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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 26, 2012

Goldman Sachs's Input Into the Role of Treasury Secretary

The second of the three rants that are mentioned here, is Neil Barofsky's book about his time as special inspector general of TARP--the bailout money given to banks after the financial crisis of 2008.  Barofsky, a former federal prosecutor, thought his job was to prevent the TARP fund from being improperly or wastefully used and to make sure there was no fraud or abuse connected with the fund.

Mr. Barofsky found the Treasury to be more friendly to the banks than to the taxpayers or to his suggestions.

This truth should not come as a great surprise when you consider previous Treasury Secretaries:  Robert Rubin (who worked for Goldman Sachs), Lawrence Summers and Henry Paulson (also from Goldman Sachs) were all against regulation and worked vigorously to deregulate rules already on the books and to make sure derivaties were not regulated ever.

Timothy Geithner never understood his role as a regulator when he was president of the Federal Reserve Bank of New York, so it is no surprise that his term as Treasury Secretary should have been met with resistance to fraud preventing measures as outlined below:
Into the Bailout Buzz Saw
. . . .

Thus the collision course was set between Mr. Barofsky and a crew of complacent, bank-friendly Treasury officials. He soon discovered that the department’s natural stance of marching in lock step with the banks meant that he had to question its policies and programs repeatedly to ensure that taxpayers weren’t at risk for fraud and abuse. 

“The suspicions that the system is rigged in favor of the largest banks and their elites, so they play by their own set of rules to the disfavor of the taxpayers who funded their bailout, are true,” Mr. Barofsky said in an interview last week. “It really happened. These suspicions are valid.” 

To be sure, Mr. Barofsky and his team were up against a powerful status quo. And that meant that they ran into plenty of brick walls. 

“Bailout” covers a lot of ground, running through attempts of the inspector general’s office to ensure that additional rescue programs suggested by the Treasury had safeguards in place to avoid conflicts of interest, collusion and fraud. One battle involved the Public-Private Investment Program, designed to get troubled mortgages off banks’ balance sheets by encouraging private investors to buy them using mostly taxpayer dollars. When the inspector general’s office recommended ways to protect against fraud and to fix other flaws in the program, Mr. Barofsky writes, the Treasury rejected the suggestions, maintaining that they would gut the programs and reduce participation. 
Read the whole article here 


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