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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

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Saturday, May 5, 2012

Comments that Apply to Goldman Sachs

Barry Ritholtz has definite views about what caused The Great Recession and about the players that indulged themselves in order to bring it to the rest of us.

The excerpts below are pertinent to bankers like Goldman Sachs in regard to HFT, Rogue Bankers, Robert Rubin, Financialization of the US Economy, Lobbying and Bankers and Risks:
Ritholtz Interviews With Jonathan Miller:  An Uncompromised View of Contemporary American Politics and Economics
From Capitalism Without Failure

On High-Frequency trading: It's a zero sum game. They are skimming. Mom and pop's pension fund is being ripped off a little bit on every trade. Only shameless whores, that are the publicly traded exchanges, would steal from the public. If the exchanges were not-for-profits no one would ever think of doing this. It is this kind of behavior that makes the public wary of investing in stock markets.

On Rogue Bankers: There is no such thing as rogue traders. There are only rogue banks. If you are that grossly negligent that you have to be rescued by the government, then I guarantee you they are doing lots of other things wrong. If you have an entity that messed up so badly that it can't survive... how are you going to go out and run a marathon? Jamie Dimon is the next CEO who needs a humbling.

 On Robert Rubin: Another giant asshole - he gave us Geithner and Summers. You don't send the same surgeon in after a botched surgery because the first surgeon is more interested in covering up his work.

On the Financialization of the US Economy: From a macro perspective, the US economy has been financialized. Wall Street is supposed to bring capital to companies working on new products. And, in theory, they also manage retirement accounts and assets - but they don't do a good job of that. Everything else - moving paper around, structuring finance, all that other bullshit - is just a waste of energy. It doesn't do anything for society. And, even worse, it pulls people - mathematicians, engineers, etc. - into the industry who would otherwise have gone into the Googles, the Apples, etc.

 On Lobbying: I have libertarian friends who are always bitching about government. I always say to them, when a dog bites you in the ass... that's what dogs do - don't blame the dog. Look up the leash and see who is holding the handle. When you look at Congress - Congress is the snapping dog. But they are somebody's bitch. You have to see who is holding the leash. Very often it is banks and Wall Street and the financial sector having Congress do its bidding. Most of the things that got us into trouble have been done at the bequest of the banks. For example, the 2004 change in leverage ratios... ironically known as the Bear Stearns Act - as in banks larger than Bear Stearns had lower ratio requirements. First of all, why do you change a law for just 5 banks and not for all of them? That shows you how corrupt the system is.

On Bankers and Risk: I look at bankers like 5 year olds - if you give a 5 year old a bowl of chocolate bars and say they can have one... As soon as you leave the room they will eat until they are sick. Bankers are no different. As soon as you say, "You're a big boy... we trust you not to blow up the economy and send the world to the precipice..." They are so short-term focused, they will do whatever is necessary to get that bonus, and then will let the world go to hell and let it be someone else's problem. The whole run-up from 2003-2007 was make-believe, based on risk not mattering. If risk doesn't matter, you mash your foot to the carpet and let the speedometer go up to 250. When the driver hits the wall he kills himself. The difference is the driver kills himself, but the bankers take everyone with them.
Read the article and listen to the podcast here

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