“The Matrix is the world that has been pulled over your eyes, to blind you from the truth.”
– Morpheus to Neo, The Matrix
It is the mission of DeepCapture to show you, dear reader, that the financial world you inhabit, a world vouched-for in dulcet Midwestern tones by actor-spokesmen you recognize and trust, a world inhabited by honest brokers looking after your money, brokers who interact through self-regulating exchanges overseen by diligent regulators, themselves overseen by elected politicians looking out for their constituents, themselves challenged by an adversarial free press maintaining a critical posture towards it all, is in fact a “world that has been pulled over your eyes, to blind you from the truth.” It doesn’t exist: it is a socially constructed reality designed to keep you complacent as you feed your savings to the machine.
And I can prove it. For that matter, so can you, right now, from your computer. To explain how, I must continue with reference to The Matrix.
There is a point in the movie where Neo and his comrades are walking up a staircase. Neo glimpses a black cat that disappears then reappears:
In this essay I will explain a glitch that is available for you to verify right now, from your computer. I do not know how long it will remain after I write this, but it has existed for many months, and cannot be fixed without causing other problems for those seeking to keep you deluded. I will take you through three steps, and then you will be able to test this theory from your computer, and see a glitch that should not exist.
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STEP #1 OF 3: UNDERSTAND WIKIPEDIA
Wikipedia is a social media encyclopedia. That is to say, it is the work of thousands of people collaborating across the Internet to write millions of articles on every subject one would expect to find in an encyclopedia, and many more. People are free to edit other peoples’ words, adding their own knowledge to the sum. The constitutional principles of Wikipedia demand that such edits and additions be written from a “Neutral Point of View”. Every article is backed up by a discussion page, where the people who are working on that article can meet and work out their differences in an atmosphere where good faith is assumed. Ultimately, differences which are not so resolved are put to community vote. In sum, Wikipedia is socially constructed reality.
Wikipedia has drawn its detractors (myself among them) across many fronts. One thing that both supporters and detractors agree on, however, is the remarkable speed with which Wikipedia is updated to reflect the world around us. When any significant event happens, the appropriate page is updated within minutes, or even within seconds, by someone. Be it a public statement of a treasury official, the passing of a celebrity, or a car bomb going off on a street in Beirut, the appropriate Wikipedia pages are updated before the story has finished scrolling across the wire.
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STEP #2 OF 3: SCROLL THOUGH THE HEADLINES OF (OR READ) THESE 21 ARTICLES (a-u) CONCERNING NAKED SHORT SELLING AND THE GLOBAL FINANCIAL IMPLOSION
a) July 12, 2006 Speech by SEC Chairman: Opening Statements at the Commission Open Meeting by Chairman Christopher Cox
Second Item – Proposed Amendments to Regulation SHO
The next item on our agenda is the serious problem of abusive naked short sales, which can be used as a tool to drive down a company’s stock price to the detriment of all of its investors. The Commission is particularly concerned about persistent failures to deliver in the market for some securities that may be due to loopholes in the Commission’s Regulation SHO, adopted just two years ago.
At the Commission’s request, the Division of Market Regulation has prepared proposed changes in Rule 203 under Regulation SHO to cut down on failures to deliver.
The need for Regulation SHO grew out of long-standing and growing problems with failures to deliver stock by the end of the standard three day settlement period for trades, some of which were symptoms of abusive “naked” short selling. Selling short without having stock available for delivery, and intentionally failing to deliver stock within the standard three-day settlement period, is market manipulation that is clearly violative of the federal securities laws…
A grandfather provision, however, gave an exception from Rule 203(b)’s mandatory close out provision for any fail to deliver positions established before a security became a threshold security. And another provision of Rule 203(b) – the options market maker provision – provides an exception for any fail to deliver positions in a threshold security if they result from short sales by an options market maker, for the purpose of establishing or maintaining a hedge on options positions created before the underlying security became a threshold security.
We are particularly concerned about the potential negative effect that substantial and persistent fails to deliver may be having on the market in some securities. Specifically, these fails to deliver can deprive shareholders of the benefits of ownership – voting, lending, and dividends from issuers. Moreover, they can be indicative of abusive naked short selling, which could be used as a tool to drive down a company’s stock price. They may also undermine the confidence of investors who may believe that the fails to deliver are evidence of manipulative naked short selling in the stock. In turn, issuers may be harmed, as investors may be reluctant to commit capital to a stock that they believe is subject to abusive naked short selling.
To address these concerns, the Division of Market Regulation is recommending proposals to amend Regulation SHO. The recommended proposals are based on examinations conducted by the Commission’s staff and the SROs since Regulation SHO became effective in January 2005. While preliminary data indicates that Regulation SHO appears to be significantly reducing fails to deliver without disruption to the markets, there continues to be a number of threshold securities with substantial and persistent fail-to-deliver positions that are not being closed-out under existing delivery and settlement guidelines. It appears these persistent fails are primarily attributable to the grandfather and options market maker exceptions to the delivery requirements of Regulation SHO.
The proposals being recommended today would eliminate the grandfather provision, and narrow the options market maker exception. The proposals would include a limited one-time phase-in period following the effective date of the amendment. The proposals also include a technical amendment that would update the market decline limitation referenced in the rule. In combination, these proposals are intended to eliminate the persistent fails to deliver that are attributable to loopholes in Regulation SHO as originally adopted…
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b) March 4, 2008 – Reuters: “SEC proposes tougher “naked” short selling rules“
WASHINGTON, March 4 (Reuters) – The U.S. Securities and Exchange Commission on Tuesday proposed tougher rules to curb so-called “naked” short-selling abuses and prevent market price manipulation.
SEC Chairman Christopher Cox said regulation SHO, an existing rule partly aimed at short selling abuses, “needs teeth.”
Short sellers borrow shares they consider overvalued and sell them. If the price drops, they repurchase the shares, return them and pocket the difference. In a naked short sale, the investor sells stock that has not yet been borrowed.
The three-member SEC voted unanimously to propose the rule, which targets sellers who intentionally deceive broker-dealers or purchasers about their ability to meet delivery deadlines.
Sellers sometimes deliberately fail to deliver securities as part of a scheme to manipulate the stock price.
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c) March 5, 2008 – Wall Street Journal: “SEC Proposes Teeth for Short-Selling Rules” by Judy Burns
WASHINGTON — Securities regulators voted 3-0 to propose a rule intended to crack down on lingering abuses involving so-called naked short sales and failures to deliver shares that have been used in such sales.
The proposal is part of a continuing attack by the Securities and Exchange Commission on short-sales abuses, an effort begun four years ago with the adoption of rules known as Regulation SHO.
Separately, the SEC voted to propose changes that could speed the introduction of exchange-traded funds, without review by federal regulators. (Please see related article.)
Short selling involves sales of borrowed shares, producing profits when prices decline, allowing the short seller to replace borrowed shares at a lower price.
In contrast, “naked” short sellers don’t borrow shares before engaging in short selling, and they may have no intention of borrowing them.
Regulation SHO sought to curb such practices by requiring short sellers to locate shares for borrowing before engaging in short sales, but it did not include any new mechanism to enforce the requirement.
Under the proposal, the SEC would create an antifraud rule targeting those who knowingly deceive brokers about having located securities before engaging in short sales, and who fail to deliver the securities by the delivery date.
SEC Chairman Christopher Cox said the proposal would bring needed teeth to Regulation SHO and address concerns about short-selling abuses, particularly in the market for small-cap stocks. “Reg SHO can’t be effective without enforcement,” Mr. Cox said.
Even with the regulation in place, the SEC received hundreds of complaints last year about alleged abuses involving short sales. While most trades settle within three days, as required, the SEC estimates about 1% of shares that change hands daily, or about $1 billion, are subject to delivery failures.
The SEC’s move last year to close off a “grandfather” exception to Regulation SHO, has done little to reduce longstanding delivery failures, according to preliminary data analyzed by SEC staff.
The SEC has yet to announce its plans for a separate pending proposal to scale back or eliminate an exemption for options market-makers.
Brokers who engage in short selling for customers would not face any new obligations under the proposed antifraud rule, and the SEC said it wouldn’t apply to market makers engaging in market-making activities.
Although the SEC already has authority to sue illegal short sellers, SEC officials said a new rule explicitly targeted to naked short sales might affect behavior. SEC Commissioners Paul Atkins and Kathleen Casey expressed support for the crackdown on abusive sales but said they want to be sure it doesn’t result in unintended consequences, such as driving legitimate short sales offshore.
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d) July 15, 2008 – Bloomberg: “SEC to Limit Short Sales of Fannie, Freddie, Brokers” By Jesse Westbrook and David Scheer
The U.S. Securities and Exchange Commission will limit the ability of traders to bet on a drop in shares of brokerage firms, Freddie Mac and Fannie Mae as part of a crackdown on stock manipulation, the agency’s chairman said.
Christopher Cox told the Senate Banking Committee that the agency will require traders to hold shares of the two mortgage buyers and the brokerages before they execute a short sale. The emergency order, to be in effect for 30 days, will bar the practice called naked short selling, in which traders avoid the financial cost of borrowing shares when betting they’ll fall.
Cox said the SEC will draft rules “to address the same issues across the entire market.”
Hedge-fund manager William Ackman, who oversees $6 billion at Pershing Square Capital Management, is among those betting that shares of Fannie Mae and Freddie Mac will fall. There’s no indication he is engaging in naked short selling, in which traders never borrow shares from their broker or deliver the stock to buyers.
The SEC has been reluctant to curb short selling “because it would require a major retooling of the plumbing of Wall Street,” said James Angel, a finance professor at Georgetown University studying short sales. “It’s only when the big Wall Street firms are threatened that the SEC does something about it.”
Trading Abuses
The SEC is investigating whether trading abuses contributed to the collapse of Bear Stearns Cos. in March and the 78 percent drop in the market value of larger rival Lehman Brothers Holdings Inc. this year. Fannie Mae and Freddie Mac have each lost about 80 percent of their value amid speculation the mortgage-market crisis may push the firms into insolvency.
Short-sellers, who borrow shares betting that they’ll decline, are spreading rumors about Lehman in an organized attempt to depress the stock, according to Richard Bove, bank analyst at Ladenburg Thalmann & Co. in Lutz, Florida.
“As with Bear Stearns, Lehman has been targeted by the fear-trade,” said Fox-Pitt Kelton Cochran Caronia Waller analyst David Trone in a report yesterday. Lehman should go private so it can avoid the attacks by short-sellers, he said.
Freddie Mac, down as much as 34 percent today before Cox’s comments, erased some of the decline and fell $1.49, or 21 percent, to $5.62 at 2:34 p.m. in New York Stock Exchange composite trading. Fannie Mae shares rebounded from a 30 percent drop and were down 18 percent.
Opposition
“I don’t think the government should ban short-selling in anything as long as it’s fully disclosed, as long as there’s no manipulation,” MFS Investment Management Chairman Robert Pozen said in an interview with Bloomberg News yesterday. “Don’t we want the market to work here?”
John Nester, an SEC spokesman, said the emergency order will “require any person effecting a short sale in the listed securities to borrow the securities before the short sale is effected and deliver the securities on settlement date.”
In traditional short selling, traders borrow stock through a broker and hope to profit by selling shares high and later buying them back at lower prices to repay the loan.
Naked short selling isn’t necessarily illegal, unless authorities can prove fraud, such as a scheme to manipulate stock prices.
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e) July 18, 2008 – Op-ed for the Investor’s Business Daily: “Public Statement by SEC Chairman Christopher Cox ‘Naked Short Selling Is One Problem a Slumping Market Shouldn’t Have‘”
The demise of IndyMac, coming on the heels of Bear Stearns’ desperate sale to JPMorgan Chase, is a sure sign of the fragility of today’s markets. What’s needed now, more than ever, is reliable information for investors and confidence that trading can be conducted without the illegal influence of manipulation.
Because financial institutions depend on confidence, they are uniquely vulnerable in the current climate. A “run on the bank” can take hold quickly, and can be fatal. But stampedes are not always rational.
When an irrational panic is fueled by a sense of urgency, false rumors that must be acted on immediately and the fear that everyone else may get out first, market integrity is threatened. It is the job of market cops to provide a measure of confidence that financial information about public companies is accurate and reliable — and when it is not, to punish those responsible.
Who profits from intentionally false information in the marketplace? Those who are in on the scam and positioned to benefit from the predictable response of others who believe the fraudulent information to be true.
The classic “pump and dump” scheme, in which a stock is inflated through false information and then dumped on unsuspecting investors when the perpetrators flee, is one example of how this works. “Distort and short” is the same thing in reverse.
Naked short selling can turbocharge these “distort and short” schemes. In a naked short, the usual process of short selling is circumvented, because the seller doesn’t actually borrow the stock and simply fails to deliver it. For this reason, naked shorting can occur even when actual shares aren’t available in the market. It allows manipulators to force prices down without regard to supply and demand.
Next week, the SEC will implement an emergency order designed to prevent naked short selling in the financial firms that the Federal Reserve Board has designated as eligible for access to its liquidity facilities.
Because these are large firms with substantial public float, honest short sellers can readily locate shares to make good on their short positions. Continued legitimate short selling in these issues will act, as it is supposed to, as a way for market participants to invest in the downside and to hedge other positions.
At the same time, eliminating the prospect of naked short selling will help assure investors that it is safe for them to participate, and that the current declining market is not the product of unseen manipulators and “distort and short” artists.
Our emergency order is not a response to unbridled naked short selling in financial issues — so far, that has not occurred — but rather it is intended as a preventative step to help restore market confidence at a time when it is sorely needed.
Many people think naked short selling is already illegal, but that isn’t true. Shares are normally delivered to the buyers within three days of the trade. But in most stocks, including those covered by our emergency order, that three-day period can be extended indefinitely.
Even without these extensions, and even when a short seller locates shares that can be borrowed, there can be problems because the short seller is not currently required to actually borrow those shares until settlement.
As a result, securities lenders can tell multiple short sellers they can borrow the same shares of stock — a sure recipe for a failure to deliver. Once the commission’s order takes effect, this possibility will no longer exist.
The SEC is committed to maintaining orderly securities markets. The abusive practice of naked short selling is far different from ordinary short selling, which is a healthy and necessary part of a free market.
Our agency’s rules are highly supportive of short selling, which can help quickly transmit price signals in response to negative information or prospects for a company. Short selling helps prevent “irrational exuberance” and bubbles.
But when someone fails to borrow and deliver the securities needed to make good on a short position, after failing even to determine that they can be borrowed, that is not contributing to an orderly market — it is undermining it. And in the context of a potential “distort and short” campaign aimed at an otherwise sound financial institution, this kind of manipulative activity can have drastic consequences.
It was famously — perhaps too famously — said that “markets will fluctuate.” That is certainly true if they are well-functioning. As market referee, the SEC neither can nor should direct the market’s fluctuations. Instead, our most basic role is to ensure a continued flow of liquidity to the markets from participants who are confident the game isn’t rigged against them.
Naked short selling can undermine the market’s integrity. For the financial sector in this crisis, certainly, but as soon as possible for the entire market, this is one worry investors shouldn’t have.
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f) July 29 – Bloomberg: “SEC Extends Naked Short-Sale Order on Fannie, Freddie” David Scheer and Edgar Ortega
The U.S. Securities and Exchange Commission extended an emergency limit on short sales in shares of Freddie Mac, Fannie Mae and 17 brokerages as it prepares broader rules to thwart stock manipulation.
The SEC pushed back expiration of its ban on so-called naked short sales of the firms’ stocks from today through Aug. 12, the Washington-based agency said in a statement. The order aims to keep traders from driving down financial stocks to boost profits after Bear Stearns Cos. and IndyMac Bancorp Inc. collapsed amid rumors they were faltering.
The emergency order, focused on companies whose collapse might expose the U.S. government to losses, gives regulators time to weigh wider restrictions. SEC Chairman Christopher Cox last week told lawmakers the agency is examining other proposals, such applying the ban on naked short sales to the broader market.
“It definitely appears that the SEC is interested in making adjustments to short-sale regulations,” said John Standerfer, vice president for financial services at S3 Matching Technologies, the Austin, Texas-based trade processor.
In traditional short selling, traders borrow shares and sell them. If the price drops, they profit by re-buying the stock, repaying the loan and pocketing the difference.
Naked short sellers don’t borrow shares before settling sales. The SEC is concerned manipulative investors may use the sales, legal under some conditions, to drive down prices by flooding the market with orders to sell shares they don’t have.
Arrange to Borrow
The temporary order, which took effect July 21, requires traders to at least arrange to borrow shares before selling short Freddie Mac and Fannie Mae, the government-sponsored mortgage buyers. The order covers brokerages with access to the Federal Reserve’s discount window, which was opened to investment banks after the March collapse of Bear Stearns.
Market makers have an exception under the SEC order that permits them to sell short to maintain liquidity. Investors, such as hedge funds, previously could start trades without an agreement to acquire shares.
Short sales, particularly among retail investors, plummeted after the SEC announced the ban, according to data from S3 Matching Technologies, which processes trades for three of the top five retail brokerages. The sales fell 78 percent on average among the companies named in the order, compared with trades on July 14, the day before the SEC announced the measure, S3 data shows. The company handles about 15 billion transactions daily.
`Pretty Restrictive’
“I see no reason that will turn around,” said Standerfer in an interview yesterday. “It seems like a pretty restrictive rule to put in place for the entire market.’
Cox last week told Congress the agency may also force investors to disclose “substantial” bets on falling stocks and or reinstate a version of the so-called uptick rule, which barred short sales of stocks when prices are falling.
The uptick rule, implemented after the Great Depression and scrapped last year, allowed short sales only if a preceding trade boosted the stock price. The SEC is studying whether increasing the uptick increment, such as to a nickel or dime, might be more effective, he said.
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g) August 2, 2008 – The Salt Lake Tribune: “Naked shorting’s early critic starts to see some vindication: Byrne’s Battle Helps Bring Curbs on Naked Short-Selling Practices“. By Steven Oberbeck
Over the past several years, Patrick Byrne’s campaign to clean up Wall Street and end a practice that has destroyed companies and cost unwary investors billions of dollars generated plenty of publicity for him, mostly the wrong kind. Critics labeled him nuts, a conspiracy theorist, a complete wack job. Byrne, the chief executive of the Utah-based discount online retailer Overstock.com, even found himself tagged a member of the “tin-foil hat” brigade, a reference to the flying saucer fanatics of the 1950s who adorned their heads with aluminium to ward off, or enhance, thoughts from aliens in outer space. These days, when people talk of Byrne, the word ‘vindication’ comes up a lot. ‘You can always tell who the pioneers are — they’re the ones with all the arrows sticking out of their backs,’ said James Angel, a finance professor at Georgetown University. ‘You really can’t understate what Byrne has accomplished.’
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h) August 13, 2008 USA Today: “Financial stocks suffer after protection ends” By Matt Krant
The SEC’s emergency curb on short selling of 19 major financial services firms stocks expired before Wednesday trading, leaving investors to wonder if the measure helped protect the strained system.
Since July 21, the SEC rule banned “naked” short sales on those 19 stocks. Short sellers hope to profit by selling borrowed shares and replacing them at lower prices. In naked short sales, traders don’t actually borrow the shares; that can intensify the downward pressure on a stock.
The rule’s expiration appeared to have some effect Wednesday as financial stocks suffered sizable losses. That could mean short sellers have been at least partly behind big drops in shares of some financial companies.
“There has to be some sort of correlation between the moratorium ending and these stocks being down,” says Eric Fitzwater, analyst at research firm SNL Financial.
Perhaps more telling: The day the Securities and Exchange Commission announced the rule, July 15, was the day financial stocks bottomed for 2008. “If (the SEC) wanted to protect these companies artificially, it served its purpose,” Fitzwater says.
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i) August 17, 2008 The Economist: “Searching for the naked truth“
The real problem with abusive short-selling
“It is impossible to know how big this problem is, but regulators accept it exists. The American Stock Exchange fined two market-makers for precisely this violation in July 2007. A month later the SEC proposed limiting or eliminating the exemption, but momentum stalled in the face of opposition from banks and exchanges. The anti-short lobby, emboldened by the July ban, is again pushing for an end to the market-makers’ exemption. …. How much does all this matter? Deliberate naked shorting has no place in a well-run market…”
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j) September 16, 2008 Associated Press: “Naked short-selling blamed in Wall St crisis“
WASHINGTON – With Wall Street engulfed in crisis, the Securities and Exchange Commission is planning measures to rein in aggressive forms of short-selling that were blamed in part for the demise of Lehman Brothers and which some fear could be turned against other vulnerable companies. During emergency meetings between federal officials and investment bank executives over the weekend, SEC Chairman Christopher Cox indicated to the bankers that the agency plans in a few days to impose new permanent protections against abusive ‘naked’ short-selling, a person familiar with the matter said Monday….
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k) September 21, 2008 Associated Press: “Dutch ban ‘naked’ short selling for 3 months“
The Dutch Finance Minister is banning “naked” short selling of financial stocks for the next three months to increase the stability of financial markets….
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l) October 28, 2008 Wall Street Journal: “Japan Cracks Down on Naked Short Selling” By Takashi Nakamichi and Ayai Tomisawa
TOKYO — Japan moved Tuesday imposed new restrictions on so-called “naked” short selling of stocks, stepping up its efforts to arrest the tumble in domestic share prices.
The Tokyo Stock Exchange has asked member brokers to stop accepting naked short-sell orders, TSE President Atsushi Saito told a news conference.
The TSE’s move followed comments from Finance Minister Shoichi Nakagawa, who said that regulations on naked short selling would be tightened. Mr. Nakagawa didn’t say that the practice would be banned, but the TSE’s move and local media’s interpretation of his comments suggested that the new strictures, to be enforced from today, will be a ban in all but name.
Short-sellers typically borrow stocks and then sell them on, profiting from the fall in price when they buy back the securities. Naked shorting removes the need to first borrow the stock, which means that larger volumes of shares can be dumped on the market. Short-selling generally has drawn fire from regulators across the world, who say it has contributed to the sharp market declines of recent months.
The Japanese government had planned to ban naked short selling from Nov. 4, but the recent plunge in local share prices has caused the new rule to be introduced a week ahead of schedule. The Nikkei 225 Stock Average closed at a 26-year low on Monday, as investor sentiment was battered by the global financial crisis, the rising yen and concerns about an international economic slowdown.
Traders said the naked short-selling ban was one reason for a big recovery in Japanese shares Tuesday.
The ban “was one of the positive factors behind the Nikkei’s gains (in the afternoon), but I don’t think it’s the main catalyst,” said Yukio Takahashi, market analyst at Shinko Securities. The Nikkei ended 6.4% higher Tuesday, erasing most of Monday’s sharp slide, due mainly to the yen’s weakening and firmness in major Asian stock markets, traders said. (See related article.)
The naked shorting ban comes as the government mulls a series of measures to improve confidence in Japan’s financial sector. Among other steps, the government wants to raise the cap on possible injections of taxpayers’ money into domestic banks from ¥2 trillion ($21.37 billion), ease fair-value accounting rules, loosen capital adequacy requirements for banks and enlarge tax breaks for stock investors.
At Tuesday’s news conference, Mr. Nakagawa highlighted the urgency of the task at hand. “I’ve discussed with Prime Minister [Taro Aso] the fact that the coming few days will be very important and that we must take steps immediately,” he said. “Our assessment is that the coming several days will be very important — and therefore dangerous — for the Japanese stock markets.”
Mr. Nakagawa also said the government will immediately open investigations into possible illegal practices linked with naked short selling. The Financial Services Agency, the Securities and Exchange Surveillance Commission and the TSE will work together in looking into past records on such sales practices, he said. “If we find out any violation of the law,” Mr. Nakagawa said, “we will retroactively deal with it strictly.”
