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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

Friday, March 15, 2013

Goldman Sachs Fails Stress Test

So Goldman Sachs and JP Morgan failed their stress tests that the Federal Reserve requested.  There is something really strange going on when a bank is allowed to create its own stress test and still fails it.  Now Goldman has a "headache" and is being "rebuked" and has to create another test for itself in order to pass.

Does that test include off-balance sheet items or derivatives?

How about a stress test of the citizens who bailed out the banks to see if they could "deal with (more) severe financial and economic shocks" brought to them by these risk-taking banks who fail their own stress tests. 

So Goldman has until September to re-submit a test.  Why doesn't Goldman just lie so they can pass.  It would not make any difference if they did. Why change the rules now?

Fed Rebukes Goldman Sachs and JPMorgan Chase Over Capital Plans
By Peter Eavis - DealBook

Goldman Sachs and JPMorgan Chase, the Wall Street giants that emerged from the financial crisis in a position of strength, are now facing questions about their ability to withstand future market shocks.

On Thursday, the Federal Reserve said Goldman and JPMorgan would need to resubmit their proposals to pay out billions of dollars to shareholders, citing weaknesses in their capital plans. In the meantime, the banks can move ahead with their shareholder payouts.

Read the entire article here 


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