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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

Saturday, June 8, 2013

Goldman Sachs are "the Dangerous Aristocrats of Finance"

The author of the article below says, "Pay is the most obvious sign of this privileged social position [as finance aristocrats]."   He list three reasons why financiers are deemed to be vastly overpaid:

1.  "professionals with comparable skills earn much less."
2.  "financiers are paid far more than is merited by their contribution to the common good."
3.  the fraudulent financiers did not face, in any meaningful way, the justice system for their crimes.
The dangerous aristocrats of finance
by Edward Hadras - BreakingViews
. . . . 
The excessive pay can be interpreted as a sign of unfair or inefficient markets. It is that, but I think the deeper cause is not so much economic as sociological. Financiers have persuaded the broader society that they are modern aristocrats. Pampered lives are part of the package. They go along with an unthinking sense of entitlement and a mix of self-righteousness and self-centredness, with just a hint of condescending tolerance for limited criticism.

Of course, today’s financial aristocracy is different from traditional nobility. The contemporary titles (partner, managing director) and privileges (first-rate education, political influence) are not exactly hereditary, and long hours on the job have replaced a life of leisure. But I believe the commonalities are more significant.

Old aristocrats believed they protected social stability and dismissed radical critics as ignorant and disruptive. Similarly, most financial aristocrats are certain that the world would be much worse off without them and that their exalted position is good for everybody.

Ask an articulate trader about the social value of playing the yield curve to the detriment of clients, and the response will have the same unthinking certainty as a French count asked about the justice of the corvée. The trader dismisses radical critics as well-intentioned but ignorant about the importance of high (and highly paid) finance.

Read the rest of the article here


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