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m) November 14, 2008 “Australia bans naked short-selling“
CANBERRA: Australia moved to slap a permanent ban on the most controversial form of short-selling yesterday amid an historic fall in share prices, part of a crackdown that is also targeting hedge funds and credit rating agencies.
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n) November 20, 2008 – CNBC: Interview with Former SEC Chairman Harvey Pitt:
Interviewer: Let’s talk shorts. Harvey Pitt is former SEC chairman and founder and CEO of Kalorama Partners. Harvey, great to have you with us….Chairman Pitt, do we need to bring back the Uptick Rule? Would that make a difference here at all?
Harvey Pitt: I don’t believe so. The Uptick Rule was almost non-existence in terms of its detrimental affects. There’s a very simple solution and the SEC has it and they know what is. It’s very simply this. If you want to sell a stock short you have to have a legally and forcible right to produce that stock on settlement day. That’s all it takes. If the SEC does that people will not be able to sell short unless they have actually first located and gotten their stock.
Interviewer2: In other words that would do away with naked shorting right?
Harvey Pitt: Absolutely, and naked shorting is what’s causing a lot of the problems in the market.
Interviewer2: Because nobody is forced to deliver. Nobody must deliver. Too much of that going on.
Harvey Pitt: That’s been the real problem. People in affect are just gambling. They’re assuming the stock price will go down. They then spread false rumors to help the stock go down, but they have no skin in the game because they haven’t committed to produce the shares that they purportedly are selling.
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o) November 21, 2008 – The Financial Times: “Regulators to discuss short selling rules” By Joanna Chung in New York
Global securities regulators will gather on Monday to discuss rules on short selling and disclosure of credit derivatives, the head of the US Securities and Exchange Commission said on Thursday.
Christopher Cox, SEC chairman, said the meeting, to be held via teleconference, would address “urgent regulatory issues in the ongoing credit crisis.”
The announcement came during yet another tumultuous day of trading in global stock markets.
“In addressing turbulent market conditions, it is essential not only that regulators act against securities law violations, including abusive short selling, but also that there be close coordination among international markets to avoid regulatory gaps and unintended consequences,” Mr Cox said in a statement on Thursday.
The International Organization of Securities Commissions, which includes securities regulators from around the globe, will consider the effectiveness of their recent actions to reduce abusive short selling, without hurting legitimate shorting…
Mr Cox said regulators will explore “possible coordination” on rules relating to naked short sales – when shares are sold without being borrowed first– in particular with regard to position reporting and delivery and pre-borrowing requirements.
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p) November 24, 2008 Reuters “Global regulators focus on abusive short selling”
WASHINGTON, Nov 24 (Reuters) – Global securities regulators launched three task forces to study abusive short selling, unregulated financial products and unregulated financial entities such as hedge funds, the U.S. Securities and Exchange Commission said on Monday.
“The working groups were established amid volatile market conditions and designed to support work of the world’s 20 largest economies, which have already agreed to step up oversight of the troubled financial system. “One group will focus on aligning global regulators’ approach to naked short selling, the SEC said.””
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q) December 1, 2008 – EuroMoney: “US equity market – Fails to deliver: The naked truth“
Fails to deliver in the US equity market have exacerbated the sharp declines in share prices of financials.
IT IS NO surprise that the stock of Bear Stearns was heavily shorted in the run-up to its government-supported rescue in March, given its high leverage, poor risk management and the fact that its sub-prime bets had gone awry. Short-selling of any financial company would have been understandable by March this year. But just why on March 12, two days before the rescue announcement, almost 1.25 million Bear Stearns shares were shorted is a question that is a little harder to answer.
Up to that point in 2008, cumulative fails to deliver of Bear Stearns’ stock were only between 10,000 and 200,000 on any given day. On March 14, more than 2 million Bear Stearns shares went undelivered, and from then until the end of March, failures increased, peaking one day at more than 13.78 million shares. At the same time, from March 12 to the announcement on Friday March 14, Bear Stearns’ share price crashed from $61.68 to $30, dropping to $4.81 the following Monday.
That the precipitous drop in Bear Stearns’ share price coincided with fails to deliver has forced the market to properly address a long-standing question: are fails to deliver responsible for rapid share price deterioration? Had those failures been averted through better regulation would Bear Stearns have had a slower downfall, or even avoided outright collapse? And what of Lehman Brothers, Fannie Mae and Freddie Mac? Indeed, would all financial companies have enjoyed more resilient share prices, instead of seeing sudden, sharp price declines that were the final nudge to creditors and counterparties abandoning firms and driving them into bankruptcy?
The SEC has since attempted to bring a halt to naked short-selling, which gives rise to fails to deliver, but are its efforts sufficient?
Formal investigations are taking place to look into abusive short-selling of the stocks of both Bear Stearns and Lehman Brothers.
Robert Shapiro, former economic adviser to Bill Clinton, chairman of Sonecon and an adviser to the presidential transition team of Barack Obama, believes there is sufficient evidence that naked shorting accelerated the collapse of Bear Stearns. He says: “Bear Stearns failed because it went bankrupt. However, the pace of the collapse of the stock price was clearly accelerated by the enormous naked short-sale activity. There perhaps could have been a more orderly bankruptcy which would have preserved more of the assets.”
John Welborn, an economist with investment firm the Haverford Group, agrees. “Fails to deliver added to the downfall of Lehman Brothers and Bear Stearns but were not, obviously, the whole story. Fails in Lehman Brothers were never significant enough to drastically alter the tradable float. In Bear Stearns, however, a torrent of fails began on March 12, before the public knew most of the bad news. The important thing to note here is that T+3 settlement essentially allows people to sell an infinite amount of any stock either to precipitate a bear raid or to capitalize on one already in progress.”
Welborn continues: “A bear raid encourages panic selling by long holders. Once enough long holders are induced to sell, then there are plenty of shares available to cover any naked positions ex post. When the long holders have sold their positions and the naked short sellers have covered at a lower price, then the issuer faces a dramatically depressed market. That may make it difficult (or impossible) to recapitalize, especially if that issuer is in the financial sector.”
Naked short-selling can be a confusing topic. A short-seller can only sell short if it can locate a source from which to borrow that security and therefore ensure delivery to the buyer – within the T+3 requirement. In most circumstances it is up to the prime broker to confirm whether it is possible to locate the stock and agree the transaction. If it is not possible to locate a stock, which can happen when certain stocks become illiquid, the trade is not allowed to take place. Market makers are an exception to this rule, and are able to lend stock without having located a source from which to borrow, in order to keep the markets liquid. This type of “naked shorting” is legal. If the source of stock is not a market maker, selling of a stock without having located a stock to deliver is illegal. Illegal, however, means very little when no enforcement penalties are in place.
Up until the end of this summer – not till September did the SEC enforce a crackdown – shorting without locating a source from which to borrow has suffered no penalty in the US, and brokers’ statements about efforts to locate them might be rather vague. “A broker can say he has located a stock, but that’s it,” says a hedge fund manager. “What if five other brokers are looking at that same stock and telling their clients they have located it. Who will get it?”
And if there is no penalty for failing to locate and failing to deliver, then why not just fail to deliver? In equity markets if a short-seller does not deliver, he can simply wait until the stock price deteriorates sufficiently so that he will never have to deliver, and therefore is able to keep the money from his sale. Do short sellers, be they hedge funds or proprietary trading desks, do this often? No. But can they do it? Yes. And were some doing this during the peak of the financial crisis? Absolutely.
One former employee of regulator NASD says he knows of a hedge fund that was shorting Freddie Mac and Fannie Mae on a “massive scale”, with no intention of ever locating stock. “His prime broker let the trade go through regardless as he was a large client of theirs,” he says.
Illegal naked shorting, at its worst, can be implemented to bring a company down. In the present crisis of confidence among financial institutions, it can also simply be a means of jumping on a losing target. If a financial institution’s stock looked as if it was falling, why not short-sell without promising a buy-in within three days and hope that the fall is sufficiently large beyond three days to make an even bigger profit?
A glance at the fails to deliver in the financials market indicates that some investors applied this strategy. A comparison of the average daily reported shares failing to deliver between the first quarter of 2007 and the first quarter of 2008 for the US’s top financial firms showed a clear increase over the period. The data, compiled by Washington publication IA Watch, showed a 335% increase for Freddie Mac, a 226% increase for Citigroup, a 133% increase for Goldman Sachs, a 632% increase for Morgan Stanley and a 1,123% increase for Bear Stearns. One source even suggests that some market participants never intended to buy-in and simply marked their tickets “long” selling shares that they did not even own as they knew they would never have to make delivery.
Fails to deliver: Unheard voices
Fails to deliver in the US stock markets are not a new phenomenon. In response to an increasing number of fails, the SEC introduced Regulation SHO in January 2004. This required that a daily list be compiled of all securities that had more than 10,000 fails to deliver, or more than 0.5% of issued shares failing to deliver for five consecutive days or more. No penalty was introduced to deter fails but it was believed that publication of the list would act as a deterrent. The majority of the stocks on the list were those of small firms on the Pink Sheets or Bulletin Boards and many were regarded as companies with weak business models that were likely to see fails to deliver, as levels of shorting in the stock would be high.
For years, small companies affected, and larger companies such as Overstock.com (which has market capitalization of $500 million) have appealed to the SEC to prevent fails to deliver, claiming that their stock prices have suffered as a result of the practice. In April 2004, in a series of articles, Euromoney warned about the implications for larger household names if fails to deliver were not properly addressed. Shapiro agrees that larger companies are now being targeted. He says: “Ordinarily this doesn’t happen to large institutions with large stock floats but in a panic situation they become vulnerable along with those companies that are always vulnerable – smaller companies that are without large public floats. In a time of panic, mechanisms that allow the markets to overshoot (naked shorts) mean you can drive a stock into the ground.”
Patrick Byrne, chief executive of Overstock.com, continues to lobby against fails but insists it is not a matter of self-interest. “The argument gets reduced to me being upset that stock in my firm might be being shorted. That was never the argument. Shorting has its place, I know. This has always been about why the government is ignoring the loopholes within the settlement system that are allowing for fails to deliver to occur.”
He is certain, as are several other long-standing lobbyists, that the recorded number of fails to deliver is only a fraction of the true amount. “If two broker/dealers clear through the DTCC, and one fails, then the two brokers can turn that failure into a private contract to be dealt with outside the DTCC and it becomes ‘ex-clearing’. After that there is no register of that fail,” says Byrne. If failures are as frequent as suggested, the idea of broker/dealers preferring to cancel out each other’s fails on a private basis is not beyond the realms of possibility.
Wes Christian is partner in a law firm representing 15 companies that allege that their stock price has been driven down by illegal naked shorting and fails to deliver. “We are aware of these deals being ex-cleared and of the failings of Reg SHO. Allowing failures to deliver creates artificial supply and that drives down prices,” he says. The defendants in Christian’s clients’ cases are the majority of broker/dealers on Wall Street.
Fails to deliver in the equity markets are seen to create artificial supply. If a stock can be sold without having to be borrowed, there is a strong possibility that stocks in excess of those issued are being sold. Indeed, several companies, Overstock.com included, have reported instances of more owners of stock than is possible. On March 14 128% of Bear Stearns stock outstanding was traded. These “phantom shares” can be on-lent without delivery again and again, further diluting the stock.
It’s a situation specific to the US markets, say participants. Patrick Georg at Clearstream Luxembourg says there has been no decline in settlement efficiency in Europe. Alan Cameron, head of clearing, settlement and custody client solutions at BNP Paribas Securities Services in London, says he has seen little to indicate similar instances of fails to deliver in Europe. “Some European countries like Spain impose strict fines on failures to deliver, as does Crest. It’s not an issue here in Europe.” Byrne adds that in Europe, the impact on reputation of failing to deliver is a deterrent. A head of a prime brokerage in the UK agrees: “It just does not happen in Europe. Securities get delivered in a timely fashion or business is lost.”
However, settlement is faster in Europe than in the US. It is surprising that the US still operates a T+3 system. Robert Greifeld, chef executive of Nasdaq, questioned the system in March this year at a conference when, in reference to fails to deliver, he said it was hard to believe that in 2008 the market still required three days to settle, and that a T+1 system should be part of a discussion about fails.
The SEC has pussyfooted around enforcing delivery in the US equity market over the past 10 years or so, but the collapse of financials stocks has pushed it to be stricter. On September 17, SEC chairman Christopher Cox announced several actions to “make it crystal clear that the SEC has zero tolerance for abusive naked short-selling.” From that date, fails to deliver beyond T+3 have been subject to a hard close-out. If stocks fail to deliver beyond T+3, the broker/dealers acting on the short-seller’s behalf are prohibited from further short sales in that security unless stocks are pre-borrowed.
This change of tack upsets those such as Byrne who have been fighting to have their voices heard for years. “When companies that had access to the Fed window became victims of fails to deliver, the SEC then had to sit up and take notice,” says Byrne.
Actions taken against naked shorting: Small steps
Since August, the number of companies with stock on the Reg SHO list has fallen from an all-time high of 650 to an all-time low of 90, although this does not take into account ex-clearing data. Shapiro says it is a step in the right direction. “The actions taken are an acknowledgement of the issues regarding naked shorting and fails to deliver at least. Progress is under way. Given there are many issues facing the SEC at the moment, this is encouraging.”
Others, however, are disappointed that more has not been done. Byrne says: “A hard close-out is not nearly enough. To truly stop failures to deliver, the SEC must enforce a pre-borrow where parties have to guarantee that a locate has been found through a contract.” At present, broker/dealers and short-sellers can say they have located a source of stock when several other parties might have also identified the same source. Peter Chepucavage of the International Association of Small Broker/Dealers and Advisers agrees that an initial pre-borrow rule is crucial in preventing fails to deliver. “The industry is resisting an initial pre-borrow rule but it is essential,” he says. “Without it the stock market is like the airline industry. You’re overselling the airplane seats knowing that someone will not be able to board even though they reserved/located, to avoid decrementing their inventory.”
The argument against pre-borrows is that liquidity will dry up, and that shorting will be deterred. However, Greg DePetris at Quadriserv believes the opposite would occur as lending would increase. “A more efficient settlement process should result from recent regulatory changes, and these tighter inventory controls might create new trading opportunities,” he says. “It’s important for anyone in possession of lendable supply to monetize its value, and traditionally that’s been done through the lending spread and reinvestment of cash. The notion of pre-borrows implies that there may be derivative value in the latent supply of securities, which lenders may be able to realize for their clients.”
Welborn says the SEC knows it has to introduce the pre-borrow rule if it wants to eliminate fails to deliver for good. “As long as there are companies on the Reg SHO list, then the problem has not been solved,” he says. “The only sustainable solution to naked short-selling is a rule requiring both a pre-borrow and a hard delivery. With only one of these pieces in place, the system is still open to abuse. For example, a hard-delivery requirement by itself would not have made an iota of difference for Bear Stearns; only a pre-borrow could have put a brake on the naked short-selling.”
Welborn points out that the SEC did precisely this in July when it ordered emergency pre-borrows for Fannie Mae, Freddie Mac and the 17 primary dealers. “The SEC knows what must be done to fix this problem once and for all,” he says.
*****
r) December 9 – Reuters: “SEC urged to do more to curb naked short selling” By Rachelle Younglai
WASHINGTON, Dec 9 (Reuters) – U.S. securities regulators need to do more to crack down on abusive naked short selling — a type of trading blamed for contributing to the free-fall in financial stocks — former and current regulators said on Tuesday. Amid volatile market conditions, the Securities and Exchange Commission adopted a number of rules to rein in those who profit illegally from stock declines. Making bearish bets on stocks is a legitimate investment strategy but the SEC’s rules are designed to weed out abusive practices, such as investors’ failure to deliver stock by settlement date. Short sellers arrange to borrow shares they consider overvalued in hopes of repaying the loan for less and profiting from the difference. A naked short sale occurs when an investor sells stock that has not yet been borrowed, which can distort markets.
Former SEC Chairman Harvey Pitt praised the SEC for taking constructive steps but said the agency has not done enough.
“Naked shorting is a situation in which someone is gambling but they have no skin in the game. They are not required to make any effort to deliver the shares,” said Pitt, one of the panelists speaking at a “Coalition Against Market Manipulation” event in Washington.
The SEC tightened up its rules this year and required short sellers to deliver securities three trading days after shorting the stock.
Rex Staples, general counsel for an association of state securities administrators, said the states are trying to eliminate the problem, but said “this seems to be a solution that the commission is best-equipped to solve.”
“States are ready to act, but we are throwing our support behind the federal regulator at this point,” said Staples, general counsel for the North American Securities Administrators Association.
Pitt and other panelists said the SEC needed to do more to eliminate ambiguity in its rules.
For example, investors are required to locate shares before shorting them. However, SEC rules require broker dealers to have “reasonable grounds” to believe that the security can be borrowed so that it can be delivered by settlement date. Critics say the language is vague.
“If you want to sell short any security, you should have a legally enforceable right to deliver stock on day of settlement. It’s unambiguous, it doesn’t leave any wiggle room,” said Pitt.
*****
s) December 9, 2008 – Wall Street Journal: “SEC Urged To Step Up Attack On Short-Sale Abuses” By Judith Burns
WASHINGTON — U.S. securities regulators need to do more to curb short-selling abuses, a group of academics, business executives and former top regulators said Tuesday.
The Securities and Exchange Commission should close loopholes and enforce current rules against “naked” short selling, said Harvey Pitt, former SEC chairman and now chief executive of Kalorama Partners, a Washington, D.C., consulting firm.
“The agency has to make it clear that naked short selling in any form is prohibited,” Mr. Pitt said at a midday press conference.
Short sellers aim to profit by borrowing shares for sale and replacing them later at a lower price. “Naked” short sellers don’t borrow shares they sell short, which can pummel stocks and facilitate market manipulation.
The SEC has sought to crack down on short-selling abuses in recent years, most recently with an interim rule requiring short sellers to deliver borrowed shares within three days of trade settlement. Mr. Pitt and others urged the SEC to make the requirement permanent and take other steps to stiffen pre-borrowing requirements, provide better tracking of stock-delivery failures, including those outside stock-clearing systems, and force buy-ins when delivery failures occur.
*****
t) December 9, 2008 – MarketWatch: “Obama adviser: Short selling must be disclosed” By Ronald D. Oral
Ambiguous rules limiting naked short selling must be clarified, attorneys say
WASHINGTON (MarketWatch) — A top adviser to President-elect Barack Obama on securities regulation on Tuesday said he wants the Securities and Exchange Commission to require public disclosure of short selling.
“We’re looking for disclosure of positions, with a small delay, after a short sale is made,” said Roel Campos, a former Democratic SEC commissioner and member of Obama’s transition team.
After the precipitous drop in stocks of major investment and some commercial banks including Citigroup Inc. in September, the agency implemented a series of short sell rules, many of which were temporary in nature. Among these, the SEC temporarily banned short sales in roughly 800 financial institutions. That ban expired on October 8.
Regulators and others argued that many short sellers — who make bets that a stock price will decline — contributed heavily to the financial crisis and the collapse of many financial institutions.
The next agency chairman is expected to grapple with whether the agency is doing enough to chill manipulative short selling of shares, particularly when it comes to financial institutions.
Campos is seeking to have the next SEC chairman introduce new rules requiring short sellers to publicly disclose their positions in a manner that is similar to how equity investors are required to reveal their equity stakes.
For example, to comply with the SEC’s 13F rule, investors with $100 million in capital or more are required to publicly disclose their positions 45 days after every calendar quarter. Equity investors with 5% or greater stakes are also required to disclose that information to the agency in either an activist Schedule 13D or passive Schedule 13G filing.
But Campos argues that four-times-a-year public disclosure of short sell positions isn’t enough. He wants to see a requirement that hedge funds and other short sellers disclose their positions publicly more quickly after stakes are made, perhaps as fast as two weeks after each position is taken.
Among the temporary regulations put into place in the fall is a requirement for confidential weekly disclosure of short positions to the agency.
According to the rule, investors with $100 million or more in capital must disclose on a weekly basis to the agency their short positions. However, these investors only must provide that position information to the agency on a confidential basis. The expiration date for the provision was extended in October to Aug. 1 of 2009.
Short seller critics argue that public disclosure will mean their proprietary strategies will be disclosed, enabling rivals to copy their approach. Campos said the delay in public disclosure is intended to protect some proprietary strategies, but that there should be some parity with equity disclosure requirements.
Other ways to rein in short selling
In addition to disclosure, securities attorneys and academics discussed other mechanisms that the SEC could impose that could reign in short selling at an event hosted by the Coalition Against Market Manipulation in Washington.
Participants argued that the agency needs stronger rules limiting illegal naked short selling, the practice of selling shares without arranging to borrow the securities up-front.
The SEC in September adopted rules requiring short sellers and their broker dealers to deliver securities within three days of a trade. Participating investors who fail to arrange to borrow shares in advance are prohibited from making future short sales in the same securities.
But securities attorneys at the event argued that there are too many qualifiers on the naked short selling rule.
Rex Staples, general counsel for the North American Securities Administrator’s Association Inc., said there is a “reasonable” qualification on the delivery requirement. “To the extent you can qualify a word like reasonable, you are going to get that time after time,” said Rex Staples, general counsel for the North American Securities Administrator’s Association Inc.
Former SEC chairman Harvey Pitt, who participated in the discussion agreed that the SEC should eliminate ambiguity when it comes to the agency’s naked short selling provision. The agency should also take steps to enforce the rules.
“The agency must make it extremely clear that any naked short selling is illegal and it has to remove the ambiguities so the rules are very clear,” Pitt said.
Participants also debated bringing back the so-called up-tick rule, a regulation removed last year that allowed short sales only if a preceding trade boosted a company’s stock price.
Georgetown Finance professor James Angel said he wants to see an up-tick rule that would take effect when a stock has fallen 5%. He also sought additional prohibitions when a stock price falls 10% and 15%. Staples argued that the SEC should bring back the same up-tick rule it eliminated in 2007. “It is very helpful in times of financial turmoil,” Staples said.
*****
u) March 19, 2009 (Bloomberg): Naked Short Sales Hint Fraud in Bringing Down Lehman” By Gary Matsumoto
The biggest bankruptcy in history might have been avoided if Wall Street had been prevented from practicing one of its darkest arts.
As Lehman Brothers Holdings Inc. struggled to survive last year, as many as 32.8 million shares in the company were sold and not delivered to buyers on time as of Sept. 11, according to data compiled by the Securities and Exchange Commission and Bloomberg. That was a more than 57-fold increase over the prior year’s peak of 567,518 failed trades on July 30.
The SEC has linked such so-called fails-to-deliver to naked short selling, a strategy that can be used to manipulate markets. A fail-to-deliver is a trade that doesn’t settle within three days.
“We had another word for this in Brooklyn,” said Harvey Pitt, a former SEC chairman. “The word was ‘fraud.’”
*****
In addition to these articles, please note that naked short selling has been implicated in the hobbling of the US financial system by The American Bankers’ Association (1 2), the US Chamber of Commerce (1 2 3 ), the CEOs of Goldman Sachs, Morgan Stanley, JP Morgan, and Lehman, politicians John McCain, Hillary Clinton, Barack Obama, Ron Paul and numerous other congressional representatives, the Chairman of the SEC, the Secretary of the Treasury, and so on and so forth.
