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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

Tuesday, January 8, 2013

The Suppurating Sore that is Proprietary Trading via Goldman Sachs

Goldman Sachs is both an investment bank and a commercial bank, the latter designation gives Goldman special status and guarantees its "deposits" are covered by the government.  After the financial crisis (brought to you by the fraudulent practices of the banks), Goldman promised to get rid of its proprietary trading unit(s) in order to comply with a new financial reform called the Volcker Rule.

Now, apparently, all Goldman has had to do is hive off a portion of its proprietary business into a separate entity and call it MSI (Multi-Strategy Investing) or SSG (Special Situations Group) and, voilà--we have a hedge fund disguised in a magical invisible cloak--and no rules broken!  The oozing rot of proprietary trading returns, not for short-term trades but for long-term ones.

And the money, we know, comes from Goldman Sachs and if in their cancerous wagers there is a gangrenous pustule of lost money, then you should know that Goldman would be eligible for another fresh green bailout.  The Bank creates these excrescences (MSI, SSG) without a thought for others.  None of the rot has gone away from the financial system.  The discharge and stench from the shadows of the financial system continue apace. The Goldman Sachs bank is nothing but a festering Hedge Fund.

The financial system as exemplified by Goldman Sachs is a sick, corrupt and nihilistic place where only Goldman's unethical and immoral growth prospers amid the gangrenous discharge of pus called proprietary trading (hedging).

Secret Goldman Sachs Team Sidesteps Volcker After Blankfein Vow
By Bloomberg - Traders Magazine
Sitting onstage in Washington’s Ronald Reagan Building in July, Lloyd C. Blankfein said Goldman Sachs Group Inc. had stopped using its own money to make bets on the bank’s behalf.

“We shut off that activity,” the chief executive officer told more than 400 people at a lunch organized by the Economic Club of Washington, D.C., slicing the air with his hand. The bank no longer had proprietary traders who “just put on risks that they wanted” and didn’t interact with clients, he said.

That may come as a surprise to people working in a secretive Goldman Sachs group called Multi-Strategy Investing, or MSI. It wagers about $1 billion of the New York-based firm’s own funds on the stocks and bonds of companies, including a mortgage servicer and a cement producer, according to interviews with more than 20 people who worked for and with the group, some as recently as last year. The unit, headed by two 1999 Princeton University classmates, has no clients, the people said.

The team’s survival shows how Goldman Sachs has worked around regulations curbing proprietary bets at banks. Former Federal Reserve Chairman Paul A. Volcker singled out the company in 2009, saying it shouldn’t get taxpayer support if it focuses on trading. A section of the 2010 Dodd-Frank Act known as the Volcker rule, drafted to prevent banks from taking on excessive risk, limits short-term investments made with firms’ capital.

The law doesn’t bar longer-term wagers. That leaves room for other risky investments, according to Matthew Richardson, an economics professor at New York University’s Stern School of Business. Bets that last months can go awry and belong outside federally backed banks, he said.

“From a systemic-risk perspective, it’s really the longer- term holdings which are of issue,” said Richardson, who heads NYU’s Salomon Center for the Study of Financial Institutions.

Please read all the details of the article here


LiberatedCit said...

Goldman Sucks really knows who to pay to play the game

Taxpayers kept on the hook for risky derivatives

JPMorgan Chase & Co. (JPM), Goldman Sachs Group Inc. (GS) and Bank of America Corp.won a delay of Dodd-Frank Act requirements that they wall off some derivatives trades from bank units backed by federal deposit insurance.Commercial banks including the Wall Street firms may get as long as an additional two years -- until July 2015 -- to comply with the rules, the Office of the Comptroller of the Currency said in a notice yesterday. The so-called pushout provision was included in the 2010 financial-regulation law as a way to limit taxpayer support for risky derivatives trades. more

Goldman’s small internal hedge fund

Joyce R said...

LiberatedCit, once again thanks for the links.  I will read them all.

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