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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, March 22, 2011

Goldman Sachs and Pushing the Envelope

Goldman Sachs likes to find out what the rules are by making their moves and seeing what happens. When Goldman Sachs offered their "special purpose vehicle" to US clients for investing in Facebook, the SEC considered that the rules of disclosure were being broken. GS removed that offer and presented it to their foreign clients, where the US rules do not apply.

It would be easy for Goldman Sachs to ask for clarification of the Volcker rules but, being a bank of great risk-taking, it is more in their makeup to do something first and find out what the rules are later. Forbes has a case in point:

Is Goldman Sachs Skirting The Volcker Rule?
by Halah Touryalai - Forbes

Anyone who thinks it’s business as usual on Wall Street in the wake of regulatory overhaul just got some more evidence of that.

One of the big rules coming out of the financial crisis was dubbed the Volcker Rule. The rule, named former United States Federal Reserve Chairman Paul Volcker, prohibits banks from making certain kinds of bets with their own capital, as opposed to making investments on behalf of customers.

The rule was part of the Dodd-Frank Act that Congress passed last year but has had a bumpy ride in implementation so far. Since then, there’s also been a some varied interpretation of the Volcker rule since actual implementation by government has been slow.

The most recent example of that comes out of none other than Goldman Sachs-arguably the king of making profits by trading its own capital. A notable Bank of America analyst said today that that Goldman continues to make principal investments with its own money because executives at the firm don’t believe the practice falls under the Volcker rule.

In other words, Goldman is still using its own money to invest as a principal in longer-maturing assets and securities.

Analyst Guy Moszkowski met with Goldman execs in Hong Kong last week who told him they don’t think the Volcker rule, which bans proprietary trading and limits holdings in hedge funds and private-equity funds, applies to principal investments, according to Bloomberg report.

Goldman Sachs wouldn’t comment on Moszkowski’s note or its interpretation of the Volcker rule when I called the firm this morning.

So is Goldman just being Goldman by getting around regulators’ attempts to manage risk? Maybe.

Regardless though, the government needs to make clear whether or not principal transactions fall in the same category as other prop trading activities. Right now, Goldman doesn’t think they do saying such deals are more of a lending business.

The FT blatantly stated last fall that Goldman, JPMorgan Chase and Morgan Stanley all intend to take advantage of the Volcker rule by continuing to make these so-called “principal investments.” Their argument: principal investments are regarded as longer-term commitments and carry higher capital charges, the FT writes.

…principal transactions were both an important driver of banks’ profits in the run-up to the financial crisis and a big source of losses.

Lehman Brothers’ participation in the $23.6bn leveraged takeover of Archstone, a property group, in mid-2007 contributed to the investment bank’s demise a year later…

Simon Johnson, professor at Massachusetts Institute of Technology, said it would be “pretty crazy” if banks were allowed to invest as a principal in longer-maturing assets and securities. “That’s exactly how banks blew themselves up,” he said.

But Goldman seems to be doing just that. Moszkowski notes that Goldman has a meaningful such deal coming up in China. The bank will buy a 12.02% stake in Taiking Life Insurance from AXA’s Life Ltd. but the value of the stake is not being disclosed. A Goldman exec in Asia notes that such investments have been a key earnings driver for the firm’s Asia business.

Read the full article here


Anonymous said...

Sleaze Watch: NY Fed Official Responsible for AIG Loans Joins AIG As AIG Pushes Sweetheart Repurchase to NY Fed

The corruption in high places is getting more and more brazen with every passing day. The only thing that separates the US from conventional banana republic status is that no one leaves keys to new luxury cars on the desks of officials to secure their cooperation. It’s just not enough of an inducement to get anyone to take action

Anonymous said...

When the Agenda 21 is about 100 years past, then the insurance on how many humans died and paid out, shall be known.

Insuring TROOPS for 10 million dollars? Or whatever the UN partners [27 countries?] can factor in the equation to get paid for genocide in the 21st Century, global apartheid in essence.

The same ole traffic of flesh deal with the idea of insuring it, what a deal to see how many clean sweeps of millions [Barry Soetero has his mission as the first Jewish President], as the Administration is hired to do other countries, too, not just America, look-see.

Roberta Kelly

Anonymous said...

My comment: Is Roberta Kelly on drugs? If she wishes to be understood, she must speak in a language that can be understood.

Anonymous said...

Anonymous, it appears government [Israel First] does not want any other human being other than an anon, it is called faceless.

Therefore, stand and say what you have to say without apartheid [separating the language], perhaps then you have credibility in not being able to understand.

Roberta Kelly

give me an email anon and tele, address? Let's communicate directly, then maybe you can get what you need in words to understand the word, apartheid.

