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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, January 30, 2011

Goldman Sachs's Josh Birnbaum

Josh Birnbaum has an interesting history with Goldman Sachs. Wikipedia has the following to say concerning his, and others', actions in 2007 and 2008:

Actions in the 2007–2008 subprime mortgage crisis

Despite the 2007 subprime mortgage crisis, Goldman was able to profit from the collapse in subprime mortgage bonds in the summer of 2007 by short-selling subprime mortgage-backed securities. Two Goldman traders, Michael Swenson and Josh Birnbaum, are credited with bearing responsibility for the firm's large profits during America's sub-prime mortgage crisis.[18] The pair, who are part of Goldman's structured products group in New York, made a profit of $4 billion by "betting" on a collapse in the sub-prime market, and shorting mortgage-related securities. By summer of 2007, they persuaded colleagues to see their point of view and talked around skeptical risk management executives.[19] The firm initially avoided large subprime writedowns, and achieved a net profit due to significant losses on non-prime securitized loans being offset by gains on short mortgage positions. Its sizable profits made during the initial subprime mortgage crisis led the New York Times to proclaim that Goldman Sachs is without peer in the world of finance.[20] The firm's viability was later called into question as the crisis intensified in September 2008.

On October 15, 2007, as the crisis had begun to unravel, Allan Sloan, a senior editor for Fortune magazine, said:

So let's reduce this macro story to human scale. Meet GSAMP Trust 2006-S3, a $494 million drop in the junk-mortgage bucket, part of the more than half-a-trillion dollars of mortgage-backed securities issued last year. We found this issue by asking mortgage mavens to pick the worst deal they knew of that had been floated by a top-tier firm – and this one's pretty bad.

It was sold by Goldman Sachs

, Fortune 500
) – GSAMP originally stood for Goldman Sachs Alternative Mortgage Products but now has become a name itself, like AT&T and 3M.

This issue, which is backed by ultra-risky second-mortgage loans, contains all the elements that facilitated the housing bubble and bust. It's got speculators searching for quick gains in hot housing markets; it's got loans that seem to have been made with little or no serious analysis by lenders; and finally, it's got Wall Street, which churned out mortgage "product" because buyers wanted it. As they say on the Street, "When the ducks quack, feed them."[21]

On September 21, 2008, Goldman Sachs and Morgan Stanley, the last two major investment banks in the United States, both confirmed that they would become traditional bank holding companies, bringing an end to the era of investment banking on Wall Street.[22][23] The Federal Reserve's approval of their bid to become banks ended the ascendancy of the securities firms, 75 years after Congress separated them from deposit-taking lenders, and capped weeks of chaos that sent Lehman Brothers into bankruptcy and led to the rushed sale of Merrill Lynch & Co. to Bank of America Corp.[24][25]

According to a 2009 BrandAsset Valuator survey taken of 17,000 people nationwide, the firm's reputation suffered in 2008 and 2009, and rival Morgan Stanley was respected more than Goldman Sachs, a reversal of the sentiment in 2006. Goldman refused to comment on the findings.[26]

More Wikipedia information on Josh Birnbaum can be found here.

Josh Birnbaum's "Prepared Remarks of Ex-Goldman Sachs Executive Joshua Birnbaum" for the U.S. Senate Permanent Subcommittee on Investigations (April 27, 2010) can be found on Dealbook here.

Bruce Krasting's blog comments on Josh Birnbaum's testimony before the Senate Committee can be found here.

Josh Birnbaum's formation of a $1 Billion hedge fund can be found on Bloomberg's report here.

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You can view the video on ZeroHedge here


Joyce said...

The Independent Commission on Banking(ICB)in the UK submitted a paper (Nov. 2010) entitled "ICB Submission: Potential flaws with securitisation" that describes the potential frauds that surround securitisation. It suggests that perhaps securitisation itself is a fraud. It seems to me that Birnbaum must have known that his bank, Goldman Sachs, was creating "lemons" by bundling its MBS loans into CDOs and at the same time transferring their risk (of carrying subprime mortgages) to investors who bought their "shitty" deals. The paper identifies this activity with fraud.

GS meets the criteria for "bankruptcy for profit" as identified in the paper. It comes with decline in regulation of banks and with government increasingly supporting such banks (TARP, QE1, QE2, and other borrowings from the Fed). GS meets all the criteria for "bankruptcy for profit" which "will occur if poor accounting, lax regulation or low penalties for abuse give owners an incentive to pay themselves more than their firms are worth and then default on their debt obligation. Bankruptcy for profit occurs most commonly when a government guarantees a firm's debt obligations." (Akerlof & Romer 1993).

See the paper here:

Anonymous said...

Sunday, January 30, 2011
Former Managing Director of Goldman Sachs: Egyptians, Greeks, Tunisians and British Are All Protesting Against Pillaging of Their Economies

When a country, among other shortcomings, relinquishes its financial system and its population's well-being to the pursuit of 'good deals', there is going to be substantial fallout. The citizens protesting in the streets of Greece, England, Tunisia, Egypt and anywhere else, may be revolting on a national basis against individual leaderships that have shafted them, but they have a common bond; they are revolting against a world besotted with benefiting the powerful and the deal-makers at the expense of ordinary people.

Anonymous said...

This is the biggest Ponzi scheme of all time, the most popular con in history. Lets call it PopCon, so it has the slick marketing-oriented anagram that gives it a nice sound and imparts the mantle of respectability.

Despite the popularity of the concept of ‘too big to fail’ among bankers and economists in the diseased economies, the simple truth is, nothing is too big to fail, and perpetual growth is impossible. Any future predicated on perpetual growth is bound to fail. The perpetual growth strategy guarantees that.

Does anybody in Davos know this? And if they do, does anyone have the cojones to say it? And if they do, do they have the political capital to effect the changes that would defer this inevitability and reverse it?

Anonymous said...

Why do you link to clusterstock?

It seems they censure your site...see bleachers..

Anonymous said...

Nomi Prins 3 1/2 minute primer on Goldman Sachs latest Facebook shady scam

Anonymous said...

Clusterstock has ome good articles. We got busted for linking a comment to

Anonymous said...

That should be "some."

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