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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, April 12, 2011

Why Doesn't Goldman Sachs Give Up Its Bank Licence?

Here's hoping that Volcker is right when he says that banks like Goldman Sachs will be allowed to collapse if they fail (again). Sheila Bair, chair of the US Federal Deposit Insurance Corporation (FDIC) since 2006, wanted to use part of the $700 billion Bush bailout funds to help Americans who were facing foreclosures. Perhaps she will figure out how to handle "too big to fail" banks so that main street doesn't have to pay for Wall Street's excesses in the future.

According to the following article in Bloomberg, Goldman Sachs hangs onto its bank holding status just in case the market comes round to letting investment banks fail when they become insolvent (the next time round)!

Soros Says Moral Hazard Looms; Volcker Says Banks Can Fail
by John Detrixhe - Bloomberg Businessweek

April 11 (Bloomberg) -- Moral hazard in the financial system “looms larger than ever before,” even after the Dodd- Frank law gave U.S. federal agencies tools to regulate institutions that may be deemed too big to fail, said billionaire investor George Soros.

“The evidence is overwhelming that the first priority of the authorities is to prevent a market collapse, and everything else has to take second place,” Soros, chairman of Soros Fund Management LLC, said yesterday at a conference in Bretton Woods, New Hampshire.

Paul Volcker, former Federal Reserve Chairman, challenged the notion that large financial institutions wouldn’t be allowed to collapse, and asked Soros whether the extra yield on Goldman Sachs Group Inc. bonds relative to Treasuries would widen if the firm gave up its bank license.

“Probably currently it wouldn’t go up very much, but it would go up,” Soros said.

The Fed allowed investment banks Goldman Sachs and Morgan Stanley to convert to bank holding companies in September 2008. Dodd-Frank, the financial-regulation law enacted in July, gave the Federal Deposit Insurance Corp. authority to wind down complex firms after the bankruptcy of Lehman Brothers Holdings Inc. exacerbated the credit crisis and forced the U.S. to bail out companies including American International Group Inc.

“So you’re not 100 percent sure,” Volcker replied. “You want a tough administrator, you get Sheila Bair up here and she’ll tell you what will happen if you fail on her watch.”


Federal Deposit Insurance Corporation Chairman Bair told bankers last month that while the Dodd-Frank law is not “perfect,” it will strengthen the sector by giving the agency tools to regulate “too-big-to-fail” institutions.

Goldman Sachs’ $1.5 billion of 5.15 percent notes due January 2014 traded at 107.21 cents on the dollar to yield 111.6 basis points more than similar-maturity Treasuries as of April 8, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The securities fell to a low of 75 cents in October 2008.

“It’s clear they’re clinging to this banking license they got during the crisis because they think the market would permit them to fail if they weren’t a bank,” Volcker said. “Otherwise, why would they be holding onto the banking license with all the additional regulation?”

Volcker Rule

Volcker, 83, is known for taming inflation in the 1980s as Fed chairman and he provided advice on economic issues as well as the rewriting of regulations for financial institutions. The law enacting those regulations included the so-called Volcker rule, which banned proprietary trading at banks and restricted their investments in private-equity and hedge funds.

He was President Barack Obama’s head of Obama’s Economic Recovery Advisory Board and was replaced by General Electric Co. Chief Executive Officer Jeffrey Immelt.

While the Volcker provision “was loosened up a bit,” it’s incorrect to say that it was completely watered down, the former Fed chairman said. There’s still “intense” lobbying by the banking industry to influence financial reform, he said.

Europe’s refusal to allow members of the monetary union to restructure their debt has added to moral hazard in the financial system, Soros said. Portugal will start negotiations with the European Union and the International Monetary Fund this week on a rescue package estimated at 80 billion euros ($116 billion). The country was forced to seek aid, following Greece and Ireland, after its budget gap helped drive up borrowing costs.

Read the rest of the article here


Anonymous said...

Would you give up a license to steal?

