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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, June 11, 2012

Goldman Sachs's CDS Rated Highest Level of Junk

It is difficult to take too seriously the ratings of Moody's when you consider their actions during the financial crisis.  Moody's helped to lower rating standards and suffered from major conflicts of interest when the firms they rated also paid their fees.

But if they were only expressing their opinion (and, therefore, cannot be sued), then maybe we should take some consolation in Moody's present rating of CDS at Goldman Sachs which have been downgraded to "the top level of junk."

Yes, High Level Junk is what CDOs and CDS represent at Goldman, then and now!
Gorman To Blankfein Treated As Junk Before Cuts:  Credit Markets
By Zeke Faux - Bloomberg
. . . .
Credit-default swaps on Bank of America, Goldman Sachs and BNP Paribas imply those banks should be rated Ba1, the top level of junk. Bank of America faces a downgrade to Baa2, Goldman Sachs could be cut two levels to A3 and BNP faces a two-step drop to A2.

Moody’s analysts derive implied ratings from prices on bonds and credit-default swaps, gauging market values for a particular company against the broader market.

Part of the discrepancy may be accounted for by traders using the contracts to bet on the health of the economy, rather than on the riskiness of the banks, according to Randy Woodbury, a portfolio manager and trader at Des Moines, Iowa-based Principal Global Investors, which manages about $258 billion in assets. Investors are wary of brokerages that can’t draw heavily on deposits and are more exposed to global threats, he said.

“The market is trying to become comfortable with the fact that this part of the industry is more of a BBB type than the AA it used to be,” Woodbury said. “Investors are struggling to figure out what is the appropriate risk they want to be compensated for.” 
Read the entire article here 


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