*****
STEP #3 OF 3: THE CURRENT WIKIPEDIA PAGE ON NAKED SHORT SELLING OMITS EVERYTHING YOU JUST READ, AND YOU ARE FORBIDDEN FROM FIXING IT
At “the encyclopedia that anyone can edit” it is as forbidden to add information such as that contained in the preceding articles as it would be to sell Adam Smith’s works on the streets of Pyongyang. Instead, right at this second, the Wikipedia page on Naked Short Selling sticks to a thoroughly-discredited two-year out-of-date Party Line that holds that experts think naked short selling is not a problem (or even exists) and the mass media agrees with the experts. Much of the page is written in gibberish apparently intended to make it more difficult for a lay person to confront (which is unusual for Wikipedia). And unique among the millions of Wikipedia articles, it cannot be fixed or updated to reflect any of the information cited exhaustively above.
That’s right. Notwithstanding thousands of articles such as the ones cited above, the current Wikipedia article on naked short selling insists that experts believe that it is not a problem. No mention is made of hearings, statements by economists and SEC Chairmen, emergency federal actions and emergency meetings of regulators from the G-20 to stop the world financial system from implding, etc.
Instead, the tone is set by this quote:
“While concern expressed by the regulator has been echoed by journalists, some commentators contend that naked short selling is not harmful and that its prevalence has been exaggerated by corporate officials seeking to blame external forces for their own shortcomings. Others have discussed naked short selling as a confusing or bizarre form of trading.”
That is, in a 54-word statement about a “concern”, precisely 11 words vaguely describe the existence of the “concern” and 43 say that there is no concern. This, though space is allocated to describe results from two off-topic studies from 2007 (one on failures in the IPO market, the other on the Canadian market):
A study of trading in initial public offerings by two SEC staff economists, published in April 2007, found that excessive numbers of fails to deliver were not correlated with naked short selling. The authors of the study said that while the findings in the paper specifically concern IPO trading, “The results presented in this paper also inform a public debate surrounding the role of short selling and fails to deliver in price formation.”
An April 2007 study conducted for Canadian market regulators by Market Regulation Services Inc. found that fails to deliver securities were not a significant problem on the Canadian market, that “less than 6% of fails resulting from the sale of a security involved short sales” and that “fails involving short sales are projected to account for only 0.07% of total short sales.”
Again, notwithstanding the thousands of articles such as the ones I cited above, the current Wikipedia page maintains that the mass media agrees that naked short selling is not a problem:
Reviewing the SEC’s July 2008 emergency order, Barron’s said in an editorial: “Rather than fixing any of the real problems with the agency and its mission, Cox and his fellow commissioners waved a newspaper and swatted the imaginary fly of naked short-selling. It made a big noise, but there’s no dead bug.” Holman Jenkins of the Wall Street Journal said the order was “an exercise in symbolic confidence-building” and that naked shorting involved echnical concerns except for subscribers to a “devil theory”. The Economist said the SEC had “picked the wrong target”, mentioning a study by Arturo Bris of the Swiss International Institute for Management Development who found that trading in the 19 financial stocks became less efficient. The Washington Post expressed approval of the SEC’s decision to address a “frenetic shadow world of postponed promises, borrowed time, obscured paperwork and nail-biting price-watching, usually compressed into a few high-tension days swirling around the decline of a company.” The Los Angeles Times called the practice of naked short selling “hard to defend,” and stated that it was past time the SEC became active in addressing market manipulation.
The Wall Street Journal said in an editorial in July 2008 that “the Beltway is shooting the messenger by questioning the price-setting mechanisms for barrels of oil and shares of stock.” But it said the emergency order to bar naked short selling “won’t do much harm,” and said “Critics might say it’s a solution to a nonproblem, but the SEC doesn’t claim to be solving a problem. The Commission’s move is intended to prevent even the possibility that an unscrupulous short seller could drive down the shares of a financial firm with a flood of sell orders that aren’t backed by an actual ability to deliver the shares to buyers.”
The Wikipedia page engages in such pettifoggery as: “However, the SEC has disclaimed the existence of counterfeit shares and stated that naked short selling would not increase a company’s outstanding shares” (true only in the narrow technical sense that the SEC does not consider that which is increased by naked short selling to be “outstanding shares”: by the same token, the National Transportation Safety Board could claim that there are no plane crashes because the NTSB considers anything which crashes to no longer be a plane).
And so on and so forth. You will find such gibberish on the naked short selling article on Wikipedia, but what you will not find is any of the information presented in the articles cited in Step #2. It is forbidden to enter that information into Wikipedia.
*****
THE TEST: ARE YOU FORBIDDEN FROM UPDATING WIKIPEDIA WITH THIS INFORMATION?
I know that to many this can be a maddeningly complicated issue, and it may not be easy to know who or what to believe. So I propose that you, the reader, conduct an easy, simple test, using the articles cited above. You can do it in about 2 minutes:
- Log on to Wikipedia (if you do not have an account you can create one in seconds);
- Go to the article on Naked Short Selling;
- Attempt to edit it with any information regarding events, data, or quotes from any of the articles cited above.
You will find that it is forbidden for you to add any information, data, or quotes from those numerous articles, or to correct any of the glaring omissions and laughable spin of the current article. If you try, your additions will be removed nearly instantaneously. In fact, you may find yourself banned from Wikipedia while all proof that you even made an edit disappears.
On “The encyclopedia that anyone can edit”, a resource that updates in seconds at the passing of a celebrity or the gaffe of a politician, you will find that you cannot insert quotes on this one topic, even when those quotes come from SEC Chairmen, economists, presidential candidates, Congressmen and Senators, G-20 regulators, and Wall Street leaders, even when those quotes appeared months or years ago in The Economist, Reuters, DowJones, Associated Press, or Bloomberg.
Two million English-language articles work by one set of rules, but this article on a grave financial crime turns out to run on a secret set of rules.
And that, dear reader, is the stutter-stepping black cat that should wake you to the synthetic reality you inhabit.
Postscript: If you want to know how this is being done, watch Judd’s magisterial “Lecture on abuse of social media by stock manipulators“. And if you want the back-story on that, read TheRegister’s article, “Emails show journalist rigged Wikipedia’s naked shorts – Overstock’s Byrne vindicated amidst economic meltdown” by Cade Metz.
Are you misreading the protection policy? There’s a lock on the upper right hand corner of the article; if you click it you learn the page is “semi-protected”, that is, protected against edits from anonymous users and those who are not ‘autoconfirmed’ (for example, not a high enough edit count).
Looking at the discussion page for the article, apparently someone requested protection for the page two months ago due to a spam attack. Of course there’s nothing to prevent someone from deliberately shutting down edits on a page by spamming it… not that anyone in the financial industry would dream of doing something like that.
You could simply try creating your own Wikipedia entry under your own title, say, “abusive short selling”, and link to that from any short selling related articles you can edit.
Max,
What’s your point? You just described the mechanism by which they are doing…. Just what I said they are doing.
Patrick
Intriguing challenge. I did not have a Wikipedia account and so I set up an account. I went to the Naked Shorting article but could not quite figure out how to edit it. I noticed that the external links do not have a link to Deepcapture, or, InvestigateTheSEC. So, I went to the help section and asked the following under the heading: “Adding External Links to Article on Naked Short Selling”
It is clear that Naked Short Selling is controversial.
My question is this: Why is there no external link to 2 very provocative web sites:
http://www.deepcapture.com
http://www.investigatethesec.com
When I seach the Wikipedia web site, I find no reference to these sites. I do not understand why they cannot be referenced from Wikipedia – in particular from the article on Naked Short Selling.
BTW, it would appear from evidence being brought forth (see the Kotz’s report – the OIG of the SEC – regarding Naked Short Selling).
While I’m thinking about it, is the report by Kotz even referenced in the Naked Short Selling Page ? This would clearly be a major oversight if in fact it was “banned” from any reference.
Thanks for any comments . . .
***********
Stay tuned for the Wiki “answer” !
Well, maybe if you had more edits to your credit, you’d be “autoconfirmed” and could edit that page.
Just now I checked out the auto-generated list of semi protected pages, and there’s an awful lot of them, thousands at least, ranging from “Germany” to “SpongeBob SquarePants”.
It seems like subjects which are very popular get this kind of attention from Wikipedia administrators; in other words, your topic isn’t being singled out.
John, there’s a “regulatory capture” page on Wikipedia and it’s not protected at all. Why not add a link to this site?
FWIW, I’m beginning to get confused and if I’m getting confused then many others may be. Now I’m NOT CONFUSED re what is legal and what is NOT LEGAL. The ILLEGAL USE OF NAKED SHORT SALES and use of phantom shares is ILLEGAL. I”m NOT confused that many are attempting to distract and confuse. That is very clear. I’m confused as to why we dialogue with the Devil or his disciples. So here is where I stand. Lets put NAMES to those who break laws, It’s NOT the SEC that is breaking a law it is X or Y who works for the SEC.Name them and then show the documentaion that confirms such. It isn’t congress but specific congressman. We know the names. NAME THEM. The Senate. We know the names NAME THEM. Media. We know the names NAME THEM. YAHOO FINANCE and the use of professional bashers NAME the execs who allow such. Dishonest Hedge funds or other. NAME THE EXECS. CNBC/CNN/NBC/FOX etc NAME THE EXECS and then NAME THE EMPLOYEES. Judd’s Video allows one to SEE and HEAR. Stewart and the use of a video allows one to SEE and HEAR. So lets start from the TOP. Ok pres elect what do YOU say about Naked short selling? Do YOU support the breaking of FED LAWS? How about YOU Mr Geithner or Mr Bernanke. DO YOU SUPPORT the breaking of FED LAWS? Ms Shapiro? I appreciate the time and energy re Wikepeida but let’s be objective. THE MARJORITY do NOT use such for aid in determing right or wrong. They look to leaders who are in place to enforce LAWS. COX was NEGLIGENT in doing so. as well as those before him.Was it WILLFUL. In my opinion it was! However lets’start somewhere. Wahsington Mutual or Wachovia or Bear Stearns, Lehman ect invesors should bring forth a class action law suit against COX for NOT enforcing the LAW. Who says govt agents can not be sued? And at the same time shoot a shot across the bow against Shaprio and others. . Then at the same time go after the Specific execs in the Media and the journalists who were complicit. TOO much talking and NOT enough ACTION.
RICO act against Christopher Cox, Goldman, Einhorn, Soros, et al. – now!
Patrick,
Wouldn’t it be great if the Deep Capture site was the number one Google search result for “naked short selling” instead of the wikipedia page?
I’ll tell you exactly what little change you need to make that happen.
Just change the title tag for the home page. The current title is “Deep Capture Blog”. Why don’t you change it to something like “Naked Short Selling. Deep Capture Exposes the Crime of the Century”
Then get a some websites linking to you with “naked short selling” as the anchor text.
You should have Judd Bagley and Mark Mitchell create their separate websites and optimize them the same way. You might be able to dominate the entire first page of a Google search for “naked short selling”.
I’d be glad to help in any way I can to help you expose this racket.
Interestingly, even the wiki article on the Pecora Commission(1930’s, conducted to determine the cause of the Crash) makes no mention of shortselling by executives of their own companies.
Most interesting:
http://en.wikipedia.org/wiki/Pecora_Commission
Is there some kind of ping-back to trace the origin/ identity of the trash posts 6-15 and the latest, #20 (as well as the “max leverage” pseudonym sabotage.)?
Much more likely than not the scumbag{s} posting are of the chanos, weiss gang variety and ought to be called out for their intentional degradation of this site and its posting privileges. In the alternative, their crap should simply be deleted and their identities “captur5ed” for future action..
Well of course you cant alter the DTCC Wiki!!
Patrick ___Are you completely insane?? Has all sense of reason finally left your black irish heart? The very epi-center resides in the DTC, the HEART OF THE MATTER so to speak. By opening PANDORAS BOX will we ever be able to resolve the sins of our past masters who in the name of FREE MARKETS leaned and leaned again in the face of the power of US investment.
Weiss and his sort were transparently hired to put a freindly face on the Black Box. The enormity of the crime is only now uttered in hushed tones. The corridors have got used to hearing trillions now _ obscene Feh!
Max Leverage _ interesting comments __ Patrick is hurting something thats screaming?
Well,well, well..now what have we here irrefutable proof by others..This just keeps getting better and better
Genesis of Financial Meltdown
Source: http://blackstarnews.com/?c=135&a=5494
[Genesis
Of Financial Meltdown]
In 1999 Robert Morgenthau, the anointed
Manhattan District Attorney, used his position to protect the Russian Mob at the
behest of his friend, Arthur Levitt, then Chairman of the Securities and
Exchange Commission.
Harbor Securities was a day trading firm, which was
based in Manhattan. It was founded by members of the American Stock Exchange
(AMEX). These members sought to establish a day trading firm so that they could
trade from off-floor premises- while they leased out their seats on the American
Stock Exchange (AMEX).
But the profits, which they had sought were
elusive. Then came Al Chalem and Maier Lehmann two stock fraud promoters. Maier
Lehmann was a good friend of Feivel Gottlieb, a seat owner at the American Stock
Exchange, who had earned millions investing in the stock frauds of Maier
Lehmann.
Chalem promised the investors a high rate of return. Being
members of the AMEX these investors did not care about how the money was
earned. If they did not like the stock fraud- they could withdraw their
money. Only one did so.
Unfortunately the stock frauds did not take off
as planned and money was lost. Then the money men behind the stock frauds grew
impatient; and these individuals were members of the Russian Mob, the most
feared criminal syndicate in the United States.
On October 25, 1999
Chalem and Lehmann were murdered in Colts Neck, New Jersey, as discussed in a
previous article. Harbor Securities was defunct. Morgenthau could not cover up
the murders of Chalem and Lehmann. Although the two were murdered in New
Jersey. But there was a crime in New York City that fell under Morgenthau’s
purview. The $4 million that had been purloined from PAX Clearing, the firm
which processed the trades that were made by traders at Harbor
Securities.
Harbor Securities was registered with the SEC, so the Securities
and Exchange Commission conducted an examination and investigation of Harbor
Securities. It must be noted that the founding principals of Harbor Securities
were members of the American Stock Exchange.
Most prominent of these
investors was Joel Lovett, former senior floor governor of the American Stock
Exchange during Levitt’s tenure as Chairman of the American Stock Exchange and
several years later Acting Chairman of the American Stock Exchange. In 1995
after Richard Syron was hired as Chairman of the American Stock Exchange, Lovett
became Vice Chairman of the AMEX.
After NASD bought the AMEX in 1998,
Lovett was ignominiously forced to leave. Under no circumstance could Arthur
Levitt have Joel Lovett and other former members of the AMEX linked to the
bankruptcy of Harbor Securities, the stock frauds of Al Chalem and Maier
Lehmann, and the murders of both men. So according to my sources Levitt ordered
the SEC to clear Harbor Securities and its officers of any
wrongdoing.
The SEC refused to investigate and gave Harbor Securities a
clean bill of health. But there was a problem. Four million dollars had been
stolen from PAX Clearing. PAX wanted its money.
The theft of $4 million
became Morgenthau’s problem. But Morgenthau took no action. Morgenthau refused
to investigate the Russian Mob takeover of Harbor Securities as a favor to
Arthur Levitt.
Once again Robert Morgenthau assisted his good friend,
Arthur Levitt.
http://www.investigatethesec.com/drupal-5.5/?q=node/628
Also read this
http://www.investigatethesec.com/drupal-5.5/?q=node/628
Source: http://blackstarnews.com/print.php?a=5481
http://blackstarnews.com/
How Levitt Covered Up Wall Street Scandal
The second letter about Arthur Levitt
In 1998 I was a former trader cooperating with Gary Weiss, a reporter for Business Week on what was to become the 1999 award-winning article, “Scandal on Wall Street.” The article exposed massive violations of federal Securities laws at the American Stock Exchange.
Edward Manfredonia
March 18th, 2009
The media have given Arthur Levitt, former Chairman of the Securities and Exchange Commission (SEC), a pass by refusing to investigate his denial of halting investigations into his friends in finance.
THIS IS SO SAD AND TRAGIC!!
FROM: J-MC Patriot Alert Task Force ([email protected])
TO: Karl Denninger ‘Market Ticker’
DATE: Sun, Mar 22, 2009 at 12:49 PM
SUBJECT: Naked Short Selling: Fraud or Honourable and Ethical conduct?
Mr. Denninger,
The Ticker Guy
The Market Ticker
Commentary on the Capital Markets
http://market-ticker.denninger.net/
CC: Comment to Deep Capture
I did a search of the Tickers’ to see what your opinions are on Naked Short Selling. Nothing came up. I wondered what your opinions were, on the issue, and if you were aware of Dr. Patrick Byrne (deepcapture.com) work on the issue. His most recent article on the issue being: Do I Live in a Synthetic Reality”? Do It Yourself Home Test
https://www.deepcapture.com/do-i-live-in-a-synthetic-reality-do-it-yourself-home-test-draft/
The issue I have with Mr. Byrne’ s expose’s, in this case Wykepedia’ censorship of these issues is: I have only once made an addition to Wikipedia’s pages: to the page of Timothy James McVeigh. My information was immediately deleted, for no reason. So, I don’t live in an illusion that Wikipedia practices serious censorship, and is anything but an open or free market of ideas and uncensorshiped media vehicle.
On Wikipedia and Naked Short Selling: Let’s imagine that there are people who think Naked Short Selling is a ‘good idea’. Fair enough it may be. But if so, why not provide the argument therefore, in an open environement. If you think your idea has merit, and is valid and contributes to ethical and honourable and transparent markets; then share your idea, and listen to the criticism thereof, as feedback.
John F. Kennedy said when he wanted to put a man on the moon, that the most important people to listen to, were the scientists who said it could NOT be done. If their arguments were seriously addressed and they being scientists were happy to practice science; ie the spirit of enquiry and investigation, then as each and every argument that said it CANNOT BE DONE, was overcome, the path to putting a man on the moon would be walked.
If there is nothing wrong with Naked Short Selling; if it is legal ethical and honourable? Why the need to hide criticism of it? Why do you need to go to such efforts to manipulate others to criticism of it?
If your ideas on any issue cannot stand scrutiny and enquiry to determine where or if they are Swiss Cheese ideas, or solid steele ideas: Is the reason they do not want them to be scrutinized possibly because in any serious further enquiry of those ideas, the major flaws may not only show major flaws in the actual idea, but how the particular idea and it’s public relations manipulation reflects on the lack of their own personal character, integrity and honour?
Anyway, I respect your opinion and your courage and your commitment to ‘honest transparent markets’ that reflect honest prices of goods, based upon accurate information; ie REALITY (not perception management reality, but true total transparent reality). So I’d appreciate it if you could provide your opinions on the issue, in an upcoming Ticker, or as relevant.
Respectfully,
Lara Johnstone
FROM: Karl Denninger (karl@*********.net)
TO: J-MC Patriot Alert Task Force ([email protected])
DATE: Sun, Mar 22, 2009 at 4:44 PM
SUBJECT: Naked Short Selling: Fraud or Honourable and Ethical conduct?
Naked short selling is fraud – period.
There goes Rome.
i dont understand your posts # 17
Fintas took the words out of my mouth. Less talk and more action. Great job Patrick. I have a feeling Wiki’s days are numbered and re-organization soon to come.
Fintas post is #6.
Harvey…. Click on the posts’ titles. I believe the poster was simply referencing a couple sites that picked up on the blog. (?)
For those who are bored, how about sending Hannity the link of Senator Shelby’s nefarious actions re his actions and words about Naked Short Selling so he can pass them along to one of his GREAT AMERICAN PANEL guest Dick Shoen and others who suggest we should be listeing to Shelby. . Mabye the subject line to Sean should be. SEAN. GET A CLUE! Then plug in the link with a Sean you mean well but stop looking at the fire and start looking at who set it and who put roadblocks in the road to stop the fire engines and crew from being able to put out the fire.. If this wasn’t serious I’d be ROFL.
thank you paladin
calltoaccount (#10)
I post regularly on a few trading blogs as well as Twitter… knock yourself out in exposing the fraud that is Max Leverage… that identity isn’t linked with this one because Patrick has chosen not to allow portable identities (as provided by OpenID for example), instead he’s using a custom comment system.
FYI I’ve been reading this blog for a while, and I chose to jump into this thread because it involves stuff I know about. Patrick’s reaction to being locked out of editing a page on Wikipedia is very typical of successful middle aged men who are used to having their authority act as an access badge, only to fall afoul of the rules of the Social Web where their meatspace authority doesn’t matter.
If there’s some more sinister explanation I’d love to hear it, but what it looks like to me is Wikipedia has restricted editing of that page as well as thousands of others because there’s some sort of controversy or concerted trolling attack. What’s behind that controversy or trolling attack is the real story, I reckon. And if Patrick wants to take this further, I used my real email. Adios.
Jim Sinclair’s Commentary
The felonious game is over.
The handwriting is no longer on the wall, it is now in neon lights 100 feet high.
The pressure against naked shorting is picking up speed. You never would have seen this in the last 8 years. Look for criminal charges of fraud soon against the practitioner. Only the most dense hedge fund manager can fail to see the jig is up on this convenient and previously profitable crime.
Now old fails to delivers are an invitation akin to a sign on the hedge fund door saying “Arrest me please!”
Check your own investments to see the “Fails to Deliver.”
http://failurestodeliver.com
In a year or so you will be able to check the location of the dense hedge fund manager:
http://www.felonspy.com/search.html
Take away naked short sales and Wall Street loses a huge chunk of profit and manipulative ability. If the small investors get wind of the way things work, they will not play the game. Ws is not seeing the volume of trades that it needs to be satiated and has become desperate.
Read how other countries are treating naked and short sales and watch what happens on march 31, 2009
http://www.mfglobal.com/fsa/shortselling.htm – 48k
Those who take a cheap shot at Patrick or use these comment sections to divert and distract are similar to those who were dissing Patrick when he was out front doing the Paul Revere while the nefarious were dissing him. Bottom line, this isn’t 2000/2005/2007. It’s a time where we have seen longstanding firms and a great nation taken to it’s knees. And we the collective aren’t going to take it any more. So either join in with PRODUCTIVE comments or be GONE. There are ENOUGH jerks who were complicit in negatively affecting hundreds of millions of lives. But those jerks are but a few as compared to the many who will make sure that there names are known. How’s that blacklist coming. PUT NAMES to the agencies/firms/political. MAKE IT PERSONAL.. IT IS!!!
Patrick,
I really thought you were going to go in another direction at the end of your list of news items. To me, the point was, in spite of the numerous statements by the SEC that they ‘were doing everything possible to look into the abuses,’ nothing concrete has been accomplished. ‘I told you so’ won’t really cut it, but, if Utah had posessed the cajones to leave their NSS law…
<<<<>>>>
….in place, the current economic crisis may have never occurred. The pressure from Wall Street seems to have caused the Legislature of Utah to let the legislation die. The threat of losing a few thousand jobs, (which probably would not have occurred anyway, it was just that, a threat,) has instead resulted in an exponentially larger number of Americans losing their jobs. Abusive short selling is a major prop in the support system of Wall Street, along with ‘captured’ media and members of Congress, and derivative instruments making up the balance of the tripod. Knock one leg out, and the others will, at the very least, falter, and maybe fall.
My point is, they’ve been threatening to rein in abusive short selling for years, to no avail.
It also pains me that the spokesman for the States’ Securities Boards has chosen to back the incompetent (at best) Federal government, instead of insisting that the individual states invoke the powers that they posess to regulate Securities Transfer, as mandated by the UCC code, adopted by all 50 states, in order to facilitate interstate trade. The SEC has usurped the power vested in the States, which it does not have the right, or the power, to do.
The States need to take back the power it has incorrectly given the SEC, and Wall Street, and deliver it back into the hands of the individual investor. Please see the Solution pages at http://investorprotectioncoalition.org/ .