8:36AM Marvell founders file lawsuit against Goldman Sachs (GS); claims GS 'put firms interests in front of clients'; claims defrauded executives of more than $100 mln (MRVL) 16.05 : The founders of MRVL, Sehat Sutardja and Weili Dai, filed a lawsuit in San Francisco Superior Court against Goldman Sachs (GS) and two account executives, alleging GS manipulated the 2008 financial crisis to defraud the two Silicon Valley executives of more than $100 mln. The suit alleges Goldman Sachs issued a margin call for the two executives' investment accounts, which were managed, under false pretenses, wrongly claiming an SEC Rule mandated the margin call when no such rule existed. It is alleged the margin call was a result of Goldman Sachs' need to repair its balance sheet and insulate itself from the extreme market turmoil of the financial crisis in 2008. Further, the complaint alleges that Goldman Sachs' wholly improper margin call reflects the Goldman Sachs' willingness to put its own interests ahead of its clients.
Founders of Marvell Technology Group File Lawsuit Against Goldman Sachs

Goldman Sachs’ “Culture of Corruption” Put Firms Interests In Front of Clients; Defrauded Executives of More Than $100 Million

Lawsuit seeks return of millions of dollars and punitive damages

yet the tv motor mouths use them as "the go to source" for advice, standards, group you know how to say..."compromised"?

Anonymous said...

You took down this...

Founders of Marvell Technology Group File Lawsuit Against Goldman Sachs

Goldman Sachs’ “Culture of Corruption” Put Firms Interests In Front of Clients; Defrauded Executives of More Than $100 Million

Lawsuit seeks return of millions of dollars and punitive damages


and why do you think volker's a beacon of light?

they already absconded with enough $ for many lifetimes...

Matt Taibbi has resurfaced with another stunner of Wall Street impropriety which will lead to merely more silence, even more unanswered questions and be quickly buried by the kleptocratic oligarchy.

The Real Housewives of Wall Street: Look Who's Cashing In On the Bailout

Why is the Federal Reserve forking over $220 million in bailout money to the wives of two Morgan Stanley bigwigs?

It's hard to imagine a pair of people you would less want to hand a giant welfare check to — yet that's exactly what the Fed did. Just two months before the Macks bought their fancy carriage house in Manhattan, Christy and her pal Susan launched their investment initiative called Waterfall TALF. Neither seems to have any experience whatsoever in finance, beyond Susan's penchant for dabbling in thoroughbred racehorses. But with an upfront investment of $15 million, they quickly received $220 million in cash from the Fed, most of which they used to purchase student loans and commercial mortgages. The loans were set up so that Christy and Susan would keep 100 percent of any gains on the deals, while the Fed and the Treasury (read: the taxpayer) would eat 90 percent of the losses. Given out as part of a bailout program ostensibly designed to help ordinary people by kick-starting consumer lending, the deals were a classic heads-I-win, tails-you-lose investment.
A key aspect of TALF is that the Fed doles out the money through what are known as non-recourse loans. Essentially, this means that if you don't pay the Fed back, it's no big deal. The mechanism works like this: Hedge Fund Goon borrows, say, $100 million from the Fed to buy crappy loans, which are then transferred to the Fed as collateral. If Hedge Fund Goon decides not to repay that $100 million, the Fed simply keeps its pile of crappy securities and calls everything even.

This is the deal of a lifetime.

Anonymous said...

Everyone that stops here should read this article in its entirety..very educational.

Can't stop what you don't understand.

A History of Rigged & Fraudulent Oil Prices

Now, with regard on the petrodollar system: I think that can be broken today quite simply by bilateral de facto barter deals between China and Saudi Arabia or other oil countries like Iran, consumers and producers, without the intermediary of the London International Commodity Exchange, the ICE Futures, or the NYMEX in New York, or the Dubai Exchange, which is controlled by NYMEX – which in turn is controlled by Morgan Stanley, Goldman Sachs and the big money center banks in New York and London. If that control can be broken – and it is a very elaborate system that the Anglo-American Establishment has built up since World War 2 to control the price of oil – it certainly is possible to break that. It’s a political decision. At that point oil will cease being a weapon of geopolitical financial warfare and will become a normal commodity whose price is based on supply and demand, which it isn’t now.

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