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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, July 28, 2011

Some New Conflicts of Interest for Goldman Sachs

Goldman Sachs finds many ways to create revenue and profit for themselves. Sometimes their methods lead to conflicts of interest; for example, Goldman Sachs sold toxic CDOs comprised of mortgage backed securities (sub-prime) to their clients without letting them know that GS was placing bets on the failure of the mortgage market. Their clients lost big time money and Goldman made billions!

Here's another example of conflicts that Goldman Sachs embraces: the bank has begun buying warehouses (the ones in Detroit store aluminum) in which the metal is stored while waiting to be sold. Goldman Sachs collects rent on the storage facilities but it also trades in commodities which leaves lots of room for GS chicanery. Unfortunately, those wishing to access the metal have had to wait too long for delivery which created higher prices even when the supply was ample. Prices were driven up by artificially induced shortages of metal produced by long waiting times. Goldman Sachs could possibly earn up to $165 million a year in revenue rent. And we have no idea what it may have earned speculating in the market on the price of aluminum which they seem to maneuver at will.

Why should Goldman Sachs, or any bank for that matter, be trading in metal and owning warehouses in which to store it? It all comes down to money: warehousing earns revenue for the LME (London Metal Exchange) which regulates and certifies the Detroit sheds plus it gets 1% of the rental income and is not anxious to change the regulations which may result in a legal challenge by Goldman Sachs.

Goldman Sachs also owns warehouses in New Orleans which store zinc.

Below is an excerpt from an article in Reuters by Pratima Desai, Clare Baldwin, Susan Thomas, Melanie Burton, Chris Kelly and Karen Norton:

Special Report--Goldman's new money machine: warehouses
By Pratima Desai, Clare Baldwin, Susan Thomas,, Melanie Burton, Chris Kelly and Karen Norton - Reuters

Madden estimates that the U.S. benchmark physical aluminum price is $20 to $40 a tonne higher because of the backlog at the Detroit warehouses. The physical price is currently around $2,800 per tonne.

That premium is forcing U.S. businesses to fork out millions of dollars more for the 6 million tonnes of aluminum they use annually.

It has also had a knock-on impact on the global market, which is forecast to consume about 45 million tonnes of the lightweight, durable metal this year.

Also pushing aluminum costs higher are bank financing deals, which are estimated to have locked up about 70 percent of the 4.4 million tonnes of the metal sitting in LME-registered warehouses around the world. LME inventories hit an all-time record above 4.7 million tonnes in May.

In a typical deal, a bank buys aluminum from a producer, agrees to sell it at some future point at a profit, and strikes a warehouse deal to store it cheaply for an extended time period.

The combination of the financing deals and the metal trapped in Detroit depots, means only a fraction of the inventories are available to the market.

Premiums for physical aluminum -- the amount paid above the LME's cash contract currently trading at $2,620 a tonne -- in the U.S. Midwest hit a record high of $210 a tonne in May, up about 50 percent from late last year. In Europe, the premium is at records above $200 a tonne, double the levels seen in January 2010.

The ripple effect into Asia has seen the premium paid in Japan increase 6 percent to $120 a tonne in the third quarter from the previous quarter, the first rise in nearly six quarters.


You won't hear banks like Goldman complaining. Rental income continues to pour in at the 19 Detroit area warehouses run by Metro as of June.

Read the entire article here


Anonymous said...

Whatever it Takes

Of the many lamentable things to have emerged from the financial crisis and the subsequent rape of the American public by Wall Street and their employees in Washington D.C. has been the emergence of catchy phrases used by the criminal elite class to sell us on our own servitude. We know all about that horrid “Too Big To Fail” gimmick, the entire concept of which is anti-freedom and anti-capitalism but right up there on the list of irritating and dangerous statements is the constant use by central planners like The Bernank and Tiny Timmy Geithner that they would do “whatever it takes.” Ah, but what does this mean. Whatever it takes. Let’s think about this for a second. Whatever it takes to achieve what exactly? They say to boost the economy but in reality when you look at what they really mean is “whatever it takes” to PRESERVE THE STATUS QUO. A status quo that has not worked for the vast majority of Americans for decades and will not work for 99.9% of us going forward. Key to preserving the status quo is the preservation of the financial and monetary system as it exists today.

Anonymous said...

Giant Banks Lobby to Raise the Debt Ceiling and Slash Public Benefits ... So They Can Keep Sucking at the Public Teet

Economist Dean Banker notes:

Wall Street will suffer more than anyone from a default and it will not let it happen. The public should know this, certainly Wall Street does.

No wonder the fatcats running the giant banks which received tens of trillions in bailouts, loans and guarantees from the American public are screaming loudly that the debt ceiling must be raised.

Anonymous said...

Ghettofication of America

starts @13 minutes


Crime Reports said...

Interesting that despite the debt ceiling talks, and discussed departure of Timothy Geithner, the goldman boys still seem to have a cast iron grip on the senate and congress deliberations. maybe boehner can reform wall streets STATUS QUO.

Anonymous said...

Conflicts everywhere...

Grassley Questions Education Agency’s Ties to Hedge Funds

There is no indication that Mr. Eisman or any other hedge fund manager traded on — or received — inside information. A spokesman for Mr. Eisman, who has not been accused of wrongdoing, declined to comment.

Over the last several months, Mr. Grassley has been focused on the nexus of Washington and Wall Street. His office is looking into the Securities and Exchange Commission’s handling of a series of stock trades by the hedge fund firm SAC Capital Advisors.

The senator also scrutinized the Federal Communications Commission’s decision to grant a crucial waiver to LightSquared, the wireless telecommunications venture backed by the billionaire hedge fund manager Philip A. Falcone.

Now Mr. Grassley is joining the broader inquiry into the Education Department’s relationship with Wall Street. Senator Tom Coburn, Republican of Oklahoma, has called for a government investigation into potential insider leaks.

mute cnbc

Anonymous said...

Third Way Document Proves Democratic Party Supports Institutionalized Looting by Banks

It is one thing to suspect that something is rotten in Denmark, quite another to have proof. Ever since Obama appointed his Rubinite economics team, it was blindingly obvious that he was aligning himself with Wall Street. The strength of the connection became even more evident in March 2009, when Team Obama embarked on its “stress test” charade and bank stock cheerleading. Rather than bring vested banking interests to heel, the administration instead chose to reconstitute, as much as possible, the very same industry whose reckless pursuit of profit had thrown the world economy off the cliff.

But now we see evidence in a new paper by the think tank Third Way of an even deeper commitment to pro-financier policies. The Democratic party has made clear that it supports institutionalized looting by banks, via the innocuous-seemeing device of rejecting the idea of writedowns on bonds they hold.

Anonymous said...

Conflicted and twisted as a pretzel...

The World’s Biggest Central Bank Has Private Shareholders

So the private banks own the Fed (and most other central banks), and the central banks – and private shareholders – in turn own BIS, the global bank regulator.

It would obviously be very interesting to find out who these private shareholders are.

mute cnbc

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