to those who make those laws work for them,” the bank’s statement read. “But we have to take care that this good for the country doesn’t come at the expense of this bank.”

In addition to the potential banking fees generated by an initial public offering of the U.S. government, there is the unlocked paper wealth it carries, and Goldman would most likely have a leg up in winning the assignment to manage that money, too.

But for the moment, the company said it is entirely focused on its current clients, whose investment the company now calls the 7,000-mile project — a reference to the dimension of the investment if it was represented as a stack of dollar bills.

One Goldman investor felt that gaining the imprimatur of a major investor like himself for himself at such lofty levels would validate his existence in the eyes of Goldman Sachs, with whom he is negotiating other deals.

“It’s not every day that I get an opportunity to invest in someone like myself,” the investor said. “I think all of us super-select Goldman clients will be looking to expand our business with ourselves beyond this minority stake. I can’t see any reason why I won’t continue as a loyal client to myself and I’m glad Goldman recognizes that.”

You can read the article here


Anonymous said...

Step Aside The Bernank Here Comes Timothy Jeethner: The Bears Explain Banker Bailouts And The Screwing Of The American People

The same two bears who explained Quantitative Easing so that even the ADHD afflicted could understand Bernanke's indirect subsidies to the PDs, once again simply finance and in 6 minutes explain the core issues behind the bank bailouts. Concepts explained include the Too Bigger To Fail banks (the JP Morgan Chase Bear Stearns Washington Mutual and the Bank of America Countrywide Merrill Lynches), Goldman Sachs' HoldCo position over the US government, the "very real evil empire's" Goldman Sachs profiting on the AIG, the reason why the failed CIT's boss is the same person who bought a $70,000 desk, and why "when you constantly get the bailouts you don't care about the shame." Also explained are NY Fed boss, The Timothy Jeethner, The Change brought from The President Obama, why The Ben Bernank will not lend you money, and The Screwing Of The American People.

Anonymous said...

Friday, January 28, 2011
How can the Architects of the Crisis Investigate it?
By William K. Black

Each of the Republican commissioners was in the impossible position of having to investigate and judge their own culpability for the crisis. The Republican politicians who selected them for appointment to the Commission knew that they were placing them in an impossible position and ensuring that the Commission would either give deregulation a pass or split along partisan lines and lose some of its credibility. The proverbial bottom line is that the Commission would fail to identify the real causes of the crisis and the control frauds that drove it would continue to be able to loot with impunity.

While the squashing of Brooksley Born was a bipartisan effort (Senator Gramm and Alan Greenspan were the most prominent Republicans in the effort), it was led by the Clinton administration – Messrs. Rubin and Summers at their arrogant, anti-regulatory worst.

Anonymous said...

The question: Who Benefits?

And, Regulating what, exactly? "Money?" What "money," exactly? We get there is no real money and freedom finally looks in the rear view mirror, 20/20: REPUBLIC, we are a Republic and the International Business Machines' keystrokes of digits into "money," belongs to We The People. What does that mean? Question is a good one to ask: COMMITTEE ON THE BUDGET, John M. Spratt, Jr., Chair,The Honorable and Paul Ryan, Wisconsin BAR#?, The Honorable Ranking Member; and, also, carefully review the letter, FY 2011, Committee's Presidential Budget Request, COMMITTEE ON THE JUDICIARY, Lamar Smith, Chair and John Conyers, Jr., Ranking Member, which does not suffer a recession with a sum far exceeding 7Billion for 2011's Federal Courts' operations and also, the non-profit Legal Services Corporation [LSC], fascinating to see how our system is with respect to the rule of law and money transparency fully, 21ST Century style.

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