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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

Wednesday, November 30, 2011

Hank Paulson: Goldman Sachs Guy

The more we know about Goldman Sachs's Hank Paulson, the less we like what we learn. He was able to use his knowledge as Treasury Secretary to enrich his fellow Goldman guys and others. It is not a pretty picture: he is not an ethical man.

How Paulson Gave Hedge Funds Advance Word
By Richard Teitelbaum - Bloomberg

Treasury Secretary Henry Paulson stepped off the elevator into the Third Avenue offices of hedge fund Eton Park Capital Management LP in Manhattan. It was July 21, 2008, and market fears were mounting. Four months earlier, Bear Stearns Cos. had sold itself for just $10 a share to JPMorgan Chase & Co. (JPM)

Now, amid tumbling home prices and near-record foreclosures, attention was focused on a new source of contagion: Fannie Mae (FNMA) and Freddie Mac, which together had more than $5 trillion in mortgage-backed securities and other debt outstanding, Bloomberg Markets reports in its January issue.

Paulson had been pushing a plan in Congress to open lines of credit to the two struggling firms and to grant authority for the Treasury Department to buy equity in them. Yet he had told reporters on July 13 that the firms must remain shareholder owned and had testified at a Senate hearing two days later that giving the government new power to intervene made actual intervention improbable.

“If you have a bazooka, and people know you have it, you’re not likely to take it out,” he said.

On the morning of July 21, before the Eton Park meeting, Paulson had spoken to New York Times reporters and editors, according to his Treasury Department schedule. A Times article the next day said the Federal Reserve and the Office of the Comptroller of the Currency were inspecting Fannie and Freddie’s books and cited Paulson as saying he expected their examination would give a signal of confidence to the markets.

A Different Message

At the Eton Park meeting, he sent a different message, according to a fund manager who attended. Over sandwiches and pasta salad, he delivered that information to a group of men capable of profiting from any disclosure.

Around the conference room table were a dozen or so hedge- fund managers and other Wall Street executives -- at least five of them alumni of Goldman Sachs Group Inc. (GS), of which Paulson was chief executive officer and chairman from 1999 to 2006. In addition to Eton Park founder Eric Mindich, they included such boldface names as Lone Pine Capital LLC founder Stephen Mandel, Dinakar Singh of TPG-Axon Capital Management LP and Daniel Och of Och-Ziff Capital Management Group LLC.

After a perfunctory discussion of the market turmoil, the fund manager says, the discussion turned to Fannie Mae and Freddie Mac. Paulson said he had erred by not punishing Bear Stearns shareholders more severely. The secretary, then 62, went on to describe a possible scenario for placing Fannie and Freddie into “conservatorship” -- a government seizure designed to allow the firms to continue operations despite heavy losses in the mortgage markets.

Stock Wipeout

Paulson explained that under this scenario, the common stock of the two government-sponsored enterprises, or GSEs, would be effectively wiped out. So too would the various classes of preferred stock, he said.

The fund manager says he was shocked that Paulson would furnish such specific information -- to his mind, leaving little doubt that the Treasury Department would carry out the plan. The managers attending the meeting were thus given a choice opportunity to trade on that information.

There’s no evidence that they did so after the meeting; tracking firm-specific short stock sales isn’t possible using public documents.

And law professors say that Paulson himself broke no law by disclosing what amounted to inside information.

Read the rest of the article here

Other articles on the topic here and here


Go iceland said...

Iceland's special prosecutor arrests former Glitnir CEO: media

(Reuters) - Iceland's special prosecutor arrested the former chief executive of Glitnir Bank on Wednesday and questioned nearly two dozen people related to the collapse of the bank in 2008.

Outraged said...

On Wall Street, Some Insiders Express Quiet Outrage

Last week, I had a conversation with a man who runs his own trading firm. In the process of fuming about competition from Goldman Sachs, he said with resignation and exasperation: “The fact that they were bailed out and can borrow for free — it’s pretty sickening.”

Though the sentiment is commonplace these days, I later found myself thinking about his outrage. Here is someone who is in the thick of the business, trading every day, and he is being sickened by the inequities and corruption on Wall Street and utterly persuaded that nothing has changed in the years since the financial crisis of 2008.

