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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, January 25, 2011

Goldman Sachs's Reputation Getting Ever More Smeared

It seems as though there is no end to Goldman Sachs's obligations towards repayment of loans, loans that were necessary in order to keep GS a viable operation (via TARP, FDIC, Federal Reserve [PDCF, etc.], and even Buffett) during the financial meltdown. There are probably other surprises out there for us to learn about. Any other business that borrowed so much money and still owed on its borrowings would not be paying huge bonuses and pay days to those executives responsible. What makes GS different?--support of their inferior banking practices up and down the government line.

Part of the error in judgment that occurred in all these borrowings is that the government did not ask for something concrete in return for all that money, such as support for financial reform, lending to small businesses, larger interest rates on repayment, for example. In fact to the contrary, after taking that bailout money, GS sent lobbyists to Congress to fight against financial reform. What gratitude! What a sad state of affairs.

If you want to see where the Federal Reserve money went in 2007 and beyond, go here.

Wall Street firms earn high profits while still owing Uncle Sam

By GREG GORDON - McClatchy Newspapers

Goldman Sachs, Morgan Stanley and other Wall Street giants that played roles in the subprime mortgage debacle are reporting huge profits and awarding hefty bonuses again even as the government remains on the hook for tens of billions of dollars of their debt.

Banking behemoths are among the scores of lenders and insurers that floated as much as $345.8 billion in federally guaranteed bonds under a program that is widely credited with helping to keep money flowing at the height of the financial crisis, when businesses had nowhere to turn for capital.

Now, with the crisis in the rearview mirror, banks that escaped tough federal pay restrictions by retiring more than $200 billion in direct loans from the Treasury Department are still benefiting from the Federal Deposit Insurance Corp.'s less-conspicuous debt guarantee program, which has no such strings attached.

Some of the Wall Street firms that are getting the guarantees are expected to draw criticism from the congressionally appointed Financial Crisis Inquiry Commission this week when the panel issues its final report on the root causes of the subprime mortgage meltdown, which crashed the global economy.

Under the FDIC program, federal guarantees ensured that bonds that dozens of lenders, investment banks and insurers issued - including Goldman, JPMorgan Chase, Bank of America, Morgan Stanley, Citigroup and General Electric - got gold-plated ratings that drew investors and drove down the cost of financing the debt.

The FDIC's bank insurance fund, which backs the bonds, has reaped more than $10 billion in fees from firms using the guarantees, while the outstanding debt declined to $267 billion as of Dec. 31.

The program doesn't expire until the end of 2012, and the agency says that most of the bonds don't expire until next year.

Robert Pozen, the chairman of Boston-based MFS Investment Management, argues that the government shouldn't have released firms from executive pay restrictions until they had paid off the Treasury Department's Troubled Asset Relief Program and the FDIC program.

"Any bank that gets out of TARP, it's basically saying that it's now 'good to go' in the private market," said Pozen, the author of the 2010 book "Too Big to Save?" "They shouldn't be continuing to have this big guaranteed subsidy."

However, the agency put tight restrictions on banks' ability to refinance the bonds. Further hampering refinancing is the fact that the market for unsecured bank debt is just beginning to thaw. Morgan Stanley only recently completed a $5.25 billion bond offering, the largest by a U.S. bank in 20 months.

Banking industry consultant Bert Ely said that the adequacy of the fees in the FDIC program, known as the Temporary Liquidity Guarantee Program, was "the kind of thing that will be debated for years."

"If you don't charge enough, then that's what creates moral hazard" and the presumption that risky behavior won't be penalized, he said. "If you charge too much, you may end up sinking institutions that you need."

On Monday, the FDIC, which had not identified the participants in its program, gave McClatchy Newspapers a list of the institutions involved.

Read the rest of the article here


Anonymous said...

Listen to this guy explain (@12 min plus into)how real estae is being accounted for on banks balance sheets: reserve acctng.etc

Keiser Report

Anonymous said...

The shell game is a roadside con as old as civilisation. This column argues that the same swindle is being performed on a massive scale at the expense of the unsuspecting taxpayer. It says that, with their near zero interest rates, central banks are effectively subsidising the banking sector – with barely a pea passed on to the public.

Wall Street bankers are then able once again to claim the bonuses they became used to in the good old days and to which they feel entitled because of the genius required to perform this operation. These bonuses are in effect transfers from tax-payers as well as from the mostly aged savers who cannot find alternative safe placements for their funds in retirement.