Anonymous said...

You ever get the feeling you're being played in a good cop/bad cop volcker, buffet, etc...with goldman & co...they are all on the same team!

Central Banking is a blight on humanity

Let’s assume that there are enough people out there who have no idea about the rigging of the precious metal markets – could you explain, please: a) who the major players are, and b) the motive to do such things?

Over thousands of years – irredeemable fiat currencies from A [assignats] to Z [zloty] have come and gone. The one thing that ALL unbacked fiat currencies ever produced have in common is that they have ALL FAILED by ultimately achieving their true intrinsic value – ZERO. Over the same time period, Gold [and silver] has served as a universal, time tested alternative [and hence, competition] to irredeemable fiat currencies.

With this in mind, we must consider who issues irredeemable fiat money? That would be the Central Banking community – quarterbacked by the Central Bank of Central Banks – the Bank for International Settlements [BIS] located in Basel, Switzerland. It is the Central Banking elite [some refer to this group as a cabal] who are currently issuing irredeemable fiat currencies at such ruinous, debasing rates that tangibles / historic alternatives like gold and silver appear as “go to” alternatives.

We have proof that the Central Banking community views gold with disdain in that former Fed Chairman Paul Volcker is “on record“ stating that, “gold is the enemy”. You can google “Volcker gold is enemy” and read about this for yourself.

So, the gold price acts as a “report card“ for the Central Banking community. When the price of gold is rising – the bankers are failing. Nobody wants to take home failing grades to show their parents now, do they?

To laypeople, the activities of Central Banks are almost invisible. That’s because Central Bank policies are carried out by proxy institutions who do their bidding in institutional capital markets – in the case of gold – Bullion Banks like J.P. Morgan, Goldman Sachs, Bank of Nova Scotia and Deutsche Bank. These banks willingly execute Central Bank policy due to the lucre afforded them by the Guttenberg press.

Anonymous said...

New Civil War erupts, led by super rich, GOP
Commentary: ‘Shock Doctrine,’ Reaganomics trigger explosive class war

Klein warned: “Free market ideology has always been a servant to the interests of capital, and its presence ebbs and flows depending on its usefulness to those interests. During boom times, it’s profitable to preach laissez faire, because an absentee government allows speculative bubbles to inflate.”

But “when those bubbles burst, the ideology becomes a hindrance, and it goes dormant while big government rides to the rescue.” Remember: A week later Paulson was on his knee, begging House Speaker Nancy Pelosi for that $787 billion bailout, to save our incompetent Wall Street banks that caused the meltdown from certain bankruptcy.

Anonymous said...

Whats that saying about lipstick?

Sides Clash Over Goldman Chief

But prosecutors, in a letter Monday to U.S. District Judge Richard Holwell, said open investigations of Goldman Sachs "are of no relevance" to the trial and have no bearing on Mr. Blankfein's credibility.

"Rajaratnam might suggest, for example, that because Goldman Sachs is tied up in many different legal proceedings, the firm—and by extension its CEO, Mr. Blankfein—is not to be trusted," prosecutors wrote in the letter. A Goldman spokesman declined to comment.

The government also told the judge that Mr. Blankfein shouldn't be cross-examined about Goldman's possible role in the 2008 financial crisis because the trial "is simply not the appropriate forum to delve into the highly complex causes" of the crisis and recession.

Anonymous said...

I know for a fact that proprietary trading is alive and well at GS. I have family and friends that continue to work in those groups in NYC, Tokyo and London. Its business as usual for them - continue to mint money as never before.

Anonymous said...

Fed Stress Test a Farce

Funny, I thought the bank bailout was supposed to encourage more
lending. The dividend increases will fatten the paychecks of bank
executives, but I don’t see lending taking off anytime soon. There
was plenty of information about what went into the Fed assessment of
the financial health of the banks, but “mark to market accounting” was
not mentioned one single time in any release or report I read from the
Fed. “Mark to market accounting” is simply valuing an asset for what
you can get for it today. It has been a standard method of accounting
much of the 20th century, and it is how the IRS values assets.

Many of the 19 largest banks are sitting on possibly trillions of
dollars of mortgage-backed securities (MBS) and underwater real
estate. Because of an accounting rule change in April 2009 by the
Financial Accounting Standards Board (FASB), “mark to market
accounting” is largely ignored. Banks can hold diminished assets on
their books at whatever value they think they can get for them in the

Anonymous said...

Blankfein also testified about a board meeting on Oct. 23, 2008, when board members were told that Goldman was facing a quarterly loss for the first time since it had gone public in 1999. He said the company was "concerned that this number would be a surprise" to investors, because the consensus in published reports was that the company was making money.

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