It’s a non partisan thing. It’s an American thing. We may not be able to recover the money that’s already been stolen, but we should be able to staunch the bleeding that’s happening right now. We must force them to settle the trades. The States are the key.
And, it looks like we have to hurry. The comment about the REG SHO list having many less inhabitants may be not so much because failing to deliver is lessening, but that the perpetrators are getting better at it.
If we could only restore some semblance of confidence in the Market again, investors would come pouring back in. Right now, they don’t know who to trust. The States can restore that confidence. It rests on the States.
RVAC
Utah’s law got left out, permisso, por favor.
May, 2006
SB3004, which overwhelmingly passed the Legislature during Wednesday’s special session, targets stockbrokers, dealers and investment consultants who engage in alleged naked shorting
RVAC
RVAC,
I agree, if Utah had stood behind its law, if Senator Curt Bramble had not sold us out like last week’s luncheon meat, had Governor Huntsman not turned yellowbelly….. Yes, it is possible that much of this disaster may not have happened.
Patrick
Would a add campaign naming all the ones who have done the crime…Wall Streeters, along with the Congressmen and women who have drank from the Wall Streeters poison fundings as well as the names of all we can find out at Regulators who have looked the other way for gain be put out =in adds naming names?
Would making this type of info available, with all the trouble we are in now work? It seems since as everyone now has lost enough to get mad they might just be ready to focus.
If so, where can I send my share of the money for just this type of add?
YUP Name those names. Then have someone put it together with timeline and milestones. There’s a reason they have document control and ensure control of such. Because somewhere there’s a document with a name/a signature, a vote screaming to say.. ME ME ME or shhh shhh shhh. Get those names out, let the collective know and then watch them feed upon themselves as they are NOW suggesting it’s ok to be enraged but ah ah let’s not do anything foolish. WHY? Perhaps some realize there are no boundaries but just those imagined. I’m waiting for someone to put up a graph showing stock prices before the the irresponsible voted NO and AFTER the irresponsible voted NO. Or what was the price of WM/WB on SEPT 19 and what were they two weeks later? CAUSE and EFFECT
Regulators seek global approach to short selling
http://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUSLN30233720090323
There a lot of documents, incriminating letters from five years, ago, comment letters, etc. where the links get buried in these comments.
Is it possible for Deepcapture to install wiki software so that members here can edit our own Wikipage for naked shorting, which becomes a better source than Wikipedia?
Wiki software is free.
http://en.wikipedia.org/wiki/Wiki_software
It’s too much for any one person to deal with, but if the entire community here could be uploading documents, news articles, wall of shame letters, etc., then the sheer volume of the evidence, all in one place, easy to understand and organize would likely attract all kinds of state level class action suits and hopefully DOJ arrests.
Here is a link to Senator Kaufman’s remarks on the Senate floor last Thursday, March 19, 2009:
http://kaufman.senate.gov/press/press_releases/release/?id=1175F96B-603C-494E-BD26-016CC8EA637D
“Mr. President, I would like to spend a few minutes talking about action that needs to be taken to restore the credibility of the fairness of the American financial markets.
On Monday, Senators Isakson, Tester and I introduced S. 605, which directs the Securities and Exchange Commission to write regulations that will deal effectively with abusive short selling. One of the abusive techniques addressed in the bill is so-called “naked short selling.” Naked short selling is when traders sell shares they don’t own and have no ability to deliver at the time of sale – which dilutes the value of a company’s shares and can drive prices down artificially.
Before the ink on our bill was even dry, we received a profoundly disappointing report from the SEC’s Inspector General entitled “Practices Related to Naked Short Selling Complaints and Referrals,” a report detailing the results of an audit on the SEC Division of Enforcement’s policies, procedures and practices for processing complaints about naked short selling. An astounding 5000 complaints about abusive short selling were sent to the SEC’s Enforcement Division between January 1, 2007 and June 1, 2008. There could be no mistaking the scale of the potential problem that that number of complaints reflected. Incredibly, a mere 123 complaints were referred for further investigation. Worse, and I quote, Mr. President, “None of the forwarded complaints resulted in enforcement actions…” Five thousand complaints, zero enforcement actions.
Not surprisingly, the SEC Inspector General has concluded that the processes for dealing with such complaints need a fundamental overhaul. Accordingly, the IG made 11 suggestions for improvements. And how did the Enforcement Division respond? It agreed to one of the IG’s recommendations, and declined to move on the rest.
Now I’ve been around Washington and the Senate for 36 years, but rarely have I seen an Inspector General’s call for action so summarily dismissed. In its comments to the IG report, the SEC Enforcement Division stated – and I quote – “there is hardly unanimity in the investment community or the financial media on either the prevalence, or the dangers, of ‘naked’ short selling.”
Mr. President, I ask my colleagues: Why would the SEC Enforcement Division want to wait until there is unanimity in the investment community and the financial media to enforce the law? Why would the SEC Enforcement Division in its comments to the IG report want to give a virtual “green light” to continued abusive naked short selling? That is an enforcement division that is not worthy of its name….
….”
This SUMS UP the position of the SEC, which has been obvious for many, many years:
…the SEC Enforcement Division stated – and I quote – “there is hardly unanimity in the investment community or the financial media on either the prevalence, or the dangers, of ‘naked’ short selling.”
The ONLY GOOD NEWS here is that the SEC Enforcement Division has now stated publicly in writing that
… THEY ARE NOT AN ENFORCE MENT DIVISION!
E-trade is a big naked short. Don’t assume they own any shares that they list on your account statement.
http://www.rys2sense.com/anti-neocons/viewtopic.php?f=11&t=17839&p=120323
I’m pulling my certs. electronically in my own name (DRS) for any shares I plan to own for more than a year. Why expose myself to the chance my brokerage is a thief? I can easily wire them into a brokerage when I want to sell them.
https://portal.dtcc.com/dtcorg/prod-serv/page19398.html
Anonymous,
I am trying to put together a “platform” for links, documents, bibliography, etc. Not a wiki though:
http://deepcapturenotes.wordpress.com/
This site could use some type platform – forum or wiki.
I am not as knowledgeable about finance or NSS as allot of people here. I could use any ideas or help people want to offer.
I keep getting asked the same question by those that have studied the SEC’s recent rebuttal to their Office of Inspector General’s (OIG’s) 11 recommendations regarding abusive naked short selling and the SEC Enforcement’s Division lack of going after the perpetrators of these frauds. The questions all revolve around how dare the SEC Enforcement Division in the midst of this worldwide furor over abusive naked short selling claim that:
“there is hardly unanimity in the investment community or the financial media on either the prevalence, or the dangers, of “naked” short selling”
and also
“The best sources for information on violations relating to “naked” short selling is the SRO, which has primary responsibility for surveillance of its trading. And we receive a large number of referrals from the SROs, addressing all forms of alleged investment misconduct. It is telling that, of the 900 SRO referrals Enforcement received during the Report’s 18-month survey period, none involved the practice of “naked” short selling. That is to say, the people closest to the trading, with the deepest understanding of and access to the data, did not see and refer any of the large-scale, damaging “naked” short sale abuse about which the Report hypothesizes”.
The irrefutable proof as to the pandemic nature of abusive naked short selling is contained in the trading data and in the failure to deliver data. Who has access to this data? The SRO(s) cited above (FINRA and the NSCC) who are, “the people closest to the trading, with the deepest understanding of and access to the data” certainly have access and so does the SEC who has the mandate to provide “comprehensive oversight” over the “registered clearing agency” known as the NSCC and the SRO (“Self-Regulatory Organization”) known as FINRA. All 3 of these parties either know the truth or are negligent in not knowing it.
Here’s the problem: The SEC entrusted with the visibility associated with having “comprehensive oversight” over “the truth” has received a record 5,000-plus abusive naked short selling complaints that resulted in NOT ONE enforcement action. The other parties entrusted with this visibility of the truth (the “SROs”) have recently filed 900 referrals for enforcement NONE of which had anything to do with abusive naked short selling. How can one explain this apparent paradox?
How can there be record demands for administrative actions by investors with none resulting and zero recommendations for administrative actions by those SROs that just happen to be owned by the brokerage firms being accused of these abuses? Is this worldwide uproar over abusive naked short selling really totally unfounded by the investors in all of these countries? Are the share price performance graphs showing the share prices of selected banks falling off of a cliff as the failures to deliver their shares went through the roof a sham?
In 2003 the SEC hired Dr. Leslie Boni from the University of New Mexico to take a peak into the secrecy-obsessed “black box” known as the DTCC. Her research revealed massive levels of FTDs of an “intentional/strategic” nature meant to intentionally depress share prices. Yet the SEC now claims that the OIG’s “Report can cite to no bona fide studies or empirical data regarding the practice’s market impact”. The “market impact” of having a plethora of readily sellable fake shares increasing the “supply” of readily sellable “shares” would obviously be to decrease share prices whether or not the SEC has commissioned such a study or not.
Why might the SEC proffer this perhaps technically accurate but intentionally misrepresentative statement? Do they not know of how supply and demand interact to provide share prices through the process of “price discovery”? In 2005 this very same SEC claimed that it had to “grandfather in” FTDs in Reg SHO because they were numerous enough to induce “market volatility issues” if they were all to be addressed by buy-ins. So which is it? Is it no problem whatsoever or is it a problem too large to address?
Here’s the issue with abusive naked short selling. The refusal to deliver that which you sell is so blatantly obvious and so heinous in nature that the IRREFUTABLE PROOF confirming these crimes needs to be constantly either covered up or its very existence needs to be denied by those SRO “participants” either guilty of these thefts and those regulators and SROs acting as “securities cops” who have been perhaps inadvertently facilitating these thefts.
In the crime known as abusive naked short selling these parties with the greatest need/desire to cover up or deny the existence of this crime wave just so happen to be the parties with the visibility of the IRREFUTABLE PROOF. As cited above sometimes it gets so silly that the party that commissioned the one definitive study revealing the pandemic nature of these frauds must deny the existence of any studies revealing the pandemic nature of these frauds.
It even gets to the point that the one party, the SEC, cites the lack of recommendations for administrative actions by the other guilty party as proof positive that there is no problem. The SEC returns the favor every time the DTCC and NSCC get sued for these thefts by coming to their rescue via filing amicus briefs stating that the NSCC’s “Stock Borrow Program” is fine and dandy and not the counterfeiting machine it is universally characterized as. Before you know it one of the parties might even have the audacity to suggest that the lack of coverage of this topic in the financial media confirms its nonexistence. OOPS! That just happened last week also.
The summary dismissal of 10 of the 11 recommendations of the SEC’s “Internal Affairs” Department (its OIG) by the SEC’s Enforcement Division represented a very sad day for our country in one respect but it was also 100% diagnostic and confirmatory of what has been going on for all of these years as the SEC vacillates somewhere in between abusive naked short selling is no big deal and that it is so far out of hand that it can’t be addressed without inducing “market volatility” issues.
I highly recommend the study of the recent findings of the OIG, the rebuttal of the SEC Enforcement Division and Sen. Kauffman’s treatise on the subject. A learning opportunity like this rarely presents itself.
http://techstock2000.wordpress.com/2009/03/21/hooray-for-senator-edward-kaufman-d-de/
Note that there are deeper issues present here also. The 1933 Securities Act (“The Disclosure Act”) strictly mandates that all information of a “material” nature in regards to the prognosis of an investment must be disclosed to the investing public. What could possibly be more “material” to the prognosis for an investment than the presence of a massive amount of readily sellable “securities entitlements” resulting from FTDs that may have already preordained the corporation being invested in to die an early death? The investing public has all of the right in the world to know not the identity of those refusing to deliver the securities they sell but the total amount of FTDs currently poisoning the share structure of any corporation being considered for an investment.
In essence the abusive NSCC participants, the NSCC management, FINRA and the SEC cannot obey the law and reveal the level of preexisting failed delivery obligations without revealing the existence of this massive “industry within an industry” associated with abusive naked short selling.
This issue is an all or none issue. You either once and for all buy in the preexisting FTDs and never allow this to happen again or you continue to relegate U.S. investors to be blindly buying a “pig in a poke” every time they make an investment just because a handful of crooks and crooked cops couldn’t allow their previous crime wave to be detected. This is not rocket science!
I just spent 10 mins speaking to the author Caley Cronin and pointed her in the direction of Mary Shapiro ( Former head of FINRA now SEC) and the Harry Markopolos’ testimony in from of Congress calling FINRA a “CORRUPT” agency and that former head of this corrupt agency is now the head of he SEC.
FOX Business Network Sues the United States Securities and Exchange Commission over Failure to Respond with Freedom of Information Act Requests
FOX Business Network Sues the United States Securities and Exchange Commission over Failure to Respond with Freedom of Information Act Requests
http://www.earthtimes.org/articles/show/fox-business-network-sues-the,758771.shtml#
FOX Business Network Sues the United States Securities and Exchange Commission over Failure to Respond with Freedom of Information Act Requests
Posted : Mon, 23 Mar 2009 17:42:29 GMT
Author : FOX Business Network
NEW YORK – (Business Wire) FOX Business Network (FBN) filed a lawsuit against the United States Securities and Exchange Commission (SEC) over failure to respond to FBN’s expedited request for information under the Freedom of Information Act (FOIA).
The initial request to the SEC, filed on February 26, 2009, sought all records relating to information that the SEC received regarding the potential violations of the securities laws or any other potential wrongdoing by R. Allen Stanford, or Stanford Financials Group and/or its affiliates. This request included, but was not limited to the SEC’s response to complaints, tips or information and any resulting audits, inquiries and/or investigations.
Kevin Magee, Executive Vice President of FOX News commented, “It is unacceptable that titans like R. Allen Stanford or Bernard Madoff were able to operate such massive financial frauds under the nose of institutions like the SEC. As a news organization, we believe it is the public’s right to know how these economic atrocities were committed as part of our continued quest to demand government accountability on behalf of the American taxpayers.”
The FOIA complaint was filed by FOX News Network, LLC, as owner of FBN. FBN has also filed lawsuits against the United States Treasury and United States Federal Reserve over their failure to respond to FOIA requests regarding use of the bailout funds and the Federal Reserve’s extended loan facilities. In February, the Federal Court in New York sided with FBN and ordered the Treasury to comply with the network’s requests.
Additionally, FBN recently moved to have a protective order vacated in the matter, NYU v. Ariel Fund Ltd., et al., because the order kept the deposition testimony of Ezra Merkin and Victor Teicher sealed from public viewing. The court granted FBN’s motion.
FOX Business Network (FBN) is a financial news channel delivering real-time information across all platforms that impact both Main Street and Wall Street. Headquartered in New York—the business capital of the world—FBN launched in October 2007 and is available in nearly 50 million homes in major markets across the United States. Owned by News Corp, the network has bureaus in Chicago, Los Angeles, Washington, DC and London. On the web at http://www.foxbusiness.com.
FOX Business
Caley Cronin, 212-301-3972
[email protected]
This verbal over whether or not massive levels of FTDs exist or not can easily be circumvented by just buying in the FTDs older than perhaps T+6 or so. If the DTCC isn’t lying then the buy-ins will be inconsequential. If they were lying then the crooks will be forced to go into their wallets and grab the money they stole from investors and buy back the missing shares and send them to their rightful owner. It’s a win-win.
What is so complex about that? The big winners should be the DTCC participants that will get a lot more business from the investors on the sidelines that think these markets are “rigged”. They’ll be back if the DTCC is willing to PROVE that the markets aren’t rigged.
In what business besides Wall Street would we be even engaging in a discussion involving the appropriateness of delivering that which you sold?
From what I’ve seen all short selling, options, CDOs, CDSs, and all other derivatives should be illegal.
These are gambling tactics which have no place in the investment arena. Stop allowing betting on betting. End it with the initial bet, be that bet on a loan, stock, or bond.
These are not complex issues until we allow people to get away with complex statements for simple concepts.
A rose by any other name is still a rose.
A rose, known (or not) by various other references, names, classes or kinds, might not exist, by implication, as not being that class which it is neither cognized nor accessed. Obviously, this depends on the perceptual acumen of those trained in such matters.
If you don’t get it, leave it to the experts. Right!!!
Obfuscation here is deception hiding inappropriate activities.
http://www.bloggingstocks.com/2009/03/23/whats-wrong-with-the-sec-investigation-of-lehman-brothers/
There is a separate wikipedia for articles like yours that get routinely censored:
wikitruth.info
This seems like the right place to park the full story
Thanks, Louis!
This may be the solution, then link to it from the front page here.
When you see words like TOO BIG TO FAIL…remember the true meaning….
Too many countries involved..
Too many naked shorted shares.
Too many politicians involved..
Too many crooked regulators..
Too many mob families..
Too many $$$$ being pocketed
Too many captured journalist
Too many dirty secrets
Too many WS elite in it…
Too many with juice…
__________________________
NO JUSTICE IN TOO BIG TO FAIL, it’s ummm TOO BIG !!
Oh Patrick, I’m rooting for you. This is one of the creepiest websites on my list and I can hardly stand to visit it, but it must be so much worse for you. Please hang in there. You’re doing the work of the angels by informing us.
Thanks Cecilia. I think.
I am a shareholder of a pinksheet company that has a rich history with a groundbreaking technology that is on the verge of going under due to exactly to the criminal methods that Dr. Byrnes and Dr. DeCosta have so painstakingly described. The day will come where there will be names and faces to the perps that make brazen uneconomic down tick trades without fail on a daily basis that I have witnessed with astonishment now going on for over 3 years.
The SEC must start charging these criminals and bring back some respectability to our markets.
http://www.bloomberg.com/apps/news?pid=20601101&sid=aHlFiP3M_Tx8&refer=japan
Anon, that link is not working.
Very serious question here.. Where is Herb Greenburg? Does it bother any of you that he has just vanished into thin air? Is he in witness protection or what? I always knew he would be the first to fold and Cramer soon to follow. Anyone???
devastated would that company be exbx?
https://www.deepcapture.com/herb-greenberg-the-worst-business-journalist-in-america-on-the-conspiracy/
https://www.deepcapture.com/herb-greenberg-the-worst-business-journalist-in-america-on-sec-subpoenas-and-fluffy/
http://www.thesanitycheck.com/Portals/0/PrisonHerb.jpg
We need to name names and put photos of the mainstream liars that made this crime possible public. They will be the first to turn states’ evidence.
Besides obvious thieves like Roddy, Greenberg, Carol Redmond AKA Carol Redmond, Bethany, lil GW, etc. are less obvious thieves like:
Larry Thomson (DTCC), who admitted in chats that he lied for a living
or
Stuart Z. Goldstein, the professional liar the DTCC brought in to spin things when Larry couldn’t take it any more.
http://antisocialmedia.net/?p=103
http://www.stuartzgoldstein.com/articles/modern_annual_report.html
Stu’s email is on the second link if you want to ask him how he lives with himself.
I often wonder how little they had to pay Herb and Stu to lie for a living.
Stu publishes papers on how to lie to spin a bad corporate situation (google stuart z goldstein) and manage public perceptions. He doesn’t work for the DTCC full time.
He’s a liar for hire.
“We’re not saying there is no problem, but to suggest the sky is falling might be a bit overdone,” DTCC’s chief spokesman Stuart Goldstein said.[1][2] DTCC General Counsel Larry Thompson dismissively calls the claims that DTCC is responsible for naked short selling “pure invention.
By putting the spotlight on the Herbs and Stu’s of the world, maybe they will put the spotlights on the cockroaches they know about.
I meant Carol Redmond AKA Carol Remond. No one ever explained to me why she had to change her name.
She was one of the most prolific liars five years ago and went quiet about the time Bobo became active.
I don’t believe that Remond ever changed her name. The explanation lies in a typo.. certainly not one that she generated. I found a Carol S. Redmond listed in a journalism award (Loeb)…
I hope that this helps.
Where do we stand on the question of Wikipedia treating their naked short article differently? Is it true that many Wikipedia articles (not just the naked short article) are “locked” from edits by “unapproved” users? And what exactly are the requirements for becoming an “approved” user? Has anyone attempted to create a new entry with a different title and to post some of Patrick’s links?
News coverage of the “Tea Party” on Fox News. It is gaining momentum. Many protests happening.
I am just a little slow so here me out. Is it that these brokerage houses, Ameritrade, Etrade, Scottrade, and Prime Stealers, I mean brokers Goldman, JPM, BAC,C cannot let stocks move up because they don’t have the cash to pay shareholders? And this is the reason why they are supressing the price of our securities and allowing Naked Sorting to permeate out system with reckless abandon. Is it, cause it would explain everything to me!! THEY’RE BROKE!!!
That here s/b hear sorry!!
Mary, Carol mostly wrote as Remond even though she won the award as Redmond.
Here she is as a Remond.
http://en.wikipedia.org/wiki/Carol_Remond
Here she is writing an unbiased article on Patrick.
http://consumerist.com/157223/overstockcoms-ceo-patrick-byrne-perhaps-is-an-ogre
She is a scumbag that not only lies for money, but she had to change her name to continue doing it.
Dr. Jim De Costa,
I found a paper written by you (7/26/06) that refers to Dr. Leslie Boni access to the DTCC records in 2004:
http://www.thesanitycheck.com/Portals/0/JDSEC.pdf
“Perhaps you at the SEC can co-design with the DTCC a “Mechanism for determining whether particular fails to deliver have occurred because of illegal naked short selling or for some legitimate reason.” You might start by noticing the pattern of the same abusive DTCC participants working through the same abusive clearing firms that result in the
11
preponderance of delivery failures well above statistically normal levels that just so happen to remain unaddressed for inordinate amounts of time.
This was the status quo before Dr. Leslie Boni was given access to the DTCC records during her research done prior to Reg SHO as a visiting financial economist in the employ of the SEC (more on her findings later). It is still the status quo today despite her shocking findings and the implementation of Reg SHO. I’ll leave it up to you at the SEC to evaluate the corrective efforts made by DTCC management in lieu of these startling research findings by both Dr. Boni and the Evans group. I’ll give you a hint, absolutely nothing constructive has occurred and the DTCC has been in an active “Cover up” mode ever since.”
……
“THE BONI REPORT
Dr. Leslie Boni’s now often-quoted 2004 research study done for the SEC revealed that the mean age of one of these theoretically “Legitimate” and short-termed delivery failures at the DTCC had grown to a staggering 56-business day average within this “Regulatory vacuum” provided by DTCC management’s professed “Powerlessness” as well as the lack of either interest, courage or understanding of the fraud by the SEC. Note that any
14
delivery failures of perhaps even 10 day’s age is very damaging for an issuer suffering the resultant dilution when “Prompt settlement” is theoretically the law of the land. It’s embarrassing to need to “Buy-in” delivery failures when your financial system is the model for all other countries to ascribe to.”
Does anyone know if Boni’s full report available online?
Not to be missed:
http://www.rollingstone.com/politics/story/26793903/the_big_takeover
http://www.ft.com/cms/s/0/9d2eb19c-17c6-11de-8c9d-0000779fd2ac.html?nclick_check=1
Securities regulators have taken a step towards harmonising global short selling rules in the wake of the sudden changes and restrictions that many countries introduced last year following the collapse of Lehman Brothers.
From the last article.
We need to reach out to these guys.
http://www.iosco.org/about/
If you get a moment you might read this paper. I think that it might be the most important paper I’ve written in the last 29 years of researching abusive naked short selling.
A LITTLE BIT ABOUT CLEARANCE AND SETTLEMENT SYSTEMS AND THE ROLE OF “CENTRAL COUNTERPARTIES” OR “CCPs”
Dr. Jim DeCosta
When many hundreds of brokerage firms are trading securities amongst themselves there is a dire need for the use of a “central counterparty” (CCP) to intermediate these trades. The lack of a CCP in the “credit default swap” market nearly wiped out our financial system recently. What most investors, SROs and regulators don’t appreciate is that equally risky is a CCP that has been hijacked by the financial interests of its owners.