I won’t pretend this is a widespread view in finance — or even a large
minority. You don’t hear this from the executives running the big Wall
Street firms; you don’t hear it from the average trader or investment
banker. From them, we get self-pity. For every one of the secret Occupy Wall Street sympathizers, there are probably 15 others like Kenneth G. Langone, who, like downtrodden people before him, is trying to reclaim and embrace a pejorative, “fat cat.”

Pinstripes said...

Eliot Spitzer: “In retrospect, I wish we had put more people in handcuffs.”
ELIOT SPITZER: There was an amazing piece of journalism that came out yesterday which analyzed the magnitude of the loans that have been made by the feds to the banks. The six big banks in particular got over $400 billion of secret loans, most of which we had not heard about. Now, at the time these banks were getting these loans, they were claiming to be in great financial shape. So why were the loans made? Is there a tension between the public statements being made by the CEO’s of the banks–
ELIOT SPITZER: The answer is no. And if you or I did that, if you or I went to a bank –
ELIOT SPITZER: Or made any public statement, knowing it to be false, we’d be in handcuffs. So the question I have is, look, we don’t know a lot of these facts. Let’s predicate — there are 100 uncertainties, but where is the inquiry right now about all the statements being made by the CEO’s, CFO’s none of which revealed these enormous loans.

Crooks govern said...

James Koutoulas Co-Founder Commodity Customer Coalition - MF Global Bankruptcy
Warren Pollock (wepollock) out foxes CNN and Reuters (Bloomberg CNBC did not attend at all) by asking hard questions of James Koutoulas regarding MF Global, in front of US Bankruptcy court, Bowling Green Manhattan. CNN tried to push him out of the way, a Reuters "reporter" scoffed, yet I bulldog to the real issues and concerns on this important issue as the mainstream media dozes in a coma. While the CME may back peddle; Warren talks to a retiree who lost all her money. We talk about JPM trying to run the show during bankruptcy as a fox in the henhouse; the CFTC, the CME and roles and responsibility. Items CNN won't cover include the two MF Global bankruptcies and balance sheets in play. One balance sheet containing customer money; the other used for speculation. If the speculative side dipped into customer funds a clawback must occur! I am sure JMP would not like that outcome. Was there fraudulent conveyance? Why is speculation still occurring if customer funds were at play in the speculative side of the house. JPM delaying motions with continuances.

On the lamb said...

Where in the World Is Jon Corzine?

When was the last time anybody saw Jon Corzine?

For several days following the bankruptcy of MF Global, Corzine was regularly appearing in the office. Sources at MF Global told me he spent his days in conference rooms with teams of lawyers and accountants. Then he abruptly resigned as chief executive.

And for his next act, he vanished.

Corzine is not an ordinary chief executive. As a former US Senator and former Governor of New Jersey, he is a public figure. He was even under consideration to be the next Treasury Secretary.

Corzine may be able to hide from cameras. Perhaps even from the Senate's panel investigating the collapse of MF Global. But he can't hide from public suspicion. And silence will never save his reputation.

On the lam said...

on the lam

At your expense said...

“MF Global – Hoisted on a Petard of Arrogance” by Sydney M. Williams

Wall Street has a maze of rules and, despite the hoots and hollers from “occupiers” and populist politicians, most are designed to protect investors. Perhaps the most fundamental of these is thou shalt not comingle customer cash with company cash. MF Global, which traces its roots back 228 years and which for the last 19 months had been run by Jon Corzine, former CEO of Goldman Sachs and a former U.S. Senator and Governor of New Jersey, allegedly did just that, according to James Giddens, trustee for the firm that filed for bankruptcy on October 31.

How complicit Mr. Corzine actually was in what would be a criminal act of using client funds for the firm’s purposes will be determined by the courts. But the act also highlights the too-cozy relationship – cronyism – between politicians and Wall Street. MF Global’s chief regulator, the Commodity Future’s Trading Commission (CFTC), which obviously did not perform the oversight they should have, is run by Gary Gensler, a former Goldman Sachs partner. Last February, MF Global was named as one of twenty-two primary dealers by the New York Federal Reserve, joining a select group that includes banks such as BNP Paribas, Goldman Sachs, J.P. Morgan and UBS Securities. The head of the New York Fed is another former Goldman partner, William Dudley. This smacks of crony capitalism at its worse, benefitting a small contingency at the expense of the people.

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