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Fraud*
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 23, 2011

Gary Gensler, Formerly of Goldman Sachs, and the CFTC

Former Goldman Sachs guy, Gary Gensler, has become an agent of change as Chairman of the CFTC which has taken on the challenge of writing new rules for regulating derivatives and halting excessive speculation in the market. Because of the financial crisis of 2008, he no longer believes that the market can rely solely on self-regulation. He is up against lobbyists of all stripes--banks (including Goldman Sachs), hedge funds and corporations of all sorts.

The opposition against Gensler's rule-making is every bit as acrimonious as the opposition to Elizabeth Warren's ideas about the CFPB (Consumer Financial Protection Bureau). See Cohan's remarks about Warren here.

May both Warren and Gensler succeed in their goals of protecting the public against predatory practices!

The excerpt below of Kambiz Foroohar's article in Bloomberg is a fair-minded and balanced one which mentions the roadblocks faced by Gensler at the CFTC:

Gensler Evolving in Derivatives War
Sees No Deed Go Unpunished

By Kambiz Foroohar - Bloomberg Markets Magazine

Gary Gensler, chairman of the Commodity Futures Trading Commission, took his seat before a Senate appropriations subcommittee on May 4 to make his case for a $106 million budget increase.

Without the money, Gensler said, his agency wouldn’t be able to perform its new job of policing roughly $300 trillion in U.S. over-the-counter derivatives, a market that includes the credit-default swaps that helped push the U.S. economy into the worst recession in 70 years, Bloomberg Markets magazine reports in its August issue.

“In 2008, both the financial system and the financial regulatory system failed the test for the American public,” Gensler, 53, told the senators. “An investment in the CFTC is warranted, because, as we saw in 2008, without oversight of the swaps market, billions of taxpayer dollars may be at risk.”

Even before Gensler had a chance to make his rounds at the Republican-controlled House, he got its response. Representative Jack Kingston, a Georgia Republican, proposed a spending bill on May 23 that called for a 15 percent CFTC budget cut to $172 million.

Although the Dodd-Frank Wall Street Reform and Consumer Protection Act required the commission to write and enforce more than 50 new rules regulating derivatives trading and commodities futures, Gensler, who’d gotten an increase for the current year, needed to tighten his belt starting on Oct. 1, as at other agencies, Kingston said.

. . . .

Wall Street Profits

Wall Street has emerged as Gensler’s biggest nemesis. JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC), Citigroup Inc. (C), Goldman and Morgan Stanley controlled 96 percent of the $321 trillion derivatives contracts held by U.S. banks in the first quarter, the Office of the Comptroller of the Currency says. The $321 trillion notional amount represents the estimated value of the assets that underlie the derivatives.

Goldman and the others make more than $30 billion in annual profit in financial derivatives trading, according to financial consultant Oliver Wyman, a unit of Marsh & McLennan Cos., the world’s second-biggest insurance broker.

Dodd-Frank would weaken that grip. The law, which gives the CFTC regulatory powers over 80 percent of the U.S. derivatives market, pushes as much swaps trading as possible onto futures exchanges and to new trading platforms called swap execution facilities.

Dodd-Frank also specifies that most swaps trades be settled through clearinghouses, which require firms to pay membership fees, provide money to cover trades and have minimum amounts of capital. Before Dodd-Frank, banks, insurance companies and hedge funds weren’t required to set aside money to cover potential losses. They made their own agreements about how much collateral, if any, to put up. The CFTC is writing the rules that govern the specifics for its portion of the market.

. . . .

It is worthwhile reading the entire article here

9 COMMENTS:

Anonymous said...

Who do you think they're protecting??

Contracts Cloud Who Has Exposure in Greek Crisis
By LOUISE STORY
Published: June 22, 2011

It’s the $616 billion question: Does the euro crisis have a hidden A.I.G.?

No one seems to be sure, in large part because the world of derivatives is so murky, but the possibility that some company out there may have insured billions of dollars of European debt has added a new wrinkle to the sovereign default debate.

The uncertainty, financial analysts say, has led European officials to push for a “voluntary” Greek bond financing solution that may sidestep a default, rather than the forced deals of other eras. “There’s not any clarity here because people don’t know,” said Christopher Whalen, editor of The Institutional Risk Analyst. “This is why the Europeans
came up with this ridiculous deal, because they don’t know what’s out there. They are afraid of a default. The industry is still refusing to
provide the disclosure needed to understand this. They’re holding us hostage. The Street doesn’t want you to see what they’ve written.”


