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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, July 5, 2011

Goldman Sachs's Paradoxical Behavior

Goldman Sachs knows how to make its presence felt and knows how to persuade the public that it is a "good" member of society. For example, it gave $1 million to the New Zealand Red Cross for support of the people who suffered from the earthquake in Christchurch. That gesture could bamboozle you into thinking that Goldman Sachs is just massaging its bruised reputation or you could think "What a grand gesture!"

On the other hand, we know that Goldman Sachs contributed mightily to the financial crisis; the following is from a press release regarding the Levin/Coburn Report:

Investment Banks and Structured Finance. Investment banks reviewed by the Subcommittee assembled and sold billions of dollars in mortgage-related investments that flooded financial markets with high-risk assets. They charged $1 to $8 million in fees to construct, underwrite, and market a mortgage-backed security, and $5 to $10 million per CDO. New documents detail how Deutsche Bank helped assembled a $1.1 billion CDO known as Gemstone 7, stood by as it was filled it with low-quality assets that its top CDO trader referred to as "crap" and "pigs," and rushed to sell it "before the market falls off a cliff." Deutsche Bank lost $4.5 billion when the mortgage market collapsed, but would have lost even more if it had not cut its losses by selling CDOs like Gemstone. When Goldman Sachs realized the mortgage market was in decline, it took actions to profit from that decline at the expense of its clients. New documents detail how, in 2007, Goldman's Structured Products Group twice amassed and profited from large net short positions in mortgage related securities. At the same time the firm was betting against the mortgage market as a whole, Goldman assembled and aggressively marketed to its clients poor quality CDOs that it actively bet against by taking large short positions in those transactions. New documents and information detail how Goldman recommended four CDOs, Hudson, Anderson, Timberwolf, and Abacus, to its clients without fully disclosing key information about those products, Goldman's own market views, or its adverse economic interests. For example, in Hudson, Goldman told investors that its interests were "aligned" with theirs when, in fact, Goldman held 100% of the short side of the CDO and had adverse interests to the investors, and described Hudson's assets were "sourced from the Street," when in fact, Goldman had selected and priced the assets without any third party involvement. New documents also reveal that, at one point in May 2007, Goldman Sachs unsuccessfully tried to execute a "short squeeze" in the mortgage market so that Goldman could scoop up short positions at artificially depressed prices and profit as the mortgage market declined. (Read the summary here.)
Goldman Sachs has been sending out information supporting its position that it did nothing illegal leading up to the crisis. But don't be fooled. Goldman Sachs tries to get its own way in order to make mountains of money by betting on and playing the market, preferably according to its own rules.

When they are challenged by new laws such as the Dodd-Frank law or new rules like the Volcker Rule both of which are meant to protect the public against predatory practices of banks like Goldman Sachs, Goldman Sachs goes into full lobbying mode. So far this year (2011) they have spent $1.3 million on lobbying expenses. Goldman Sachs doesn't lobby just anyone; they lobby those with the knowledge of how government works. They meet privately with regulators and lawmakers; they employ former Senators and House minority leaders; they use Committee members to learn important information; they rain money on those whom they wish to influence, including President Obama.

In 2010, Michael Paese's lobbying team spent $4.6 million on lobbying the federal government. We must not be confused by Goldman Sachs's grand gestures. GS wants to influence government financial policies and it knows how to do that.

Goldman Sachs flexes its lobbying muscle
The investment bank has bolstered its Washington presence significantly, turning a low-key lobbying operation into a sophisticated, high-powered enterprise led by a well-connected former congressional staffer, Michael Paese.
By Jim Puzzanghera - Los Angeles Times

. . . .

Now, under Paese, Goldman has developed what a former Senate staffer described as a "very sophisticated" lobbying operation.

Goldman rarely has gone public with its positions — even as federal agencies draft hundreds of rules this year — preferring to let trade groups such as the Securities Industry and Financial Markets Assn. highlight key issues.

The company almost never circulates documents outlining its views, except on the rare occasions its executives testify before Congress.

But by many accounts, Goldman has become an influential, behind-the-scenes player in Washington. Its quiet lobbying, for instance, is widely believed to have helped water down some key provisions of the financial reform law that would directly affect its business.

Those provisions include a broader exemption for the continued use of some unregulated financial derivatives and a weaker ban on so-called proprietary trading — known as the Volcker Rule — to allow Goldman and other banks to invest up to 3% of their capital in hedge funds and private equity funds that have been huge money-makers for the industry.

Several current and former congressional staffers described the company's way of spreading influence but did not want to be quoted for fear of crossing it.

Goldman often sends top officials to Washington to meet privately with lawmakers and regulators. For example, its executives have held 55 separate meetings with staff at the Commodity Futures Trading Commission alone since last summer as the agency works to craft new regulations covering the complex financial derivatives that are Goldman's lifeblood.

The securities industry overall has boosted its spending over the last five years as well. But Goldman's increase far outpaces the industry's. The company had eight in-house lobbyists and 41 outside lobbyists in 2010, compared with five in-house lobbyists and 31 outside lobbyists in 2005, according to the Center for Responsive Politics.
Read the entire article here


Anonymous said...

Lobbying sure...but that's to give the whole process diversion....they make policy with direct influence...they don't need middle men when they are the financial cartel!

How The Federal Reserve Continues To Conduct Shadow Bailouts

Squeezing the working and middle class

The line out of Wall Street banks has now shifted from:

-(2007) We need money from the Fed to keep money going to American families and small businesses.

And the new line now follows:

-(2011) We need to cut spending and wages to keep competitive in the global marketplace.

What happened to lending to American families and small businesses, the actual reason for the bailouts? These financial liars of course will say anything to steal more taxpayer money. Now it is a narrative of more stealing. These bankers of course don’t follow that line of cutting their own wages but then again, what do expect from the new oligarchy sponsored by the Fed?

The Fed and its banking cabal would like you to believe that now, everyone needs to live on wages slightly above minimum wage while the pinstriped suit bankers continually squeeze out more and more profits through bailouts, rip offs, financial alchemy, or simply by robbing taxpayers. This is the new business model.

Anonymous said...

good quote from jesses cafe:

"The real menace of our Republic is the invisible government, which like a giant octopus sprawls its slimy legs over our cities, states and nation...Powerful international bankers virtually run the US government for their own selfish purposes. They practically control both parties, write their platforms...and resort to every device to place in nomination for high public office only such candidates as will be amenable to the dictates of corrupt big business." John F. Hylan, Mayor NYC, 1922

Anonymous said...

Sounds like the US.....

How Greece's Political Elite Ruined the Country

The latest tranche of loans from the EU and the IMF has helped buy debt-ridden Greece some time. But the Greeks will find it hard to get back on their feet. Their country has been ruined by three political dynasties, which created a bloated system of cronyism that is hard to change. By SPIEGEL Staff

In the 1980s, he gave so much to his cronies and supporters that the country's debt ballooned.,1518,772176,00.html

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