In the absence of a “CCP” the individual brokerage firms would have to constantly assess the “counterparty risk” of a trading partner’s defaulting on its payment or delivery obligations. The use of a CCP allows the issuance of a “trade guarantee” that implies to the investing world that it is safe to trade securities in this particular clearance and settlement system and that which you purchase will indeed be delivered in a timely manner.
There is, however, a catch to these greatly enhanced efficiencies. The risks within the entire system are intentionally “concentrated” onto the shoulders of this CCP (the U.S.’s NSCC subdivision of the DTCC) such that any conflicts of interests between the corporations whose shares are being traded, the investors taking equity positions in these “issuers” and the “securities intermediaries” within the clearance and settlement system must be removed from the system in order for it to function effectively.
The CCP has to fulfill its newly acquired fiduciary duties of care to manage these “concentrated risks” which it voluntarily took off of the shoulders of its individual NSCC participants and accepted onto its own shoulders. The primary risk to be managed is making sure that the seller of securities delivers that which it sells in a timely manner due to the incredibly damaging nature of readily sellable but mere “securities entitlements/IOUs/”placeholder securities” and that the buyer of the securities pays for that which it purchased also in a timely manner.
This is referred to as “Delivery versus payment” and all of the worldwide authorities on clearance and settlement systems from the Bank for International Settlements or “BIS” to the “Committee on Payment and Settlement Systems Technical Committee of the International Organization of Securities Commissions” (IOSCO) agree that “Delivery versus payment” forms the foundation for any clearance and settlement system and that the seller of securities should not gain access to the funds of the buyer UNTIL “delivery in good form” is achieved.
The following quote is from this “Committee on Payment and Settlement Systems Technical Committee of the International Organization of Securities Commissions”:
“CCPs occupy an important place in securities settlement systems (SSSs). A CCP interposes itself between counterparties to financial transactions, becoming the buyer to the seller and the seller to the
buyer. A well designed CCP with appropriate risk management arrangements reduces the risks faced by SSS participants and contributes to the goal of financial stability. (Comment: Note that financial stability is the result of implementing “appropriate risk management arrangements” and the inference that the lack of appropriate risk management arrangements regarding delivery and payment obligations might predictably lead to financial instability.) CCPs have long been used by derivatives exchanges and a few securities exchanges. In recent years, they have been introduced into many more securities markets, including cash markets and over-the-counter markets. Although a CCP has the potential to reduce risks to market participants significantly, it also concentrates risks and responsibilities for risk management. (Comment: Onto the shoulders of the CCP). Therefore, the effectiveness of a CCP’s risk control and the adequacy of its financial resources are critical aspects of the infrastructure of the markets it serves.”
1.2 A CCP has the potential to reduce significantly risks to market participants by imposing more
robust risk controls on all participants (Comment: regarding delivery and payment obligations) and, in many cases, by achieving multilateral netting of trades. It also tends to enhance the liquidity of the markets it serves, because it tends to reduce risks to participants and, in many cases, because it facilitates anonymous trading. However, a CCP also
concentrates risks and responsibility for risk management in the CCP. Consequently the effectiveness
of a CCP’s risk controls and the adequacy of its financial resources are critical aspects of the
infrastructure of the markets it serves.
1.3 A risk management failure by a CCP has the potential to disrupt the markets it serves and
also other components of the settlement systems for instruments traded in those markets. The
disruptions may spill over to payment systems and to other settlement systems. Because of the
potential for disruptions to securities and derivatives markets and to payment and settlement systems,
securities regulators and central banks have a strong interest in CCP risk management.
(Comment: In layman’s terms the above basically says that the NSCC subdivision of the DTCC as the “CCP” in the U.S. plays an unfathomably important role in our overall financial system due to the associated “concentration of risks” and that proper “risk management arrangements” center on making sure that any securities sold must be promptly delivered. Unfortunately in the U.S. this critical role of the NSCC has been undermined by the insatiable greed of certain abusive NSCC participants and their co-conspiring usually unregulated hedge fund “guests”. The systemic risks incurred by all Americans whether investors or not is not the least bit appreciated by the SEC, the NSCC management, FINRA and the exchanges otherwise they would treat any failure to deliver older than perhaps T+6 as the emergency it truly embodies.
As it turns out CCPs are necessary but they can easily become hijacked by the financial interests of the owners and administrators of the CCP with a vastly superior knowledge of, access to and visibility of the clearance and settlement system they have been entrusted to administer.
The theft of investor funds associated with abusive naked short selling is obviously a heinous concept but this crime spree goes a whole lot deeper than that.)
Dr. DeCosta, in the age of computers, do you think there is still a need for a central counterparty?
If all you’re moving is bits, why can’t the ownership records at the company transfer agent be updated electronically each day to settle trades for that day? Wouldn’t that be simpler than having the extra step of the DTC?
You could still have the continuous net settlement system, but at the end of the day, electronically transfer the share ownership at the transfer agent?
When you think about it, what benefit is served by keeping track of beneficial owners at the DTC instead of at the transfer agent?
Watch Sears As a Referendum on Naked Shorting
By Jim Cramer
RealMoney Columnist
3/24/2009 10:26 AM EDT
Click here for more stories by Jim Cramer Try Jim Cramer’s Action Alerts PLUS
CLICK HERE NOW
Sears (SHLD – commentary – Cramer’s Take) gets downgraded and it goes higher. The company’s credit rating is cut to Ba2 by Moody’s because of continued deterioration of business, and yet it’s flying? It’s got a huge revolving credit deal that matures next year — a $4 billion line only minimally tapped — and the stock’s going up?
What gives?
Yesterday it was postulated in the Columnist Conversation that Eddie Lampert, the guy who runs Sears — and a friend — will use Sears’ cash to go buy bank assets.
I found that farfetched. I think there are a couple of other forces at work. First, if you get a turn in housing, then you are going to get a turn in Sears’ fortunes no matter what. Any turn in housing will produce buyers of Sears’ hardware. You may hate the stores, but you have to like the hardware. You also have to like the delivery and at times the prices.
Second, though, this is a company that has been totally victimized by naked shorting. The fact that we are now finding out that there are many companies that have their stocks crushed by naked shorting, including Bear and Lehman, tells me that the SEC is waking up to the enforcement of this rule and is going to crack down on naked shorting, something that the previous SEC thought was a total waste of time.
If it isn’t a waste of time and if the government decides to pursue it, I think you would see a short squeeze of phenomenal proportions given that the company’s float has been so shrunk.
We all know that the previous SEC’s laissez-faire attitude basically surrendered the playing field to the shorts.
I think that if the government opens an investigation of naked shorting, it will be of Sears.
And if you get a housing turn and an SEC investigation, it will be hard to believe that this one will remain just a $5 billion company.
At the time of publication, Cramer h
Anonymous,
You need CCPs otherwise there would be no issuance of a “trade guarantee” to protect investors. Can you imagine assessing the counterparty risk of doing trades with thousands of different counterparties you’d have to a bunch of due diligence on. It’s basically an insurance policy.
In actuality we don’t really have a “trade guarantee” in the U.S. If you file an “entitlement order” with the DTCC demanding the delivery of paper-certificated shares they can stall your demand ad infinitum if their cupboards are bare. They’ll tell you that there is a “chill” on the shares of that particular stock. This means that the NSCC management will refuse to buy-in the failed delivery obligations of one of their bosses.
Long articles like this definitely point out this site’s structural shortcomings.
The amount of time I need to spend simply scrolling to the ‘comments’ section at the end of an article is causing no joy.
This beast needs to be broken into discrete pages before it becomes totally unusable.
The NSCC’s guarantee is effectively meaningless as they refuse to deliver to the buyers. Whether they are owed stock or not should be irrelevant as they guaranteed the trade.
My thought is there is no reason why settlement couldn’t happen electronically at the end of each day, with ownership shuttling from one participant to the next at the transfer agent, exactly the way beneficial ownership is shuttled from one participant to the next at the DTC today.
If settlement happens daily, then there would be much less risk.
Here’s Dr. Leslie Boni’s paper:
http://www.fma.org/Chicago/Papers/StrategicFailsPaperFMA.pdf
Here’s the abstract from Dr. Boni’s research paper. Keep in mind that this was the first public view of what goes on behind the doors of the secrecy-obsessed “black box” known as the DTCC.
“Sellers of U.S equities who have not provided shares by the third day after the transaction are said to have “failed-to-deliver” shares. Using a unique dataset of the entire cross-section of U.S. equities, we document the pervasiveness of delivery failures and provide evidence consistent with the hypothesis that market makers strategically fail to deliver shares when borrowing costs are high. We also document that many of the firms that allow others to fail to deliver to them are themselves responsible for fails-to-deliver in other stocks. Our findings suggest that many firms allow others to fail strategically simply because they are unwilling to earn a reputation for forcing delivery and hope to receive quid pro quo for their own strategic fails. Finally, we discuss the implications of these findings for short-sale constraints, short interest, liquidity, price volatility, and options listings in the context of the recently adopted Securities and Exchange Commission Regulation SHO”.
What Dr. Boni is describing is also referred to as “pairing off”. Two abusive NSCC participants will “pair off” with each other and essentially pledge not to buy-in the delivery failures of each other no matter how old they get. This amounts to one brokerage firm telling its “partner” that it can sell all of the fake shares it wants to its clients and steal their investment proceeds as long as it can do the same to its partner’s clients. The other thing she describes in this abstract is the policy that an NSCC participant will not buy-in the delivery failures of a fellow NSCC participant without incurring the risk of retaliation.
Since it is only the abusive NSCC participants that are able to establish and maintain massive naked short positions then the result is the invisible routing of an unknowing U.S. investor’s funds into the wallets of those NSCC participants/”banksters” that simply refuse to deliver that which they sell.
Dr. Jim DeCosta,
Thank you for your continued support in educating us public!
And thank you for the link the Dr. Leslie Boni’s paper
Is it true that Hedge Funds can easily become Market Makers?
Which of course would then allow them to easily become a “Market Maker Guest” to avoid pre-borrow requirements.
istandup,
Securities fraudsters love to take advantage of asymmetries. There is absolutely no barrier to entry to become a “market maker”. The problem is that the single largest loophole utilized in abusive naked short selling (ANSS) frauds is that of illegally accessing the “bona fide market maker exemption” from making pre-borrows or “locates” before making admittedly naked short sales.
NSCC management absolutely refuses to monitor for the illegal accessing of that exemption by their abusive participants. Why? It’s because they’re employees of the abusive participants. You have to be a registered broker/dealer to become a market maker. The default assumption of the NSCC is that all failures to deliver are associated with “bona fide market making activity” until proven otherwise.
By the time you can “prove otherwise” that FTD is on the books at the DTCC and safe from being bought in because the ONLY party empowered to provide the ONLY cure available when the sellers of securities refuse to deliver that which they sold i.e. execute a buy-in, which is the NSCC management, will pretend to be “powerless” to do so. Why? Because that is in alignment with the financial interests of their bosses that constantly refuse to deliver that which they sell. We should all have employees empowered to forgive our debts!
None of this will matter much if Obama gets this one through.
http://www.washingtonpost.com/wp-dyn/content/article/2009/03/23/AR2009032302830_pf.html
You may have to be older to recognize what this could evolve into.
Think about it.
Scott Moritz, long-lost thestreet.com zombie, bashing Apple computer:
http://www.thestreet.com/story/10476593/1/apples-netbook-foray-will-flop.html?cm_ven=GOOGLEFI
On this Wikipedia issue:
The son of well known Christian conservative activist Phyllis Schafly founded his own version of Wikipedia called Conservapedia.
On Conservapedia there are little to no financial topics that are covered here at DeepCapture. In fact, naked short selling doesn’t even come up. It would be interesting to put all of Deep Capture’s info on their site and see if it remains.
The reason Schafly started Conservapedia was because of what he claimed were editing problems. Schafley claimed anti-Christian bias. In fact, on Widipedia’s own entry on Mr. Schlafly, they write:
“In a March 2007 interview with The Guardian newspaper, Schlafly stated, “I’ve tried editing Wikipedia, and found it and the biased editors who dominate it censor or change facts to suit their views. In one case my factual edits were removed within 60 seconds—so editing Wikipedia is no longer a viable approach.”[17]”
So it would seem here, that Dr. Byrne isn’t the only individual claiming censorship.
Now I can understand the battle between Christianity and other religions or humanism, etc. What I don’t understand is why edit or prevent the disclosure of information on naked short selling?
Is it because the founder of Wikipedia got his start in Chicago in the “bidness” of futures and options? Who does he know?
From Wikipedia itself:
From 1994 to 2000, Wales was the research director at Chicago Options Associates,[17] a futures and options trading firm in Chicago.[15]
Also from Wikipedia itself you can read about the creation of wikitruth–an online website devoted to exposing the censorship practices of Wales and his team at Wikipedia.
I’m a techno-rube so I don’t know how to post links on this site or I would have provided them for you. You can to the searches on wikitruth and conservapedia however, and they’ll pop right up.
Dr. Jim DeCosta,
You said:
“Securities fraudsters love to take advantage of asymmetries. There is absolutely no barrier to entry to become a “market maker”. The problem is that the single largest loophole utilized in abusive naked short selling (ANSS) frauds is that of illegally accessing the “bona fide market maker exemption” from making pre-borrows or “locates” before making admittedly naked short sales.”
From what you say here, it appears that every hedge fund can setup its own “Market Maker” business so it can simple by-pass every new rule (band-aid) the SEC places upon Wall Street in its never ending attempts to “stop?” naked shorting (counterfeiting).
Since there is NO BARRIER to become a “Market Maker” …
Since every “Market Maker” has been given the “LEGAL” power to engage in Naked Shorting (counterfeiting)…
…it is easy to conclude that every “Securities Fraudster” will setup a “Market Maker” business to give legal cover to its daily Counterfeiting Activities (naked- shorting).
This would also lead to the conclusion that every Band-Aid the SEC places upon Naked-Shorting will NOT solve the problem. The graphs presented in DeepCapture.com have demonstrated this to be true.
So the double-speak we heard from Mr. Cox in Judd’s video on the fall of Bear Stearns that “Naked Shorting is NOT illegal” and then that “Naked Shorting is Illegal,” stems from the the fact that “Market-Makers” have been given an exemption from making “pre-borrows” or “locates.”
So when Counterfeiting Hedge Funds use their Market-Maker business to destroy a company with huge volumes of counterfeit shares of a company stock, Mr. Cox would conclude that it was “LEGAL” for the Market-Maker to destroy the company. But if the public gets upset, Mr. Cox has to say publicly that Naked-Shorting (counterfeiting) is ILLEGAL.
So one year after Bear Stearns was purposefully destroyed with massive volumes of counterfeit shares, the SEC has not found any “illegal activity”? Because Bear Stearns was destroyed by “Market-Makers” using their “LEGAL EXEMPTION” to make “pre-borrows” or “locates”?
The Money Trail……………
Why do we see Senators investing their money in Hedge Funds?
Why do we see family members of Senators (VP now), owning and operating investment companies?
Why do we see family members of former Washington DC based elected officials working for Hedge Funds?
One simple answer it – MONEY…
I have seen the press:
– One Senator invests is wealth in Hedge Funds
– One Senator’s family (now VP) operates an investment company (Hedge Fund?)
– One former president’s daughter works for a Hedge Fund.
What I would really like to know is HOW MANY Elected officials in Washington DC have DIRECT TIES TO THE HEDGE FUND INDUSTRY?
The news about naked shorting is getting out (on SeekingAlpha, no less):
http://seekingalpha.com/article/127772-how-to-profit-from-market-manipulation?source=yahoo
iStandUp: Citizens need an immediate disclosure of ALL POSITIONS by ALL LEGISLATORS – now.
SeekingAlpha really teeing off on the shorting problem:
http://seekingalpha.com/article/127781-exchanges-propose-weakened-uptick-rule?source=yahoo
Good for them!
Jim,
Here is a quote from seekingalpha.com article:
“Another major source of manipulation is hedge funds, which are largely unregulated, and off shore hedge funds which are completely unregulated. Some of the tactics that these funds use to manipulate stocks are to gang up on a particular stock and short it en masse, naked shorting (shorting shares that don’t exist, counterfeiting shares of stock), and they also sell US stocks on foreign stock exchanges where they are not even listed. I have personal knowledge of one US stock listed only on the NYSE being sold on the Munich stock exchange to drive down the price, and also on the Pacific stock exchange. If these were legitimate sales and they wanted to get the best price, the clear choice would be to sell on the NYSE, but they didn’t want the best price, they were short in their offshore accounts and wanted to drive down the price.
Knowledge is power. Use this knowledge to protect your assets by getting them out of the stock markets, and to time your buying and selling when the big money is doing the opposite.
Disclosure: I am long SRS and SKF”
http://seekingalpha.com/article/127772-how-to-profit-from-market-manipulation?source=yahoo
Seems like the DOJ is listening and working …albeit very slowly
Morgan Stanley Executive Convicted of Conspiracy to Commit Securities Fraud
http://newyork.fbi.gov/dojpressrel/pressrel09/nyfo032409.htm
iStandUp ,
Biden and Company:
http://www.dailyfinance.com/2009/02/24/bidens-son-and-brother-runs-hedge-fund-with-links-to-stanford/
Nice work if you can get it…
Jim,
Thank you…
Here is the title of the article:
Biden’s son and brother run hedge fund with links to Stanford
QUESTIONS?????????????
Does the Biden Family Hedge Fund have their own “Market-Maker” business on the side? ….if YES, do they use a “Market-Maker” EXEMPTION to Counterfeit Shares of stock to make more money?
OR Does the Biden Family Hedge Fund Guest with someone else’s “Market-Maker” business? … And does this “Market-Maker” use a “Market-Maker” EXEMPTION to Counterfeit Shares of stock to make more money?
The abusers in high office are many and if there is resolve here to do something to combat the corruption, a strategy must be developed. I am willing to create a rear car window sticker aimed at education poeple about deep capture. What do you think?
Diane,
I think you have a good idea. At this time, I would suggest that you want until we get some more information before publishing one.
Biden Family Hedge Fund……
I need to rephrase my second question:
QUESTIONS?????????????
1. Does the Biden Family Hedge Fund have their own “Market-Maker” business on the side? ….if YES, do they use a “Market-Maker” EXEMPTION to Counterfeit Shares of stock to make more money?
2. OR Does the Biden Family Hedge Fund “Guest” with someone else’s “Market-Maker” business? …… And does the Biden Family Hedge Fund use the “Market-Maker” EXEMPTION to Counterfeit Shares of stock to make more money?
………………….
Does anyone know if there is a public listing of all “Market-Maker” businesses and who are the owners?
When the Bancroft family owned Dow Jones, they were a propaganda outlet for pro naked shorting stories (Carol Remond / AKA Redmond).
Now they are putting out stories.
http://online.wsj.com/article/BT-CO-20090324-712548.html
CHICAGO (Dow Jones)–Four U.S. stock exchanges on Tuesday launched a joint call for regulators to take action against “abusive” short selling of stocks through a “modified uptick rule.”
The call, in a letter to U.S. Securities and Exchange Chairwoman Mary Schapiro, comes six months after regulators imposed a temporary ban on shorting financial stocks to curb what was seen as excessive volatility.
Bumper Sticker can be simple, if it creates curiosity in the reader:
“SEC says Wallstreet counterfeited shares worth $60,200,000,000 in a single year. Protect your $$$. https://www.deepcapture.com”
Source:
http://www.sec.gov/about/secstats2008.pdf
Mary Schapiro will only do what the powers that be make her do, just as Cox did…which equates to NOTHING !!!! I find it so ironic the pro short sellers started screaming only after they became the victims themselves. It was fine as long as they were not the recipient of being naked short sold, and only were the NSS’ers themselves. Funny how the sharks turn on each other and then scream foul. Those screaming foul should have their trading records looked at as well as those they blame.
Or this would be a good bumber sticker….
WALL STREET TOOK YOUR 401K
HELP http://www.deepcapture.com GET IT BACK
Even David Einhorn, who collapsed LEH, even got Greenlight RE added to the SEC’s no-short list.
He must be brought to justice.
Anonymous, Now these ‘exchanges’ are trying for a higher-bid with a 10% circuit breaker, so they can kill stocks over 10 days.
Sen. Ackerman’s plan .05 cents has them very nervous.
http://www.foxbusiness.com/story/markets/market-overview/momentum-builds-bring-uptick-rule/
We need to dictate the terms for this uptick, not the industry.
A LITTLE BIT ON REGULATORY STRUCTURE IN THE U.S.
A little background on regulatory structure might help you grasp why abusive naked short selling (ANSS) crimes are so pandemic. At the top of the heap are the congressional oversight committees that oversee the SEC. The problem here is that the Wall Street “banksters” and unregulated hedge funds committing these crimes are the biggest donors to their political coffers. You never know when a Wall Street firm caught misbehaving in the naked short selling arena might need some muscle from a politician.
The SEC then has “comprehensive oversight” responsibilities over the self-regulatory organizations or “SROs” and the exchanges. The problem here is that there is a “revolving door” from the SEC to much higher paying jobs on Wall Street that is mainly accessible to SEC personnel that don’t “rock the boat” or disturb the corrupt status quo on Wall Street.
The 2 main “SROs” in this arena are FINRA which is the largest non-governmental regulator for all securities firms doing business in the United States.
It was created in July 2007 through the consolidation of NASD and the member regulation, enforcement and arbitration functions of the New York Stock Exchange. The other main SRO is the NSCC subdivision of the DTCC. Since the “over the counter” trading venues wherein a lot of these crimes are being committed are not “exchanges” then they are missing one layer of regulators from the onset. The problem here is that the “member firms” of FINRA and the “participants/co-owners” of the NSCC ARE the “banksters”, corrupt market making firms, corrupt clearing firms and corrupt prime brokers that are committing these crimes associated with refusing to deliver that which they sell.
Thus there are both governmental and nongovernmental entities and shock of all shocks they don’t communicate very well and their “regulatory turf” is ill-defined. In regards to the provision of investor protection in the abusive naked short selling arena we see an interesting phenomenon. First of all the NSCC chimes in and says “We just clear trades all day long and we are “powerless” to provide the only cure available when our abusive “participants/co-owners” sell shares and refuse to deliver that which they sold (execute a “buy-in”). This responsibility belongs to the “exchanges and the regulators”.
The “regulator” known as the SEC chimed in just last week and said: “The best sources for information on violations relating to “naked” short selling is the SRO (FINRA and the NSCC), which has primary responsibility for surveillance of its trading. And we receive a large number of referrals from the SROs, addressing all forms of alleged investment misconduct. It is telling that, of the 900 SRO referrals Enforcement received during the Report’s 18-month survey period, none involved the practice of “naked” short selling. That is to say, the people closest to the trading, with the deepest understanding of and access to the data, did not see and refer any of the large-scale, damaging “naked” short sale abuse about which the Report hypothesizes”.
When you interview the folks at FINRA they claim that the NSCC is the party with access to the failed delivery data on a real time basis that is in the best position to monitor the behavior of its “participants”.
Nobody in this network of Congress people, regulators, exchanges and self-regulators claims to have the direct responsibility to detect and address naked short selling abuses. The various conflicts of interest cited above result in no regulator wanting this particular “regulatory turf”. The biggest of the big daddy “banksters” and market makers operate on this turf and nobody seems to be willing to challenge their turf. The network of “securities cops” mandated to provide “investor protection” is complex and the conflicts of interest and the favors owed and owing are even more complex.
iStandUp, where on earth is journalism’s once-healthy curiosity regarding the Biden/Hedgefund nexus?
