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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

Thursday, June 16, 2011

Can a Goldman Sachs Guy Change His Spots?

Gary Gensler worked for Goldman Sachs for 18 years. In 2009, he became chairman of the CFTC (Commodity Futures Trading Commission) which has the task of creating, regulating and enforcing the new Dodd-Frank rules for derivatives and speculation in the market. At first, Gensler appeared serious about regulating derivatives and speculation but lately there have been rumblings about delays in implementing the new rules.

Or, maybe the motto should be: Once a Goldman guy, always a Goldman guy. Delay of implementation is a kind of de-regulation in itself. You can see the pros and cons of having Gensler in the CFTC here. It may be a while until we know for sure if the leopard can change his spots.

Some of us are more skeptical than optimistic as shown by the piece from Zero Hedge:

CFTC Delays Swaps Regulation By Another 6 Months to Comply With Wall Street Demands
By Tyler Durden - Zero Hedge

One year after the passage of Dodd-Frank's provisions on swap regulation absolutely nothing has been implemented. And judging by the just announced yet another 6 month delay of rule implementation, it now appears pretty much certain that the $600 billion derivatives market will never be actually regulated, courtesy of conflicted interests at the CFTC. "The U.S. Commodity Futures Trading Commission proposed delaying rules for the huge derivatives market that had been automatically set to go into effect on July 16. One year after the passage of the Dodd-Frank financial overhaul that ordered a crack-down on the $600 trillion derivatives market, regulators have not been able to meet the deadline for translating the legislation into specific provisions. That prompted the CFTC on Tuesday to propose delaying some of the so-called "self-executing" rules until as late as the end of the year." After all, it is the CFTC's sworn duty to do anything to help the poor OTC traders who may experience a modest drop to their multi-million year end bonuses if profit margins are cut into by regulatory intervention: "Traders had feared that billions of dollars in transactions might suddenly fall into legal limbo. Without relief from the CFTC, a delay could have caused those contracts to lose the legal protection afforded them by a clause in the Commodity Futures Modernization Act of 2000 that created a framework that stated they were not illegal off-exchange futures." But lest someone suspect the fine upstanding gentlemen at the CFTC led by former Goldman Sachs employee Gary Gensler who has absolutely no interest in seeing his old firm continue along the confines of the status quo (very much like that other form Goldmanite Hank Paulson), the CFTC did provide this brilliant clarification: "The temporary relief proposals have "nothing to do with any outside pressure one way or the other to extend the rule-making or the effective date," a CFTC staff member said." Well, if they say so, it must be true.

More on why absolutely nothing will ever change until the next blow up which since it is backstopped by every central bank in the world, will be the very last one. From Reuters:

Those granted temporary relief from the new guidelines include transactions in exempt or excluded markets -- primarily in financial, energy and metals -- as well as measures that do not require rule-making but refer to terms such as swap, swap dealer or major swap participants that must be further defined by regulators.

"The exemptive relief that's being granted by the Commission would allow virtually all the same types of transactions conducted now to continue during this period," a CFTC staff member told reporters ahead of an agency meeting.

The relief measures became necessary after the CFTC said it would miss the July 16 deadline to write regulations for the over-the-counter derivatives market.

The delay risked a legal void for trades that would be caught between the current regulatory framework, which ends next month, and and not yet offered protection under as-yet unfinished new rules.

Read the entire article here


Anonymous said...

Elizabeth Warren, Capitalist Moderate

I think the first lesson that any businessperson should be taking from the massive downturn of the past few years is that we’ve let finance run too far afield, and that the guys at the banks are messing things up for everybody else. How can the rest of America make any money when Wall Street is bringing the entire system to its knees? It doesn’t seem fair. But instead, the Republicans and the Chamber of Commerce—claiming to represent all businesses from the titans down to “the local butcher“—are standing in solidarity against any regulation to promote the stable functioning of American capitalism.

Anonymous said...

The administration has done nothing to crush foul play...btw wasn't Goldman a big Obama supporter?

TOP MONEYMEN LAND PLUM POSITIONS: OpenSecrets Blog has reported in the past about President Barack Obama's big-money bundlers landing top ambassadorships to countries such as France, Belgium, Luxembourg and the Bahamas. Now, iWatch News, the collaborative investigative reporting effort of the Center for Public Integrity and the Huffington Post Investigative Fund, adds more data to that trend.

"More than two years after Obama took office vowing to banish 'special interests' from his administration, nearly 200 of his biggest donors have landed plum government jobs and advisory posts, won federal contracts worth millions of dollars for their business interests or attended numerous elite White House meetings and social events," iWatch News reported Tuesday.

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