For most purposes, determining whether a default occurred in a country’s debt falls to ratings agencies like Fitch and Moody’s. But for the derivatives market, a committee of I.S.D.A. makes the call.
http://www.nytimes.com/2011/06/23/business/global/23swaps.html?_r=1

Goldman Works Its Capture Magic, Hires 15 Year New York Fed
Derivatives Reform Veteran


If you can't beat them, might as well get paid by them. Such were the
prevailing thoughts in the head of New York Fed veteran Theo Lubke,
who after 15 years at Liberty 33, most recently as head of reform
efforts in the private derivative market, famous due to its size of
roughly €583 trillion which may or may not take the financial system
down with it during the next market meltdown. And so, after realizing
the derivatives reform is impossible, and further realizing that
getting paid a grossly exaggerated government salary for what is
basically a lobby job, Lubke has instead decided to get paid an even
more exorbitant amount by everyone favorite monopolistic bloodsucking
parasite. What is most ironic is that during an ISDA conference in
Beijing in April 2009, Ludke said: “It is simply unacceptable in
today’s environment that the design and structure of the OTC
derivatives market can be controlled by a handful of large dealers.”
Oh well - an average government salary is $119,982, an average Goldman
Sachs salary is about 4 times greater, an infinite amount of hypocrisy
- priceless. For everything else there is the taxpayer bailout debit
card.

http://www.zerohedge.com/article/goldman-works-its-capture-magic-hires-15-year-new-york-fed-derivatives-reform-veteran

Sovereign CDS – The Case for Control

ISDA’s argument that a ban on naked sovereign CDS will adversely
affect Europe’s financial stability is disingenuous. Speculative
trading in sovereign CDS is likely to be more destabilising, allowing
potential market manipulation.

The response of the industry to the EU proposal reveals that
participants are unwilling to admit the unpalatable realities of
derivative trading. Much of what passes for financial innovation is a
vehicle for unproductive speculative activity, specifically designed
to conceal risk or leverage, obfuscate investors and reduce
transparency. The aim is to generate profits for dealers.

http://www.wilmott.com/blogs/satyajitdas/index.cfm/2011/4/30/Sovereign-CDS--The-Case-for-Control

Anonymous said...

why don 't you take down the spam and leave posts with information up?

ISDA’s argument that a ban on naked sovereign CDS will adversely
affect Europe’s financial stability is disingenuous. Speculative
trading in sovereign CDS is likely to be more destabilising, allowing
potential market manipulation.

The response of the industry to the EU proposal reveals that
participants are unwilling to admit the unpalatable realities of
derivative trading. Much of what passes for financial innovation is a
vehicle for unproductive speculative activity, specifically designed
to conceal risk or leverage, obfuscate investors and reduce
transparency. The aim is to generate profits for dealers.

http://www.wilmott.com/blogs/satyajitdas/index.cfm/2011/4/30/Sovereign-CDS--The-Case-for-Control

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Anonymous said...

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Anonymous said...

got a lot of action in the comments section today ...dumb asses...that's what you get for censoring visitors and erasing posts

Anonymous said...

Sinclair, Hathaway - Hell Could Break Loose, Confidence Cracks

“We’re talking about the credit default swaps. There is a crisis in the derivatives again that nobody sees, but many people know. This crisis is the fact that the person who creates the derivatives, the manufacturer, what he’s creating is insurance policies. What’s being paid for it? Higher and higher prices as all of this default talk takes place, it’s nothing more than a promise to pay.


Modern derivatives have some degree of margin behind them, but not enough that could possibly survive a default on Greece tomorrow followed by all of the weaker nations of the EU. Nobody is really putting enough attention on the fact that these manufacturers sell these things and they take in huge amounts of cash flow. But their ability, taken as a whole, to guarantee the debt of sovereign nations is simply not there.


If you think that the banking system of the western world is strong enough to guarantee the debt of the western world, you’re totally out of your mind. That’s the reason they’ll do everything possible to paper over the Euro crisis to prevent the defaults in order to prevent another crisis in banking that definitively would occur, that absolutely would occur from a default. This fact is ravingly positive for gold. You would have a complete collapse of the western banking system if Greece goes down.”


http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/6/24_Sinclair,_Hathaway_-_Hell_Could_Break_Loose,_Confidence_Cracks.html

Anonymous said...

EU Leaders Appoint Mario Draghi to Head ECB; Draghi Was Head of Goldman’s Derivatives Group When Bank Advised Greece On Hiding Debt

http://maxkeiser.com/2011/06/24/eu-leaders-appoint-mario-draghi-to-head-ecb-draghi-was-head-of-goldmans-derivatives-desk-at-time-of-greek-swaps/

Anonymous said...

Where are the naked cds?
The banksters are holding everyone hostage...

Listen and learn

Jim Rickards

http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2011/6/25_Jim_Rickards.html

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