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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, December 26, 2012

Goldman Sachs and Mergers and Acquisitions

One way that Goldman Sachs makes profit is through merging and/or acquiring other companies.  In May 2012, Goldman Sachs purchased Dwight Asset Management based in Vermont which became part of GSAM as a "leading provider of investment solutions for defined contribution (DC) plans and reinforces the importance of stable value as a principal preservation option for plan participants."

Once again, Goldman Sachs is getting rid of risky investments and placing the risk on the shoulders of others.  Defined contribution is a riskier way to save and to plan for the future retirement of contributors:

"In a defined contribution plan, investment risk and investment rewards are assumed by each individual/employee/retiree and not by the sponsor/employer. This risk could be substantial. Based on simulations from security returns over the twentieth century across 16 countries, there is considerable variation in pension fund ratios across both time and country. Those countries keenest on individual DC pension accounts have the highest pension fund ratios (e.g. the UK, the USA), but all investors in all countries face considerable downside risk. Some countries such as France, Italy and Spain face a ten percent probability of having a real replacement ratio of 0.25, 0.20 and 0.17 respectively.[3] In addition, DC scheme participants do not necessarily purchase annuities with their savings upon retirement, and bear the risk of outliving their assets."  (Wikipedia, emphasis mine)

As of December 26, 2012, Goldman has begun hollowing out the once-thriving company where about 40 employees have been cut with the possibility that perhaps only a dozen jobs will be left at the firm.  So much for big banks being job creators!

So we see the decimation of a once-thriving company and the increased bulking up of Goldman Sachs which is already TBTF (Too Big To Fail).  Welcome to the most fragile world of banking where it is getting riskier and riskier for others, but not for Goldman Sachs!

Source:  Goldman Sachs Has Cut Dozens of Jobs at Burlington Investment House
By Kevin J. Kelley - Seven Days

. . .Everyone expected job losses at Dwight Asset Management when Goldman Sachs took over the Burlington-based investment firm earlier this year. One of many unanswered questions that remained after Seven Days broke news of the takeover was: “How many?”

Asset-Backed Alert, a newsletter focused on securities transactions, predicted that Goldman would pink-slip about 40 highly paid “structured-product professionals” at Dwight. A source closely acquainted with the Burlington company offered a darker prognosis. He suggested that Dwight’s workforce, which peaked at around 100 a couple of years ago, could be slashed to fewer than a dozen employees as Goldman absorbed most of the firm’s operations into its Manhattan offices.

Such a hollowing-out of the company founded in 1983 by John K. Dwight of Charlotte would enfeeble one of Vermont’s only finance-sector powerhouses. Dwight Asset Management, which specializes in stable-value funds for retirement plans, reported $42 billion worth of assets at the end of 2011. Some of its executives were said to have been making $500,000 a year or more in boom times for bond markets. 

Read the whole article here


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