Anonymous said...

Of course Nierenberg didn’t act alone, Jeff Verschleiser who ran the other half of the Bear trading group, was making sure the bank was also shorting the stocks of the companies they sold products to that were designed to fail. And then bragged in 2007 to his risk committee, run by guys like Ace Greenberg and Waren Specter, that he’d just made double-digit millions off those shorts.

A few months after JP Morgan took over a near bankrupt Bear Stearns, Verschleiser landed in the mortgage department of none other than Goldman Sachs. According to a WSJ blog he even helped his new peers prepare for congressional testimony when it was their turn to defend selling products they thought were shit and designed to lose money.

Anonymous said...

Dirty Little Secrets About Goldman's Collateral Calls on AIG

Yes Goldman was smart, and yes, the people at AIG were clueless, which is why Goldman could pull off such an audacious scam. Goldman's demands for margin were made in bad faith, and possibly under fraudulent pretenses. The conventional wisdom overlooks a critical point: The legal documents had no teeth and might have been impossible to enforce.

The problems with the documents, in the context of the overall business deal, require a bit of explanation. But it's worthwhile to remember that all these deals are governed by two truisms: First, if you skip a step in analyzing a structured deal, you probably end up with the wrong answer. And second, almost everything about CDOs is kept secret in order to protect the guilty.

Joyce said...

Just when I get discouraged and think that no one will ever be prosecuted for the financial fraud committed by the banks, another story comes along and I get my hopes up again.

Anonymous said...

Zombie IPO: Is American International Group the "Blood Doll" of Wall Street?
January 25, 2011

Last week saw a number of important developments in Washington. General Electric CEO Jeffrey Immelt and Bill Daley were appointed as economic advisor and chief of staff at the White House, respectively, a move that signals the mutation of Barack Obama from Euro-socialist to center-right Republican. Think of the betrayal of conservative values by Richard Nixon in reverse and you've got the scale of the political transformation now underway at 1600 Pennsylvania Avenue.

With President Obama taking orders directly from former JPMorgan ("JPM"/Q3 2010 Stress Rating: "C") investment banker and Chicago fixer Bill Daley, there seems little reason for Treasury Secretary Timothy Geithner to remain at Treasury as the guardian of Wall Street. In historical terms, Geithner is the third protector of the big banks at Treasury after Hank Paulson (2006-2008) and Robert Rubin (1995-1999). Part of the duty of protector, to be fair, was also carried out by Bill "NYSE" Donaldson (2003-2005) and Chris "XBRL" Cox (2005-2009) during their respective tenures as SEC Chairmen.

Next Question: Quiet Periods and the Securities Act of 1933

Putting aside the financial condition of AIG for a moment, let's now consider the spectacle of the Treasury draining AIG of assets to repay the bailout funds and then selling what remains to the investing public in a share offering. In his zealous advocacy of the financial interest of the American people, Geithner makes a lie of his previous sworn protestations that he is not an investment banker. Oh, our boy Timothy is a master of the universe all right, a regular Jedi warriror, but one who serves the Dark Side. And like his peers at GS and JPM, skirting a few securities laws along the way to cashing in at the great casino called Wall Street is not a problem.

When we asked, hypothetically you understand, whether Tim Geithner calling Arthur Sulzberger or other senior managers at the New York Times and demanding favorable coverage of AIG in front of an offering would be a violation of the law, they reiterated that all Treasury officials are doing their utmost to comply with the securities laws. We are delighted to hear it. But still, we understand from several members of the media that Siewart, the former and last press secretary for President Bill Clinton, has been offering to arrange interviews with AIG management and senior Treasury officials. Again, if these allegations are true, Mr. Siewart's actions look an awful lot like conditioning the market in advance of a securities offering.

The recent Goldman Sachs fiasco involving FaceBook, where those special masters of the universe did not seem to understand that doing a private placement for a prominent internet company is pretty nigh impossible, the Treasury's handling of the sale of shares in AIG and other zombie companies seems to confirm that none of these people know their business -- or care.

Anonymous said...

Joyce...discouraged....forget it.

This is the banksters favorite song. It seems to work.

Joyce said...

Song and dance that lifts the spirits!!

Joyce said...

Everyone should read ZeroHedge's "Dirty Little Secrets About Goldman's Collateral Calls on AIG." It is so well written and proves the point about Goldman Sachs being a bully.

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