I took this from the above article. Ever notice how most articles related to naked short selling is always presented as “so called NSS, or so called short sellers.
There is no SO CALLED TO IT. IT IS NSS or Short sellers period. Presenting as so called is like calling it a myth. Dayum journalist. Call it like it is….
“The uptick rule was designed to prevent so-called short sellers from being the only investors to cause a stock price to decline. “
I just tried to POST the following in a YAHOO Financial Message Board a second time — Both times the YAHOO software immediately deleted my comments without indicating an Error message..
Have I found another flaw in the The Matrix?
——————————————
goldenmabs,
It turns out the it is easy for any Hedge Fund to become a “Market-Maker”.
WHY would a Hedge Fund like to become a “Market-Maker”?
So a Hedge Fund can access a “Market-Maker” EXEMPTION which allows them to Counterfeit Shares of stock LEGALLY.
Does this explain why the SEC has NOT found any ILLEGAL activity in the use of MASSIVE NUMBERS OF COUNTERFEIT SHARES OF BEAR STEARNS stock just over a year ago?
BECAUSE these Counterfeit Shares were all created LEGALLY by a “Market-Maker(s)” who have LEGAL RIGHT TO COUNTERFEIT STOCK SHARES?
——————-
……… The Money Trail……………
Why do we see Senators investing their money in Hedge Funds?
Why do we see family members of Senators (VP now), owning and operating an investment company?
Why do we see family members of former Washington DC based elected officials working for Hedge Funds?
….One simple answer it — MONEY….
I have seen in the press stories about:
– One Senator investing his wealth in Hedge Funds
– One Senator’s family (now VP) operating an investment company (Hedge Fund?)
– One former president’s daughter working for a Hedge Fund.
What I would really like to know is…
HOW MANY Elected officials in Washington DC have DIRECT TIES TO THE HEDGE FUND INDUSTRY?
(Family / Friends / Personal monies invested in Hedge Funds / Financial Supporters?)
——————–
TITLE OF AN ARTICLE:
Biden’S Son And Brother Run Hedge Fund With Links To Stanford…..
( http://www.dailyfinance.com/2009/02/24/bidens-son-and-brother-runs-hedge-fund-with-links-to-stanford/ )
QUESTIONS?????????????:
1. Does the Biden Family Hedge Fund have their own “Market-Maker” business on the side? — if YES, do they use a “Market-Maker” EXEMPTION to Counterfeit Shares of stock TO MAKE MORE MONEY?
2. OR Does the Biden Family Hedge Fund “Guest” with someone else’s “Market-Maker” business? …… And does the Biden Family Hedge Fund use the “Market-Maker” EXEMPTION to Counterfeit Shares of stock TO MAKE MORE MONEY?
——————
Does anyone know if there is a public listing of all “Market-Maker” businesses and who are the owners?
OK – I was able to post the first half of my text above, BUT NOT THE Second part here:
———————–
TITLE OF AN ARTICLE:
Biden’S Son And Brother Run Hedge Fund With Links To Stanford…..
( http://www.dailyfinance.com/2009/02/24/bidens-son-and-brother-runs-hedge-fund-with-links-to-stanford/ )
QUESTIONS?????????????:
1. Does the Biden Family Hedge Fund have their own “Market-Maker” business on the side? — if YES, do they use a “Market-Maker” EXEMPTION to Counterfeit Shares of stock TO MAKE MORE MONEY?
2. OR Does the Biden Family Hedge Fund “Guest” with someone else’s “Market-Maker” business? …… And does the Biden Family Hedge Fund use the “Market-Maker” EXEMPTION to Counterfeit Shares of stock TO MAKE MORE MONEY?
——————
Does anyone know if there is a public listing of all “Market-Maker” businesses and who are the owners?
Here is a list of Market Makers…Now lets connect the DOTS !!
http://www.info.gov.hk/hkma/eng/infra/cen_money/exel/cmup8027.pdf
I wonder who is telling the truth..You do the math!!!
http://www.nytimes.com/2009/03/25/opinion/25desantis.html?_r=3&pagewanted=1
OK, the YAHOO Matrix does NOT LIKE the link above:
( http://www.dailyfinance.com/2009/02/24/bidens-son-and-brother-runs-hedge-fund-with-links-to-stanford/ )
I cannot post this link – it is immediately deleted.
More Market Makers:
http://www.otcbb.com/dynamic/tradingdata/download/mmids.txt
http://www.allstocks.com/markets/Market_Makers/market_makers.html
T-shirt
“My broker went to the Cayman’s and all I got was this lousy IOU” (picture of IOU for one share on t-shirt).
Nice article from Forbes
http://www.forbes.com/2009/03/25/naked-short-selling-opinions-contributors-sec-congress.html?partner=yahootix
Re: Post 98
Jim Hall,
I think we should buy some ad space and run this picture of Einhorn.
http://www.flickr.com/photos/36380899@N08/3369741362/
This collapse was orchestrated to break the back of the dollar as the world currency. The globalist banksters want a world currency controlled by the IMF, which they in turn control.
As it stands the SDR (Special Drawing Right) is not a currency as such, but rather a basket of currencies (USD, EUR, JPY and GBP) used essentially as a unit of denomination by the IMF. Note that, as the PBOC themselves point out, for the SDR to resemble a “real” currency several institutional factors would need to change, including the development of settlement and clearing infrastructure and perhaps most critically the development of a market in SDR-denominated securities. Indeed, it is arguably the depth and breadth of underlying capital markets that have maintained USD’s status as the world’s reserve currency for so long and currently leaves EUR as the only remotely viable alternative.
Tee Shirt or Bumper sticker idea…
Wall Street and corrupt Politicians Stole your Pension…
Join DeepCapture or STOP YOUR BITCHIN’…..
DCN, Everyone in the media kisses his ‘genius’ ass, but he’s gonna pay at some point.
Nice shot!
Anonymous,
Thanks for the link to “More Market Makers”:
http://www.otcbb.com/dynamic/tradingdata/download/mmids.txt
Here on this list are two Stanford Group phone numbers:
STFG |Stanford Group Compamy ||TRADING DESK New York|212-372-6310
STFG |Stanford Group Compamy ||Toll-Free|888-372-6359
I wonder if the Biden Hedge Fund used Stanford Group Market Makers for their Hedge Funds, since there was reportedly an exclusive marketing agreement between them?
Scary stuff!
http://www.sec-oig.gov/Reports/AuditsInspections/2009/450.pdf
Peter Madoff’s assets frozen!
Great news.
By a Boston judge.
Why didn’t the SEC do this first??!!??!!??
http://www.foxbusiness.com/story/markets/judge-freezes-madoffs-brothers-assets/
Lets see based on the MM list what do these MM’s have in common-
GSCO ,M ,GOLDMAN, SACHS & CO
SGHK, M, SOCIETE GENERALE
DBAB ,M ,DEUTSCHE BANC
BARC ,M ,BARCLAY
ist of the top four beneficiaries of the AIG bailout:
1. Goldman Sachs: $12.9 billion
2. Société Générale (France) $11.9 billion
3. Deutsche Bank (Germany) $11.8 billion
4. Barclays (United Kingdom) $7.9 billion
This is the real scandal of the AIG bailout.
Add the other TARP funds Goldman Sachs received to the AIG pass-through money and you get an astounding total of $23 billion from the taxpayers.
All for a company that now says it never needed help to begin with.
Here is a link with information about Hunter Biden:
http://www.bloomberg.com/apps/news?pid=20601109&sid=aKJhGIn.Z1O4
This article mentions other people with DC connections who have moved into the Hedge Fund Industry:
“Greater Scrutiny
“The lobbyist overlap is unusual, and that kind of stuff needs to be reported,” Feiner said in an interview. “It’s that people question whether there’s a pure separation as Congress talks about greater scrutiny of hedge funds.”
Hedge funds are largely unregistered pools of capital that cater to wealthy individuals and institutions such as pension funds and endowments. Fund managers aim to make money regardless of the direction of financial markets, and usually charge a fee of 2 percent of assets and take 20 percent of trading profits.
Former government leaders including ex-U.S. Treasury secretaries John Snow and Lawrence Summers have joined hedge funds in recent years. Chelsea Clinton, daughter of Senator Hillary Rodham Clinton and the former president, last year joined New York-based hedge- fund manager Avenue Capital Group as an analyst.
Hedge-Fund Oversight
Senator Biden’s office did not return a call seeking comment.
Joe Biden, 64, is chairman of the Senate Foreign Relations Committee and a member of the Senate Judiciary Committee. The judiciary committee in the past year has held hearings on SEC oversight of hedge funds and so-called naked short-selling, or the practice by some hedge-fund managers of selling shares in companies they don’t own.
The senator’s oldest son, Democrat Joseph “Beau” Biden, 37, is the attorney general of Delaware and a former federal prosecutor in Philadelphia.
Hunter Biden said he and his father have not discussed details of his Paradigm management role or ownership. “
Interesting…….
http://www.nypost.com/seven/08062008/business/twice_biden__never_shy_123265.htm
DEUTSCHE BANK EXEC FILES $10M HEDGE-FUND SUIT
By DAREH GREGORIAN
Posted: 3:56 am
August 6, 2008
A Deutsche Bank executive has filed a $10 million suit against the son and brother of Delaware senator – and possible Democratic vice presidential candidate – Joe Biden.
In papers filed in Manhattan Supreme Court, Stephane Farouze claims that Biden’s son Hunter and brother James “engaged in an elaborate scheme to defraud” him in a multimillion dollar business deal back in 2006.
The suit is the second accusing Biden’s relatives of financial funny business in their deal to buy hedge fund firm Paradigm Cos.
Farouze’s suit names Washington lobbyist Hunter Biden, James Biden, and James’ former business partner Anthony Lotito as defendants.
Farouze, who’s now global head of fund derivatives for Deutsche Bank, claims the trio and LBB, the company the three had formed together, entered into a deal to buy his membership interests in Paradigm Cos. in May 2006.
While the Bidens took control of the company, they never paid Farouze the cash they’d agreed to pay, the suit says.
The scheme also claims they had enough cash to live up to the terms of the contract when they didn’t, the suit says.
The Bidens’ lawyer, Nicholas Gravante Jr., said he hasn’t seen the suit and couldn’t comment.
In the earlier suit, filed in January 2007, Lotito accuses Hunter and Jim Biden of allegedly using one of Sen. Joe Biden’s former colleagues to try and force their then-lawyer to drop his legal fees.
“Ultimately, the Bidens threatened to use their alleged connections with a former United States Senator to retaliate against counsel for insisting that his bill be paid, claiming that the former senator was prepared to use his influence with a federal judge to disadvantage counsel in a proceeding then pending before that court,” the Lotito suit says.
The Bidens’ lawyer said Lotito has yet to back up the claim – and that it is Lotito who is scamming the Bidens.
Is everyone familiar with Clearstream? They are the equivalent of the DTCC in Europe. They are accused of being involved in money laundering.
http://en.wikipedia.org/wiki/Clearstream
I think a lot of fails are hidden there because the depositories allow IOU’s to build up with each other. The idea is you’re allowed to fail to facilitate arbitrage between two exchanges, so IOU’s could be legit.
(For example, I could naked short in dollars here, as long as I claim to have an offsetting long purchase where I buy on the Frankfurt in Euros. The point is to equalize prices where the same stock trades on the various exchanges via the profit motive.)
Back in 2004, thousands of penny stock companies were listed on the Berlin exchange against their permission because the NASD was cracking down on naked shorting.
Luckily for the naked shorts, the SEC killed the NASD’s rule, which was working, replacing it with SHO in 2005.
Connect the dots:
– the NASD comes up with a rule that works to stop naked shorting
– “Over the past few months, a large German brokerage has managed to get the shares of at least 800 tiny North American companies listed on the obscure Berlin Stock Exchange — without asking for anyone’s permission. ”
http://www.thestreet.com/story/10164442/1/berlin-markets-conjuring-act.html
– the SEC kills the NASD rule which was working and replaces it with the loophole filled SHO
Who’s side is the SEC on?
From pg. 3. Luckily for the shorts, the SEC killed this NASD rule within weeks of it going live and working.
“Hayes, Bottazzi and other executives say the timing of the listing of their stocks on the Berlin exchange is more than curious. They point out that Berliner Freiverkehr applied to list most of the Bulletin Board stocks in March, just weeks before a new NASD regulation on “naked short-selling” took effect on April 1.”
And from the last page, the advice from the SEC is that investors should help the naked shorts by dumping these stocks and refusing to buy them. Who cares if these development companies might have the cure to cancer or an electric car that works? Who cares about all the workers that will be laid off and the taxes that will be lost when the company goes bankrupt?
“For now, there’s more smoke than fire in this controversy over the Berlin exchange. But the episode is another illustration why prudent investors would do best to avoid betting on speculative Bulletin Board stocks altogether”
Alpha Magazine’s 2008 Top Hedge Fund Moneymakers
1 – James Simons, Renaissance Technologies Corp, $2.5 billion
2 – John Paulson, Paulson & Co, $2 billion
3 – John Arnold, Centaurus Energy, $1.5 billion
4 – George Soros, Soros Fund Management, $1.1 billion
5 – Raymond Dalio, Bridgewater Associates, $780 million
6 – Bruce Kovner, Caxton Associates, $640 million
7 – David Shaw, D.E. Shaw & Co, $275 million
8 – Stanley Druckenmiller, Duquesne Capital Management, $260 million
9 – (tie) David Harding, Winton Capital Management, $250 million
9 – (tie) Alan Howard, Brevan Howard Asset Management, $250 million
9 – (tie) John Taylor Jr, FX Concepts, $250 million
Profiles for hedge fund managers ranked 12 through 25 will be available tomorrow:
12 – James Chanos, Kynikos Associates
13 – Michael Platt, BlueCrest Capital Management
14 – Roy Niederhoffer, R.G. Niederhoffer Capital Management
15 – John Horseman, Horseman Capital Management
16 – Paul Touradji, Touradji Capital Management
17 – Henry Laufer, Renaissance Technologies Corp.
18 – Kenneth Tropin, Graham Capital Management
19 – (tie) Pierre Andurand, Dennis Crema, BlueGold Capital Management
19 – (tie) Christopher Rokos, Brevan Howard Asset Management
22 – (tie) Christian Baha, Superfund
22 – (tie) Christian Levett, Clive Capital
24 – William Dunn, Dunn Capital Management
25 – Andrew Hoine, Paulson & Co.
25 fund managers who make a total of $11.6bn
Re: Clearstream
Madoff was on a list of Clearstream’s counter parties.
http://thekomisarscoop.com/2009/03/17/the-mysterious-bank-madoff/
I know some about Clearstream from another field. Thats some shady stuff there.
Re: Einhorn
Jim Hall,
I have the address of this genius’s ass should that time never come.
These dots are connecting nicely. What a web these crooks have weaved…GUESS WHAT CROOKS, justice comes in many forms. The American people are watching ur asses..and learning your bad deeds….judgement day in some form or another will sneak up on you when you least expect it, whether you are a Kroll member or not.
If you had purchased $1000 of shares in Delta Airlines
One year ago, you will have $49.00 today.
If you had purchased $1000 of shares in AIG
One year ago, you will have $33.00 today.
If you had purchased $1000 of shares in Lehman Brothers
One year ago, you will have $0.00 today.
But—- if you had purchased $1000 worth of beer
One year ago, drank all the beer,
Then turned in the aluminum cans for recycling refund,
You will have received $214.00.
Based on the above, the best current investment plan
Is to drink heavily & recycle.
It’s called the 401-Keg..
I find that posting a short message with a link to the following videos in various financial companies on Yahoo Finance draws lots of debate and interest on the topic of naked short selling (and brings about more awareness, perhaps more should use this method)
Sample post i recently posted on the GS board:
—-
Video #1
http://antisocialmedia.net/
Video #2
http://video.google.com/videoplay?docid=4490541725797746038
First Bear Sterns, then Lehman. Is Goldman Sachs next?
Help stop naked shorting. Write your congressman and level the playing field to a fair investing environment. This illegal activity by powerful hedge funds needs to stop.
—-
If you enjoyed the previous two video you may enjoy this tutorial explaining how naked short selling is done:
http://businessjive.com/
Nice catch, DCN. The account is probably not literally Madoff, but probably a group of counterparties assigned the label Madoff.
I’ve always maintained that naked shorting had a lot to do with money laundering.
The depositories around the world often avoid dealing in real shares altogether, only trading in IOU’s as the regulators of that American stock have no jurisdiction outside of America. Smart thieves set up hedge funds in the Caribbean, then wash trade and naked short amongst their various accounts.
Mark Valentine, the billionaire 30 year old kid arrested in Operation Bermuda short THEN LET GO had hundreds of accounts around the world, even though he owned his own brokerage in Canada.
I was told he ran one of three naked shorting operations controlled by someone much bigger and the purpose was to launder money for everyone from CIA arms dealers to drug smugglers to foreign dictators.
I believe the roots of this go deep into the establishment.
Something doesn’t smell right about Madoff. If he was running a Ponzi scheme and didn’t actually do any trading, then why are there accounts in his name at Euroclear and the DTC?
Is it possible that he didn’t buy or sell stock, but he did sell IOU’s, through the Madoff exemption and others to his heart’s content
There’s still something funny about Refco, too, and their tie into all the naked shorting with Sedona, etc.
I bet all of these groups are tied together at some higher level in an organized way (a conspiracy).
It’s BCCI all over again.
DCN, thanks for the link. This site is great.
http://thekomisarscoop.com/
DCN,
I’m afraid we may need to start to aggregate the names/addresses for easy reference, should the court, and redress, of last resort be torches, pitchforks, and, possibly, the guillotine.
Anonymous 130,
Madoff never traded any of his own clients money that was in his investment side of business. He never took the investment side money and made trades through his brokerage side.
Do not confuse the fact there were trades through his brokerage. There were, just not his elite clients money. His brokerage handled trades from other entities. The NO trades were executed on behalf of his own investment funds. This came from a reporter from the Boston Globe. She stated there was trades, just not trades of his own investment clients.
This is why I feel the SIPC should not compensate these people as their money was separate from the brokerage. Had there money been traded through the brokerage side, then yes, they deserve compensation. It didn’t. It stayed on the investment side and there was no trades executed on their behalf. Therefore, SIPC protects money in brokerages, not investments. Why should they pay?
What SIPC Covers… What it Does Not
The cash and securities – such as stocks and bonds – held by a customer at a financially troubled brokerage firm are protected by SIPC.
Among the investments that are ineligible for SIPC protection are commodity futures contracts and currency, as well as investment contracts (such as limited partnerships) and fixed annuity contracts that are not registered with the U.S. Securities and Exchange Commission under the Securities Act of 1933.
It is important to recognize that SIPC does not work the same way as the Federal Deposit Insurance Corporation in terms of blanket protection of losses. For more information click here.
” The cash and securities such as stocks and bonds”—-is covered
What is not covered:
“Among the investments that are ineligible for SIPC protection are commodity futures contracts and currency, as well as investment contracts ”
Currency and investment contracts…
These people had investment contracts, and currency which clearly state are not covered….
Had Madoff actually brokered their money and bought securities in the market with their money, they would be covered….Well, he never did. How then are they receiving SIPC protection when Mr. Madoff never made a trade on their behalf and it clearly states currency and investment contracts are not covered?
See how the rules bend according to who got scammed?
“Why We Are NOT the FDIC
“Insurance” for investment fraud does not exist in the U.S. The Federal Trade Commission, Federal Bureau of Investigation, state securities regulators and other experts have estimated that investment fraud in the U.S. ranges from $10-$40 billion a year. In the case of microcap stock fraud, the toll on investors has been estimated as $1-3 billion annually.
With a reserve of slightly more than $1 billion, SIPC could not keep its doors open for long if its purpose was to compensate all victims in the event of loss due to investment fraud.
It is important to understand that SIPC is not the securities world equivalent of FDIC–the Federal Deposit Insurance Corporation. Congress specifically considered creating a Federal Broker-Dealer Insurance Corporation, but lawmakers wisely concluded that such a designation would be both misleading and out of step in the risk-based investment marketplace that is so different from the world of banking. ”
Notice the very first statement:
“”Insurance” for investment fraud does not exist in the U.S. ”
Then why is the SIPC cutting the Madoff victims checks? I have been screwed royally and the SIPC didn’t come to my rescue? Who here has lost money to scamsters and did the SIPC step in and give you back money?
So, who’s watching the watchers?
Too far gone…everyone in Government is stealing from us, the Citizens.
We are justprey to those we trust to lead us.
Where is this all going? It is obvious that things are going to blow up.
To back the last post look at this.
http://www.chicagotribune.com/news/politics/obama/chi-rahm-emanuel-profit-26-mar26,0,5682373.story
And from his own home town paper.
Patrick,
It just dawned on me at this moment that your previous article also falls into the……. MATRIX………:
t Only Hurts When I Laugh
March 4th, 2009 by Patrick Byrne
The Congressional Research Service is a Library of Congress think-tank with just one client: Congress. A member of Congress requests a study on a subject of interest, and CRS researchers generate it. The CRS is one of the most respected institutions in Washington, DC, and its output is universally considered non-partisan, objective, and thorough…..
…
Consider this: The regulatory structure of the US capital market was set in the Secuties Exchange Act of 1934. It devoted a section (immediately after the section on Directors, Officers, and Principle Shareholders, and the section establishing the need to keep records), to describing the need for a “National System for Clearance and Settlement of Securities Transactions” (Section 17a). Its opening is instructive:
“a. Congressional findings; facilitating establishment of system
“1. The Congress finds that–
“A. The prompt and accurate clearance and settlement of securities transactions, including the transfer of record ownership and the safeguarding of securities and funds related thereto, are necessary for the protection of investors and persons facilitating transactions by and acting on behalf of investors.
“B. Inefficient procedures for clearance and settlement impose unnecessary costs on investors and persons facilitating transactions by and acting on behalf of investors.
“C. New data processing and communications techniques create the opportunity for more efficient, effective, and safe procedures for clearance and settlement.
“D. The linking of all clearance and settlement facilities and the development of uniform standards and procedures for clearance and settlement will reduce unnecessary costs and increase the protection of investors and persons facilitating transactions by and acting on behalf of investors.”
It seems that in 1934 Congress thought having securities transactions clear and settle promptly was pretty important.
Which makes it especially odd that in 2009, in the Congressional Research Service’s admirably thorough report on the parts of the US financial system and the regulators who oversee them, no mention is made of that “”National System for Clearance and Settlement of Securities Transactions” whose establishment Congress in 1934 found “necessary for the protection of investors.”
( http://www.deepcapture.com/it-only-hurts-when-i-laugh/ )
Lets get this guy, Joe Farah on the case. This internet news site is the largest in USA. He has shown lots of effort to exspose the whole FED fraud. I think this article shows he would be of help to our cause if we could just convince him.
http://www.wnd.com/index.php?fa=PAGE.view&pageId=92832
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——————————————————————————–
Our immoral money system
——————————————————————————–
Posted: March 26, 2009
1:00 am Eastern
© 2009
America’s money system is on the verge of collapse, and, as much as I hate to say it, it deserves to fail.
Even though I, too, will be hurt by a collapse of the dollar, which seems all but inevitable sometime in the next few years, the fiat money system we use in our country is neither sustainable nor moral.
I say this not based on my ideas of what is just, but on God’s ideas.
Most people tend to overlook what the Bible says about money. It has much to say. In fact, Jesus had more to say about money and possessions than any other topic – including faith, hope, heaven and hell combined. There are more than 2,350 verses in the Bible referencing money and possessions.
