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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

Monday, July 4, 2011

Goldman Sachs and Conflict of Interest

Goldman Sachs and BlackRock have "completed an index credit derivative trade along the lines of what was envisaged in the 2010 Dodd-Frank financial overhaul law." Now that is very interesting because the rules have been delayed in the CFTC and the SEC is still working on its rules. Shouldn't it be the government that is making the rules, not Goldman Sachs?

Or how can Goldman Sachs follow the rules that haven't been made yet?

But there you go. Maybe Wall Street does make the rules and then the government applies them, as has been the case in the past. But isn't that the wrong way of doing things? Goldman Sachs successfully hide its derivative trading in the shadow banking system that caused a financial crisis in 2008 and now Goldman Sachs is serving as the clearing agent and also the dealer on the trade that is purported to be according to Dodd-Frank. That sounds like conflict of interest.

Is Goldman Sachs trying to show that the government is not needed because GS has solved the problem. Oh, woe is us!

UPDATE: Goldman, BlackRock Complete E-Traded, Cleared Credit Swap

By Katy Burne - Dow Jones Newswires

NEW YORK -(Dow Jones)- Goldman Sachs Group (GS) and $3.65 trillion asset manager BlackRock Inc. (BK) announced Thursday they have completed an index credit derivative trade along the lines of what was envisaged in the 2010 Dodd- Frank financial overhaul law.

It is Goldman's first swap trade with a client to be electronically executed and centrally cleared in the spirit of that law. The firm has conducted several trades in a manner largely consistent with the aims of the act with other dealer banks for some time.

The trade, referencing the CDX North America Investment-Grade Index administered by Markit, was executed on a trading platform run by Tradeweb, and was cleared through Chicago'sCME Group. Other firms in the derivatives market, including Deutsche Bank, J.P. Morgan and Barclays Capital, have made similar announcements in recent months.

Goldman served as the clearing agent, routing the trade through to the CME clearinghouse for processing on its client's behalf. It also served as the executing dealer on the trade.

Clearing is when a central counterparty stands between trading parties, guaranteeing their contractual obligations in case a member of the clearinghouse defaults.

Under Dodd-Frank, standardized swaps will have to be traded on registered exchanges or other transparent platforms called "swap execution facilities." The majority of swaps will also have to be centrally cleared.

Tradeweb is considered one of the leading contenders to win "swap execution facility" status, although it is not yet possible to register as a SEF because regulators have not finished writing rules for the swaps market overhaul, as they were authorized to do under Dodd-Frank.

SEFs are expected to capture 10% to 15%, or $5 billion to $6 billion, of the banks' swaps revenue by 2013, according to a recent report by Morgan Stanley and consultancy Oliver Wyman.

Goldman is the latest in a string of Wall Street firms to be touting its capabilities in the derivatives clearing arena.

"This is the first end-to-end trade that we have conducted for a client from a likely SEF to clearing," said Jack McCabe, co-head of futures and derivative clearing services at Goldman, in an interview with Dow Jones Newswires.

He declined to comment on the trade itself, such as its size and direction.

Read the article here


Anonymous said...

by Paul Craig Roberts
Global Research, July 4, 2011

In a June column, I concluded that “conspiracy theory” is a term applied to any fact, analysis, or truth that is politically, ideologically, or emotionally unacceptable. This column is about how common real conspiracies are. Every happening cannot be explained by a conspiracy, but conspiracies are common everyday events. Therefore, it is paradoxical that “conspiracy theory” has become a synonym for “unbelievable.”

Conspiracies are commonly used in order to advance agendas.

Conspiracies are also a huge part of economic life. For example, the Wall Street firm, Goldman Sachs, is known to have shorted financial instruments that it was simultaneously selling as sound investments to its customers. The current bailouts of EU countries’ sovereign debt is a conspiracy to privatize public domain.

Anonymous said...

makes one wonder...but not US regulators???

ETFs Face U.K. Serious Fraud Office Review

U.K. fraud prosecutors are reviewing how exchange-traded funds are marketed and whether they have the proper tools to prosecute any wrongdoing in the industry, a person directly involved with the probe said.

The Serious Fraud Office, which prosecutes white collar crime, hired a consultant to interview bankers and lawyers to determine whether there is a risk that sales of the products may involve criminal conduct in the future. The Financial Services Authority and the Bank of England’s Financial Policy Committee have warned of a lack of transparency in the ETF market.
The mixture of “people buying things they don’t understand, complex structures, synthetic structures with counterparty risk, and huge short selling without enough assets in the underlying ETF” to meet demand makes the products sound like “something that we’ve been through before,” Smith said.

Opaque Funding

At a meeting of the interim financial policy committee in June, the group warned that FSA bank supervisors should “monitor closely the risks associated with opaque funding structures, such as collateral swaps or similar transactions employed by exchange-traded funds,” according to a record of the meeting.

Some parts of the ETF market “warrant closer surveillance by regulatory authorities,” the Financial Stability Board, a group of global regulators and central banking officials, said in April.

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