Jerry Robinson, author of a great new book, “Bankruptcy of Our Nation,” makes the point that the Bible condemns the kind of money system we use in the U.S. – one in which the value of money is constantly changing and subject to manipulation.
(Column continues below)
Where is that condemnation?
It is found in the following verses:
“A false balance is abomination to the LORD: but a just weight is his delight.” (Proverbs 11:1)
“Divers weights, and divers measures, both of them are alike abomination to the LORD.” (Proverbs 20:10)
“Ye shall do no unrighteousness in judgment, in meteyard, in weight, or in measure. Just balances, just weights, a just ephah, and a just hin, shall ye have: I am the LORD your God, which brought you out of the land of Egypt.” (Leviticus 19:35-36)
“Are there yet the treasures of wickedness in the house of the wicked, and the scant measure that is abominable? Shall I count them pure with the wicked balances, and with the bag of deceitful weights? For the rich men thereof are full of violence, and the inhabitants thereof have spoken lies, and their tongue is deceitful in their mouth.” (Micah 6:10-12)
We don’t use weights and measures when we buy and sell today, yet the principle behind these biblical pronouncements remains the same.
When the Federal Reserve can produce $1.2 trillion dollars out of thin air, as it did last week, and add it to the money system, that action changes “the weights and measures” we use to buy and sell. More money in the system by definition devalues the currency that was already in the system.
It’s just like the Fed put its big thumb on the scale whenever Americans go to use their wealth.
That is an example of an “unjust weight and balance” in Robinson’s book. And I agree with him.
“Fiat currency systems, where the currency is backed by nothing and its value can be manipulated at will, is by definition an unjust weight,” he writes. “And so therefore, by biblical definition, fiat currency systems are clearly unjust systems.”
Robinson goes so far as to say that Americans coins and currency does not warrant being labeled with the statement, “In God We Trust,” because if we truly trusted in God, we wouldn’t be using a fiat currency that is unjust and immoral and contrary to God’s Word.
It’s kind of like what the Bible tells us in the Book of Haggai 1:6: “Ye have sown much, and bring in little; ye eat, but ye have not enough; ye drink, but ye are not filled with drink; ye clothe you, but there is none warm; and he that earneth wages earneth wages to put it into a bag with holes.”
That’s what all of us trading in U.S. dollars are doing today – earning wages that go into a bag with holes.
Order you copy of Jerry Robinson’s “Bankruptcy of our Nation” today!
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Joseph Farah is founder, editor and CEO of WND and a nationally syndicated columnist with Creators Syndicate. His book “Taking America Back: A Radical Plan to Revive Freedom, Morality and Justice” has gained newfound popularity in the wake of November’s election. Farah also edits the online intelligence newsletter Joseph Farah’s G2 Bulletin, in which he utilizes his sources developed over 30 years in the news business.
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How to prosecute the SEC?
Bloomberg article Geithner to seek power over Hedge Funds, Derivatives…
http://www.bloomberg.com/apps/news?pid=email_en&refer=worldwide&sid=a0V_8UoPk2A0
Contact your reps and sens and let them know that you understand the gaming that is going on.
anyone else having posting issues?
JOURNAL: More on Banksters, By John Robb. Global Guerrillas, 25 March 2009.
http://globalguerrillas.typepad.com/globalguerrillas/2009/03/journal-more-on-banksters.html
Rondoc, you are prey from the SEC’s point of view.
Listen to this quote from the transcript discussing the new rule SHO.
http://www.sec.gov/about/economic/shopilottrans091506.pdf
“I feel like a person of faith facing the lions and debating and debating whether the ethics of eating someone that’s there to be eaten”
Transcript of Beneficial Voting
http://www.sec.gov/news/openmeetings/2007/openmtg_trans052407.pdf
Re: Money Laundering
Anonymous,
I know more about the world of terrorism and organized crime then I do about the world of finance. Your comment on nss and money laundering is an interesting one. I believe Dr. Decosta has made a great comment about nss and money laundering before (can’t find it).
IIRC, a hedge fund with organized crime connections named Westfield Financial was involved with laundering and Reg S stock. This firm employed two London based lawyers named Stuart Creggy and Andrew Warren, who were involved in this scheme. Creggy and Warren were also tied to the 1999 Bank of New York scandal; in fact I believe that the BoNY case came about because of intelligence gleaned from the Westfield case. That case I believe stemmed from an Operation GANDOLF in the UK, which I believe was linked to an Operation POLAR CAP (?) in the US from the early 90’s that broke up a ring that laundered Colombian cartel money.
Westfield Financial was a target of Operation UPTICK in the US in 1998. This operation arrested 120 people including organized crime members in a market manipulation scheme involving nss. This Op stemmed from evidence recovered in Felix Satter’s storage locker.
The Uptick-Westfield-Creggy/Warren connection is the clearest I have connecting nss to high level Russian organized crime (Mogilevich).
http://www.rgm.com/articles/nytimes2.html
Mr. Pace is suspected of being involved in clearing house fraud.
He was involved in Sterling Foster.
http://www.forbes.com/forbes/1997/0224/5904114a.html
This is the guy who runs stockpatrol
“Its owner, a 31-year-old egomaniacal fellow named Andrew Bressman, has filed for bankruptcy. The N.Y. County district attorney’s office has convened a grand jury on the A.R.Baron affair.”
“Officials at Bear, Stearns declined to be interviewed for this story. Company spokesperson Hannah Burns says: “Clearing is a very, very proprietary business for us, and we don’t want the public knowing about it.” A strange comment. Doesn’t the public have a right to know how its trades are handled?”
“What Harriton is selling especially to the small and dubious firms is respectability. If Bear’s famous name appears on the trade confirmation or monthly statement as the clearing firm, who can doubt that his money is in safe hands?”
“One of Bear, Stearns’ first clearing customers was Rooney, Pace Inc., a notorious stock manipulator firm shuttered by regulators in 1987. Former co-owner, Randolph Pace, is a close friend of Harriton and regularly brings new clearing customers to Bear”
When Bear went down, so did a lot of records on fraud with Brennan and Pace.
TRULY MEANINGFUL DETERRENCE TO THE COMMISSION OF ABUSIVE NAKED SHORT SELLING (ANSS) CRIMES
Throughout the years it has become painfully obvious that there has never been any meaningful deterrence to the commission of these crimes. Historically, in the ultra-rare circumstance when the regulators caught the bad guys misbehaving we’ve seen the regulators fine the perpetrators of these frauds with a fine equivalent to paying back perhaps 1% of their ill-gotten gains. They’d then be forced to sign that fear inducing “AWC” form (Acceptance Waiver Consent) stating essentially that “they didn’t do it and that they won’t do it again”. So much for meaningful deterrence!
After studying the recent report of the Office of the Inspector General (OIG) of the SEC and the rebuttal provided by the SEC’s Enforcement Division it is perfectly obvious that the SEC has no intention whatsoever in changing their way of doing business and any truly meaningful deterrence is going to have to come from a different source.
In order to provide meaningful deterrence to the commission of these thefts one has to go back to the crime scene and study just what this fraud entails. When a party intentionally refuses to deliver the securities that it sold then the resultant “failures to deliver” procreate what UCC Article 8 refers to as “securities entitlements”. These were designed by the authors of UCC-8 to serve as ultra short termed “accounting measures” to denote a failed delivery obligation. The question then became should these mere “accounting measures” be treated as readily sellable or should they be restricted for resale UNTIL that which was sold was delivered.
If they were treated as being readily sellable then obvious dilutional damage would be incurred by the corporation involved and the shareholders therein as the sum of the “supply” of their readily sellable outstanding shares plus the “supply” of these new readily sellable “accounting measures/IOUs” would be artificially increased.
Since the “supply” and “demand” of that which is readily sellable whether they be readily sellable legitimate shares or these new readily sellable “accounting measures”/”securities entitlements”/IOUs determine share prices and since the “supply” variable has been artificially adjusted upwards then by definition the share price will be adjusted downwards during the “price discovery” process. This damage is reversible when any failures to deliver of a longer termed nature are “bought-in” by the appropriate authorities when it becomes obvious that the seller of securities had no intent to deliver that which it sold. Imagine the damages possible and the invitation for abuse if those with the authority to execute these “buy-ins” (the NSCC) pretended to be “powerless” to do so.
Now we have to address the matter of “Intent”. Did the seller of the securities knowingly refuse to deliver that which it sold or was it unintentional. The arbiter here is the amount of time that has lapsed since the previously agreed upon “settlement date” or T+3. Keeping in mind that there are indeed “legitimate” reasons for ultra short termed delays in delivery then I might posit that the age of the delivery failure might arbitrarily be set at T+6 or so to determine the intent factor. After all, the sellers of securities don’t “forget” to deliver that which they sold and there was an agreement to exchange funds for shares on T+3.
The authors of UCC 8 decided to rule in favor of the sellers of securities and to “assume” that all FTDs were of a legitimate/unintentional nature and therefore to allow them to be readily sellable. They knew that the NSCC had the mandate “to act in the public interest, provide investor protection and to “promptly settle” all securities transactions and therefore plenty of power to provide the only cure available when the seller of securities absolutely refuses to deliver that which it sold i.e. “buy-in” that delivery failure. They also knew that the SEC had the congressional mandate to provide “investor protection and market integrity”.
There is a legal concept known as the “manipulation” of share prices. “Manipulation” has to do with intentionally altering the supply and demand variables that interact in the “price discovery” process to determine share prices. Once again, this “intent” to alter these variables would be determined by the time increment in between the previously agreed upon “settlement date” and the age of the FTD. Keep in mind that the buyer’s funds were already tendered.
The illegality of intentional share price “manipulation” brings in the role of the Department of Justice as the SEC has no criminal prosecutorial powers. The problem is that “referrals” need to be made to the DOJ and the recent OIG study informs us that these mandated “referrals” have not been being made. Therefore the truly meaningful deterrence to these thefts provided by potential criminal liabilities has been missing and supplanted with microscopic fines and the signing of “AWC” forms. These meaningless fines were written off by billionaire “banksters” as mere “costs of doing business”.
Since even criminals must make risk/reward calculations then historically these calculations have always resulted in a “green light” tacitly recommending the commission of the crime. The question begging to be asked is why wouldn’t the SEC be making these mandated referrals all along and why wouldn’t they be willing to provide some truly meaningful deterrence to these thefts.
Continuing to put two and two together, why would Bear Stearns get stock pumpers like Brennan and Pace to find penny stock firms where all the clients were long in worthless penny stocks? There is no big source of revenue unless Bear wasn’t bothering to own the worthless shares they were supposed to be holding in custody for their clients.
Each time a Refco or Bear goes down, many incriminating records are destroyed.
“Why did Bear now open its doors to Baron? The question is especially compelling when you realize that because of the nature of Baron’s business, Bear wasn’t really making all that much money on its clearing business.
Remember the variety of ways a clearing firm makes money. The most profitable is charging interest on the firm’s customer debits typically a result of stocks bought on margin. But Baron had no customer debits it was a firm, as many bucket shops are, that specialized in stocks that are not marginable. Baron’s customers had no margin positions.
Neither did Baron’s clients typically have credits in their accounts cash resulting from a liquidated stock position.”
Finally,we’ve got our own guys with “juice”
Kaufman gets tough on finance sector
By: Victoria McGrane
March 26, 2009 04:33 AM EST
Back in his Senate days, the vice president had such a cozy relationship with Delaware’s banking interests that his critics called him Sen. Joe Biden (D-MBNA).
It would be hard to slap that slur on Sen. Ted Kaufman.
Kaufman may have been Biden’s handpicked replacement, but he’s taking a very different tack than his predecessor did when it comes to dealing with big-time financial firms.
As in threatening their execs with incarceration.
In an op-ed piece in The Philadelphia Inquirer earlier this month — a piece accompanied by a drawing of a corporate CEO in the stockades — Kaufman said the government must prosecute “local mortgage brokers or the biggest banks” if they engaged in crimes that contributed to the nation’s economic meltdown.
“Let’s enforce the laws that were on the books and throw those who broke them in jail,” Kaufman wrote. “I am not prejudging anyone. We may well find that only a few cases involved outright criminal behavior. And we must take care that our anger does not cloud our judgment. But if people rob a bank, they go to jail. If bankers rob people, they should go to jail, too.”
Kaufman explained his tough talk in an interview with POLITICO: “When you’re sitting around a meeting and somebody says, ‘Hey, last time somebody did this, they went to jail,’ it has a very salutary effect on what you do.”
Kaufman says he’s free to say such things because he has no plans to run for his seat in 2010. And while he won’t connect the dots himself, that means he doesn’t need the support of the financial firms that showered money on Biden.
MBNA, the Delaware-based credit card company now owned by Bank of America, was Biden’s largest source of campaign cash for the span of his Senate career, donating more than $215,000 through the 2008 cycle, according to the Center for Responsive Politics. The company also employed Biden’s son Hunter as an executive and later paid him as a consultant.
Bank of America, which has kept MBNA’s card operations in Delaware, and Citigroup Inc. also made generous donations to Biden’s 2008 presidential bid.
In 2005, Biden and his fellow Delaware senator, Tom Carper, played pivotal roles in the passage of a measure that made it harder for individuals to file for bankruptcy protection — a measure that MBNA and other credit card companies had been pushing for years.
Of course, big banking interests are a major constituency in Delaware — a source of jobs and revenue in the state — and therefore one that Biden would have had a natural interest in protecting. And both Kaufman and outside observers say that, given the current economic and political realities, Biden might be just as tough on financial firms now as Kaufman is.
“I don’t have any doubt that if Biden were still in the Senate, his rhetoric would be similar to what Sen. Kaufman’s is now,” said Thomas Mann, a congressional expert at the Brookings Institution. The financial crisis has so changed the situation that “even those senators representing districts and states with substantial financial industry players are really speaking out very harshly.”
Still, says Meredith McGehee, policy director at the Campaign Legal Center, a “combustible cocktail” of constituent interests, money interests and a politician’s need to raise millions creates a situation where “no one knows, least of all the candidate, what their motivations are.”
Campaign reform experts like McGehee see plenty to dislike about the process of appointing placeholders — Roland Burris, anyone? — to fill out departing members’ terms. And Kaufman’s own appointment drew negative press as critics accused Delaware’s governor of just helping Biden keep the seat open for his son Beau.
But McGehee said it’s refreshing to see what can happen when someone like Kaufman is freed from the need to raise campaign cash. “Can you imagine what it would be like if every member of Congress had that freedom?” she said.
Kaufman, who served as Biden’s chief of staff before taking over his seat, won’t say that money from financial firms drove his old friend’s decision making. But he notes repeatedly that, since he’s not going to run for the seat, he’s free of political concerns.
Asked if he thinks it’s politically important to show voters that Congress is going after financial scofflaws, Kaufman said: “I don’t have to worry about that.”
“It’s one of the great things” about being a short-timer, Kaufman said. “Because I think this is an issue where someone could say, ‘Hey, Kaufman, you’re just doing this because its politically expedient for you.’ But I can say I’m not doing this because it’s politically expedient.
“I don’t recommend this, couldn’t run a country like this, couldn’t run a Congress like this. But for me, this is just great. So for two years, I don’t have to worry about people [questioning] my motivations. I’m just trying to figure out what [is] the right thing to do.”
Kaufman has pointed to potential wrongdoing by mortgage brokers who preyed upon homebuyers, bankers who neglected due diligence in designing and marketing mortgage-related products, and credit-rating agencies that gave these now-toxic products top-notch ratings.
And to make sure those prosecutions happen, Kaufman is pushing bipartisan legislation that would beef up federal law enforcement resources committed to investigating these crimes.
He is also calling for the Securities and Exchange Commission to reinstate rules to prevent “abusive” short-selling that he says is “tantamount to fraud and market manipulation.”
http://www.politico.com/news/stories/0309/20497_Page2.html
The Real AIG Scandal: How the Game Is Rigged at Wall Street’s Casino
There’s nothing like a grandstanding member of Congress to deflect attention from the real issues at hand by throwing a few juicy bones to the masses.
Most legislators at a House Finance subcommittee hearing last week deftly avoided the real story of AIG’s collapse. Instead, they homed in on the public relations disaster of hundreds of top AIG officials and staff getting $165 million (later revealed as over $218 million) in bonuses.
The key issue ignored by the congressmen and women was the potential catastrophe represented by as much as $2.7 trillion in AIG derivative contracts and how AIG and the U.S. government are dealing with them. To put that number in context, we’ve so far provided the company only about $170 billion.
An exception at the hearing was Rep. Joe Donnelly, D-Ind., who declared that “naked credit default swaps” were little more than “gambling … dreamed up” by Wall Street to create additional profits, and he suggested that instead of being bailed out, “when the casino goes bust, the guys who are gambling close shop.”
He noted that if ordinary Indiana citizens acted the same way as the titans of Wall Street had, they’d be in jail. But Donnelly never got to explain what he meant by “naked credit default swaps.”
We did learn early at the hearing that the Federal Reserve is in charge of overseeing AIG. The Fed is strongly influenced by some of the same big banks and brokerages that are getting AIG payouts and taxpayer funding.
These same firms have opposed regulating credit default swaps, other derivatives and naked short selling (which are explained below). That should have set the stage for the rest of the questions, not to mention an investigation into where, exactly, all that money that AIG received went.
More Money for AIG
We discovered in passing at the hearing that AIG has $1.6 trillion of derivatives left to “unwind” — the mess remaining of the AIG derivatives debacle. Nobody asked the basic details of how the other $1.1 trillion was “unwound” or how the rest will be dealt with. And nobody got an answer to the question of how much more in taxpayer money it will take to finish the job, and who will benefit from this unwinding process. Or, since the U.S. government is now in the derivatives business through its financial support of not only AIG but also Citigroup ($300 billion in guarantees), and other financial companies, how much taxpayer money may be required to pay off those other firms’ derivatives bets.
Derivatives
Derivatives are financial instruments derived from something else, hence the name. In the lingo of Wall Street, nouns are turned into verbs and verbs beget nouns. If a bank or brokerage firm “securitizes” debt — for example, turning a bundle of mortgages into financial products — the resulting securities are derived from those mortgages, thus they are mortgage “derivatives.” They can be sliced and diced and sold and at the insistence of Wall Street powers and their representatives, and the derivative transactions are unregulated.
Central to AIG’s demise were derivative credit default swaps (CDS), basically insurance on financial deals. Some people bought insurance against their houses burning down. Others made bets on somebody else’s house burning down. That’s an insurance policy for someone without a house at risk.
The first type of contract should be seen as legitimate. But should U.S. taxpayers, who own nearly 80 percent of AIG, pay off a wager that somebody else’s house would burn down in this financial casino Wall Street built out of the ashes of cut-and-burn deregulation?
More importantly: Should they pay off the wager if there are indications that the game may have been rigged in the first place?
Hedging the Bets
Derivatives contracts on stocks can be “hedged” with a short sale.
Short selling is selling a stock that you borrow. The short-seller hopes the price will go down in order to buy the security cheaper and transfer it back to the lender, gaining a profit from the difference in prices from the time the shares were borrowed and the time the shares were returned to the lender.
Naked short selling is selling shares that were never borrowed — it’s selling thin air, or in essence, selling counterfeit securities. Done on a large scale, this pushes down share prices across the board as the artificial supply of shares — ballooned by those phantom shares — outweighs demand.
The Securities and Exchange Commission’s real effort in stopping naked short selling has been on a par with its interest in investigating Bernie Madoff.
A newly released report from the Office of Inspector General revealed that the SEC received 5,000 complaints regarding naked short selling of stocks in 2007 and 2008, which led to zero enforcement actions by the SEC.
A Market Ripe for Fraud and Manipulation
Here’s how naked short selling relates to manipulation of CDSes. The face value of CDS contracts at one time was $60 trillion. Even Christopher Cox, who took no meaningful action on the matter as SEC chairman, got worried and acknowledged in testimony, “Holding a credit default swap is effectively, or nearly effectively, taking a short position in the underlying … and because CDS buyers don’t have to own the bond or the debt instrument upon which the contract is based, they can effectively naked short the debt of companies without any restriction, potentially causing market disruption and destabilizing the companies themselves. This market is ripe for fraud and manipulation.
“This is a problem we have been dealing with, with our international regulatory counterparts around the world with straight equities (stock), and it’s a big problem in a market that has no transparency and people don’t know where the risk lies.”
The most profit from these types of contracts is obtained if the security that is the asset for the contract declines to a price of zero. Derivative trades are often sham transactions between cooperating dealers designed solely for the purpose of creating shares to sell into the public market. Securities prices can be manipulated downward through naked short selling. Even though derivatives are unregulated transactions, the stock manipulation occurring from the sham transactions that create the naked short shares is regulated and is illegal under U.S. securities laws.
If the derivatives contracts were hedged with a short sale by the casino operators, they have already received profit from the sale of the securities they did not own.
Where Does the Money go?
Derivatives trades are generally accounted for by the big broker dealers (now getting taxpayer money) as “off balance sheet” transactions. They are hidden from regulators and investors, via special purpose entities (SPEs), which can be offshore and presumably are for the profit of elite special partners or clients of these same firms.
More Transparency Needed
So, we need to know about the claims AIG and others on Wall Street are paying out from taxpayer funds. Who made these derivative trades? Did they own the underlying assets or not? Did the parties that received money from the taxpayers write sham contracts to create shares to sell and then naked short sell securities they didn’t own into the U.S. markets? Is AIG paying on “losses” for which no claims have yet been made?
Shouldn’t Congress, the Fed — which is overseeing AIG — and law enforcement agencies be investigating these SPEs and the money they received? Shouldn’t they investigate whether it was obtained illegally?
What if there are trillions of dollars in the special purpose entities that have been hidden for the benefit of a powerful few? Should the U.S. taxpayer come to the aid of the largest U.S. banks and brokerages that created these fancy off-balance-sheet financial instruments without full disclosure to at least one government agency of the monies in SPE accounts?
How can Congress make intelligent regulation without understanding the scope of the problem and the trading techniques they are trying to regulate, which took down AIG and are destroying the economy — especially the sham transactions designed for the purpose of creating shares of publicly traded companies?
Since Congress is so focused on Wall Street salaries and bonuses that compensate obscenely paid Wall Street executives, shouldn’t it be asking if these titans of business have reaped financial rewards through the use of SPEs? Beyond that, were offshore SPEs used to avoid taxes or hide improper gains?
Why should we pay anything for the casino gambling debt? If there were illegal profits made on derivatives transactions that created sham shares sold into the marketplace, we should claw back that money, which could amount to a lot more than the bonuses paid to AIG officials.
http://www.alternet.org/workplace/133228/the_real_aig_scandal:_how_the_game_is_rigged_at_wall_street's_casino/
It’s hard to wrap your mind around $2.7 trillion.
The average median income (that means half made less than this and half made more) in America was $48,200 in the 2006 census.
There are 111,162,259 households.
$2.7 trillion would give each of those households an additional $24,288.82 which means that if the money went to the people instead of the banks, the median household would increase their income by 50%.
If the people received it, they would likely spend the money setting the economy on fire. The banks instead, will use it to pay off bets they took with foreign counter parties, possibly their own personal offshore accounts and that money will never set foot in our economy.
Where did this money come from? It’s being printed out of thin air in a year, will make each dollar less valuable because there are more of them. It will express itself in a rise in interest rates or a falling exchange rate.
And guess who that benefits? The banksters who can cover their fails with dollars that are less valuable a year from now.
Steve A Cohen’s firm made an anonymous post on swaps on Wikipedia (the IP gave them away).
The way they explained it, a short agrees to pay the interest on $1 million in exchange for his brokerage agreeing to pay any upside on $1 million worth of the stock he’s shorting.
Because both sides of the swap have equal value, it nets to zero and neither side has to disclose it as it is off balance sheet.
Now the short pays interest on the $1 million + has to put marked to market collateral up without getting interest in return, but the short has NO risk if the stock runs.
The brokerage, on the other hand, gets interest on the short’s collateral, interest on $1 million that doesn’t exist and they can guarantee the stock doesn’t run by piling on by selling long stock in other shareholder’s accounts.
Important read!
http://www.sec.gov/comments/s7-30-08/s73008-108.pdf
Follow the money!
These billions of dollars are only commission payments. The funds themselves likely made 50 times that much.
http://www.iimagazine.com/article.aspx?articleID=1914753
Dr. Jim DeCosta,
Thank you!
YES, this is an important read, and it contains an appendix with pictures of Counterfeiting perpetrated by The Wall Street Counterfeit Machine.
These pictures can clearly illustrate to every investing man and woman in the world… HOW The Wall Street Counterfeit Machine steals the investing public’s money!
http://www.sec.gov/comments/s7-30-08/s73008-108.pdf
In regards to all of that money floating around in the hedge fund industry that you just cited try to imagine how incredibly easy it is to “collateralize” the monetary value of a failed delivery obligation on a daily marked to market basis. Pretty easy right? Now factor in that all of the FTDs piling up in the share structure of the corporation under attack procreate readily sellable “securities entitlements” that will easily place the share price of the corporation into a “death spiral” so that the collateralization requirements drop proportionately to how the share price is dropping.
This then allows the funds of the unknowing investor to flow into the wallets of the crooks DESPITE THE FACT THAT THEY CONTINUE TO REFUSE TO DELIVER THAT WHICH THEY SOLD. Pretty slick right? Hold on it gets better. Now you need to realize that 99% of the original “collateralization” requirements “posted” by the party refusing to deliver that which it sold IS MADE UP OF THE FUNDS OF THE INVESTOR. THE CROOKS HAVE NONE OF THEIR OWN FUNDS i.e. THEY HAVE NO “SKIN IN THE GAME”! Now that is one well-designed fraud on the market. It even gets better if there are “credit default swaps” available to manipulate.
The letter to the SEC by Roel Campos looks like the real deal. It will be hard for them to ignore it.
I hope the senators proposing new legislation on naked short selling see this.
Jim deCosta:
What are the chances that TARP money will flow to entities that profited hugely from illegal naked short selling and hid the profits aside in off-balance sheet accounts?
If the Madoff ‘victims’ were, say, autoworkers in Detroit, I doubt congress would be doing anything more than sneering at them for their ‘stupidity’.
DCN, here’s why Soros is worthy of inclusion in your deck.
Wonder who crashed the US financials??!!??
http://news.id.msn.com/business/article.aspx?cp-documentid=2954977
Fred…
I don’t need to be as smart as the good doctor to figgure this out the amount of tarp money received by the same people who made money naked shorting the united states economy into the dirt is more than the amount of money they made destroying our economy.
They naked shorted [NEVER DELIVERING AND KEEPING THAT MONEY]stocks,bonds, derivitives, eveything they could driving the value of the underlying securitys into the ground so the government could call for funds to bail out the financial markets ,get taxpayer funding approved ,now all that tarp money will dissapear into the black hole of the ‘insurance policys’ written on ASSETS NOT OWNED BY THE INSURANCE HOLDERS.
now they have the value of the worlds economys naked shorted and hid away and the bailout money as well,which my 8 year olds grandchildren will still be paying off !
All clear on that now?
Dr. Jim DeCosta,
In the generic letter I am working on, I need an easily understood term to describe the Long positions recorded in monthly brokerage statements that have NOT BEEN DELIVERED….
This morning the thought came to me that I call the fraudulently recorded LONG Position an…….
—- FTD IOU ………….
(Fail -To-Deliver IOU)
Does this sound like a accurate term?
FTR: Long position held as an IOU
(FAILURE TO RECEIVE)
istandup,
It’s really rather clever. On your monthly brokerage statement that which you purchased is typically referred to as “securities held long”. Note that it won’t say “shares owned”. Why? It’s because firstly in the case of abusive naked short selling these aren’t “shares” of a corporation. Secondly, the purchaser doesn’t “own” them. “Cede and Co.” the nominee of the DTC “owns” them. “Ownership” is defined in Rule 200 of Reg SHO.
In the case of “securities” purchased but never delivered or those FTDs cured by a “borrow” from the NSCC’s “Automated Stock Borrow Program” (SBP) the purchaser is the “co-beneficial owner” of any given parcel of shares purchased. Any given “parcel” of shares whose FTD was cured by a borrow from the SBP may have many, many co-beneficial owners because these lending pools are self-replenishing and they are held in an “anonymously pooled” format or “dark pool”. You need a lot of “darkness” in a crime wave as obvious as refusing to deliver that which you sell and the secrecy-obsessed “black box” known as the DTCC provides it in spades.
Technically the “accounting measure” that denotes a failed delivery obligation is referred to as a “securities entitlement”. Since one definition of a “security” is “an evidence of indebtedness” then TECHNICALLY an FTD gives rise to a “security”. As far as your monthly statement saying that your brokerage firm’s clearing firm is “holding it long” for you TECHNICALLY any “book entry” made by any “securities intermediary” gives rise to a “long” position even if it is referring to a failed delivery obligation.
When you link together these two TECHNICALITIES then “securities held long” can very well be a smoking gun denoting a fraud or it might be the real McCoy. Since the purchaser of either real shares or “securities entitlements” is allowed to sell that which she or he purchased then nobody gives a hoot and these nonexistent “shares” keep getting handed on from buyer to seller to buyer to seller ad infinitum. It’s like a game of “musical chairs” with 100 participants and maybe 30 chairs. If the music never stops at the DTCC (via periodic audits or buy-ins) then the fact that there is a gigantic disparity between participants and chairs is never revealed.
Dr. DeCosta, question for you, a very basic one. I was under the impression that in order to naked short a stock you had to use a “Prime Broker”if that was/is the case how did the PB’s get shorted? Did they did this to themselves???Please explain it to me like I’m a five year old. Thanks in advance.
Hi Sean,
You don’t need a prime broker to NSS a stock at all although they’re often involved. The prime brokers are the guys that work closely with the hedge funds. They process their trades, effect their short selling loans and loan them money to increase their leverage. They’re typically a division of one of the big “banksters”. Since the hedge funds aim a ton of money at these guys annually they’re going to expect some “favors” back. These might be in the form of bogus “locates”, access to crooked market makers willing to illegally access their exemption from making pre-borrows or “locates” before naked short sales, etc.
Sean,
It might be easier to grasp that a naked short sale is synonymous with refusing to deliver that which you sold. It doesn’t matter if the brokerage firm taking the order labeled the sell order as “Long sale”, “Short sale” or “Short sale exempt” i.e. done by a theoretically bona fide MM. It also doesn’t matter if the selling party executed a bogus “pre-borrow” or bogus “locate” in order to give Reg SHO a head fake. Naked short selling is a piece of cake.
The thing to focus on is what happens AFTER the party refused to deliver that which it sold. The only cure in the whole world available when the seller of securities absolutely refuses to VOLUNTARILY deliver that which it sold is for the authorities to FORCE delivery by promptly “buying-in” that FTD.
The party that has “accidentally” collected 15 of the 16 sources of empowerment and authority to provide this ONLY cure available is the DTCC. But it is owned by the parties refusing to deliver that which they sold and their management being loyal employees refuses to provide this ONLY cure available despite its congressional mandate “to act in the public interest, to provide investor protection and to “promptly settle” all securities transactions. When you break it down into its component parts this is one very slick form of fraud.
SOMETHING SCARY TO PONDER
1) The SEC recently stated in an amicus curiae brief in a case wherein the victims of naked short selling were suing the DTCC: “A security entitlement is a property interest entitling the holder to exercise all of the rights attached to the security. See UCC § 8-501(b)”.
2) A legitimate “share” of a corporation represents “a property interest entitling the holder to exercise all of the rights attached to the security”.
3) The SEC thus holds a “securities entitlement” as being essentially synonymous with a legitimate “share” of a corporation.
4) What’s the quickest way to get a “securities entitlement” credited to the account of an investor? You naked short sell him shares and refuse to deliver that which you sold.
5) Since only the Board of Directors of a corporation is allowed to “issue” shares of a corporation and only via a corporate resolution then by definition the DTCC should not allow failures to deliver to occur.
6) This would be tantamount to NOT allowing any sell order to be processed UNTIL that being sold is in place and ready to be delivered on the previously agreed to “settlement date” of T+3.
7) The SEC and DTCC can’t have it both ways. You can’t treat a “securities entitlement” as a legitimate “share” and then have the ONLY party (the NSCC) empowered to provide the ONLY cure available when its abusive participants refuse to deliver that which they sell i.e. promptly buy-in that FTD pretend to be “powerless” to provide the ONLY known cure.
8) The DTCC does not have the statutory authority to essentially “issue” new shares of a corporation especially when it results in the investment funds of U.S. investors being rerouted into the wallets of the DTCC “participants/co-owners” that absolutely refuse to deliver that which they sold. Is this fraud really that complex?
The easiest way to naked short for a retail investor is to open an account with a Canadian boutique.
You place your order to short and they say “this one may be hard to borrow” and you say “short it anyway”. About a week and a half later, they will complain that they are going to have to buy you in, as they can’t find stock.
Simply place the order to buy, then naked short to yourself or a friend from a different boutique (or cover at a profit, rinse and repeat).
Alternatively, you can get a “wholesale” account which basically means to trade directly through a friendly market maker who naked shorts for you.
I should provide some context to the above post #173 because it is truly brilliant what the crooks have done. The nominee of the DTC “Cede and Co.” has been named the “legal owner” of all shares held in “street name”. This was done to streamline the clearance and settlement process. It made sense.
Because of this, UCC Article 8-501 got drafted stating that although the DTC’s nominee is TECHNICALLY the “legal owner” the purchaser of these shares that holds the “securities entitlement” and not the title of “legal owner” to these shares must be treated as able to exercise all of the rights that comprise the security. After all, they’re his shares. This made sense and provided some investor protection.
The opportunities sensed by the crooks and the lawyers of the crooks was that since the “entitlement holder” HAD TO BE TREATED BY LAW as entitled to exercise all of the rights that comprise a security (as per 8-501) then if we merely refuse to deliver that which we sell then we can establish massive naked short positions AT THE SAME TIME that we’re diluting the company to death with all of these extra readily sellable “securities entitlements”. These naked short positions will immediately be worth a fortune as the share price of the corporation targeted for an attack tanks associated with the extra “supply” of shares and fake shares now breaking its back.
Thus a law meant to provide investor protection from crooked DTCC participants leveraging their “legal owner” title did just the opposite. You have to realize that there are $1,000 per hour lawyers being paid by the “banksters” and the hedge funds to search for loopholes and asymmetries to use as leverage over less financially sophisticated U.S. investors. That’s why we theoretically have SROs and regulators like the SEC looking out for us!
The riskiest part for the crooks was being “bought-in” by the authorities empowered to provide the ONLY cure available when parties refuse to deliver that which they sell i.e. execute a buy-in. As it turns out the employees of the crooks, the NSCC management, had quietly acquired a monopoly on 15 of the 16 sources of empowerment to execute buy-ins. The 16th source of empowerment still had to be dealt with. This is the brokerage firm of the purchaser of the shares that never got delivered. This party was essentially “bribed” not to opt for a buy-in by being given the interest earnings of the investor’s funds UNTIL that which was sold got delivered. All of a sudden the last thing in the world the brokerage firm of the buyer wants is for delivery to occur.
Dr. DeCosta, as always, now I get it and thank you for your assistance!!!
Goldman Sachs is both a major NSS and a TARP recipient.
Their incestuous relationship with the US ‘government’ needs to be exposed for what it is and terminated.
http://www.nytimes.com/2008/10/19/business/19gold.html
Dr. Jim DeCosta,
You said:
“The 16th source of empowerment still had to be dealt with. This is the brokerage firm of the purchaser of the shares that never got delivered. This party was essentially “bribed” not to opt for a buy-in by being given the interest earnings of the investor’s funds UNTIL that which was sold got delivered. All of a sudden the last thing in the world the brokerage firm of the buyer wants is for delivery to occur.”
I think you have stated that our individual brokerage companies cannot tell us whether the individual account received DELIVERY of long stock share bought or whether they were NOT DELIVERED.
OK, is it not then true that our brokerage companies, at least, CAN and DO KNOW if they are receiving interest payments from the Clearance and Settlement System?
Also,evidence firms receiving TARP funds (MS) have been paying out to cannibalize other firms (F):
http://www.huffingtonpost.com/2009/03/05/morgan-stanleys-13-payout_n_172259.html
Now, is that a good use of our funds?
istandup,
Brokerage firms that utilize a clearing firm are called “introducing” or “correspondent” broker/dealers. They don’t know whether their client got delivery of that which he purchased. The clearing firm does know, however. It’s the one that has an option to file an “Intent to buy-in” with the NSCC or not to. It will nearly always choose not to. It would rather have the interest income than a book entry gathering dust.
The “introducing b/d” has a fiduciary duty of care after earning a commission after operating as an “agent” to make sure that his client got what he paid for. He gets blinded as to the delivery status of that order by the NSCC’s Continuous Net Settlement’s (CNS) use of multilateral “pre-netting” which disconnects clearance from settlement. That fiduciary duty of care goes poof! The “introducing” b/d doesn’t care anyways; he got his commission and moved on.
istandup,
The net-net is that the NSCC says to the clearing firm holding the delivery failure that it can either file the “Intent to buy-in” and risk retaliation from your NSCC fraternity brothers for disturbing the corrupt status quo or you can take in a bunch of money in the form of interest earnings UNTIL delivery occurs. Gee, that’s a tough choice! But what a minute how can the NSCC with the congressional mandate to “promptly settle” all securities transaction give its “participant” the option to sit around and wait for the EVENTUAL delivery of that which may never show up?
critical read!
http://www.gao.gov/new.items/d09318r.pdf
To put Dr. Decosta’s brilliant post 175 in layman’s terms.
You give your brokerage money to make a purchase and instead of receiving the shares you bought, you get an IOU. As long as your brokerage doesn’t demand delivery of the shares, they get interest on your money. You’re none the wiser as the industry controlled regulators allow your brokerage to refer to the IOU’s as “securities held long”.
You’re none the wiser and don’t realize you paid good money and received nothing in return. Your purchase helped increase the supply of outstanding securities entitlements, without adding to the demand. Perversely, the more demand to buy, the lower the shares will go, as long as the system is willing to print entitlements.
(They will always do this with companies not likely to show a profit in the short term.)
Kind of makes you look like a stupid sap for putting your money into the market, sucker!
Dr.DeCosta,
If a company makes a profit and buys back shares does this have any effect on the NSS’ers?
If a company gets bought out and there is a massive amount of share short what happens?
TIA
Henry Kissinger sez:
“We are building for the first time, not just a global economy but a truly global society.” The credit crisis, he repeated, would be seen as a mere hiccup in the progress of globalization, as the world financial system adjusts to massive flows of money between countries.
http://www.independent.co.uk/news/uk/politics/
three-in-a-bed-will-gordon-roll-over-1654277.html
The crash of the American banking system and economy, with the emergence of a new global reserve currency (IMF Special Drawing Rights) as a solution to the crisis makes sense when you realize THEY don’t like that democratic America with Internet educated citizens is a superpower which dominates the world economy.
What if the global elite who run the world banking system (the banksters) had a goal in mind and that goal was to subjugate your democracy to a global dictatorship they secretly control through their own privately controlled global currency?
Would treason be too strong a description of the intentional crash of our economy by gutting the clearance system so THEY can manipulate it?
Ron, in the first case, yes it hurts them as the company will demand real shares to cancel and will be in a position to sue the brokerage if they aren’t delivered.
In the second case, it is meaningless. The company is either sold for dollars at the low price (and IOU’s are covered at that low price) or for IOU’s in the acquiring company.
Thought you guys may be interested in seeing and reading this…
GAO Report Blasts SEC Short-Selling Investigation
Law360, New York (March 27, 2009) — The U.S. Government Accountability Office issued a report Friday laying out the process for clearance in the equities market, finding that a U.S. Securities and Exchange Commission office may have missed significant activities related to manipulative naked short-selling in the nation’s largest equities clearinghouses.
The GAO report stressed the importance of oversight into the clearance and settlement process for equities markets, while saying that it did not support the SEC Office of Compliance Inspections…
Re: GAO Report Blasts SEC Short-Selling Investigation
http://securities.law360.com/registrations/user_registration?article_id=94008&concurrency_check=false
Interesting….
http://research.scottrade.com/public/markets/news/news.asp?docKey=100-077×2983-1§ion=headlines
Here’s one to pass along to the friends of Bill O’Reilly. Mabye it will help to end his and Nws corp/Foxnews front running crap.
http://thinkprogress.org/2009/03/27/ups-oreilly/
Dr. Jim DeCosta,
The GAO Report states the following on page 4:
“If a participant fails to deliver the total number of securities that they owe NSCC on a particular settlement date, NSCC may be unable to meet its delivery obligations, resulting in a fails to receive (FTR) for participants who have net long positions. NSCC uses the automated Stock Borrow Program to borrow shares to meet as many of its delivery obligations as possible. This program allows participants to instruct NSCC on the specific securities from their DTC account that are available for borrowing to cover NSCC’s Continuous Net Settlement System delivery shortfalls. Any shares that NSCC borrows are debited from the lending participant’s DTC account, delivered to NSCC, and, subsequently, delivered to a NSCC participant with a net short position. NSCC creates a right to receive (net long) position for the lender in the Continuous Net Settlement System to show that it is owed securities. Until the securities are returned, the lending participant no longer has ownership rights in them and, therefore, cannot re-lend them. Additionally, any delivery made using the Stock Borrow Program does not relieve the participant who fails to deliver from its delivery obligation to NSCC.”
Does this paragraph reflect your understanding of HOW the SBP program is used?
Does Goldman rig the oil markets as well?
http://www.forbes.com/forbes/2009/0413/096-sachs-semgroup-goldman-goose-…
re: post #190
istandup,
That citation is 100% accurate as to how the SBP operates. Now for the fine print. Rule #1: don’t get faked out by the legal “ownership” of that particular parcel of shares. It’s a Ponzi scheme of sorts. “Ownership” is divorced from “delivery obligations” at the NSCC. The buying b/d that received the borrowed shares from the SBP to cure its failure to receive (FTR) becomes the new “legal owner” of those shares. No problem because 17 A mandates the transference of beneficial ownership in a securities transaction. It is semantically correct that the donor of the shares that were borrowed loses “ownership” but what did he gain? He gained a “long position” in a “C” sub account at the NSCC. This “book entry” is a “securities entitlement”. The b/d whose shares were chosen by the NSCC to cure a delivery failure does not get on the phone to his client and say OOPS you just lost “ownership”; you can no longer sell your shares.
Remember the “Pet Quarters” case and the amicus curiae brief filed by the SEC. The SEC’s interpretation of UCC 8-501 is that “the holder of a “securities entitlement” is entitled to exercise ALL of the rights that comprise the security”. There is no difference between “owning” a security and “having the right to exercise all of the rights that comprise a security” except for a mere “accounting measure”. Whether an investor is technically wearing a hat inscribed with “LO” as “legal owner” or with “SEH” for “securities entitlement holder” makes no difference since both are allowed to exercise all of the rights that comprise the security.
In reality 8-501 says nothing of the sort. It says that since “Cede and Co.”, the nominee of the DTC, has been appointed to act as the surrogate “legal owner” of all shares held in “street name” for reasons associated with streamlining the transference of ownership and the purchaser of shares and the investor TECHNICALLY only retains a “securities entitlement” then the DTC better not try to leverage its acting as the surrogate “legal owner” and try to exercise any of the rights that comprise that security. After all, the investor paid for them. That is a far cry from the SEC’s interpretation.
For all intents and purposes the SBP of the NSCC “issues” UNREGISTERED SHARES of a corporation’s stock. A clearance and settlement system with integrity would not allow the new brokerage firm receiving the borrowed shares to donate them back to the SBP UNTIL the earlier failed delivery obligation was paid off otherwise you’re running a counterfeiting machine. That’s why crooks can sell nonexistent shares all day long, refuse to deliver that which they sell and simply let the SBP work its magic. Since each FTD results in the generation of readily sellable “securities entitlements” then the share price has to tank and those previously established naked short positions gain value. All of this transfer of wealth involving only the need to refuse to deliver that which you sell.
The net-net is that “ownership” becomes a moot point if the SEC and NSCC misinterpret UCC 8-501 and allows “book entries” known as “securities entitlements” to become synonymous with “shares” which relegates the act of refusing to deliver that which you sell to result in the “issuance” of shares behind the backs of the Board of Directors which is the only party allowed by State Law to “issue” shares.
Dr. Jim DeCosta,
Thank you… I am still trying to “degist” the details.
Let me concentrate on the last two sentences quoted above:
“Until the securities are returned, the lending participant no longer has ownership rights in them and, therefore, cannot re-lend them. Additionally, any delivery made using the Stock Borrow Program does not relieve the participant who fails to deliver from its delivery obligation to NSCC.”
In a previous post above, you stated:
“In the case of “securities” purchased but never delivered or those FTDs cured by a “borrow” from the NSCC’s “Automated Stock Borrow Program” (SBP) the purchaser is the “co-beneficial owner” of any given parcel of shares purchased. Any given “parcel” of shares whose FTD was cured by a borrow from the SBP may have many, many co-beneficial owners because these lending pools are self-replenishing and they are held in an “anonymously pooled” format or “dark pool”. You need a lot of “darkness” in a crime wave as obvious as refusing to deliver that which you sell and the secrecy-obsessed “black box” known as the DTCC provides it in spades.”
So as I understand your statement here, the same SBP shares are owned by many, many different people, because they go back into the pool after they are used.
Yet the GAO paragraph states:
“Until the securities are returned, the lending participant no longer has ownership rights in them and, therefore, cannot re-lend them.
So I seem to be missing a fine detail here…
How is the GAO sentence true if the SBP is self-replenishing with the same shares?
Re post #184
Ron doc,
Share repurchase programs are an excellent idea for companies that have had the you know what kicked out of the share price. It is step 2 of a 14-step sequence to address these frauds.
In the case of a tender offer, those that are naked short your shares on the “record date” of a tender offer are on the hook for the amount of the tender offer. Here’s where things get really crooked at the DTCC. If “acquiringco” takes out “acquiredco” on a 1-for-1 share swap acquisition the NSCC doesn’t make those naked short “acquiredco” go out into the open market and buy shares of “acquiredco” to cover its naked short position.
Instead what they do is take out a bottle of “white out” and let their abusive participants off the hook and merely change their naked short position to being short shares of “acquiringco” on a share for share basis. Of course this is 100% illegal because the law says that those short must match the tender offer in like kind and like quality.
In this example all of those share price depressing readily sellable “securities entitlements” poisoning the share structure and share price of “acquiredco” now get redeposited into the share structure of “acquiringco”. Shouldn’t the DTCC or SEC or FINRA brought all of this toxic waste to the attention of the board of directors of “acquiringco” before they voted on the tender offer. How about to the attention of the shareholders of “acquiringco” before they voted on the tender offer? Doesn’t the ’33 Act (“The Disclosure Act”) mandate the disclosure of this very “material” information?
The reality is that these thefts have been going on for so long that the following of the law in the ’33 Act would reveal the existence of this gigantic “industry within an industry” and the crooks as well as the regulators can’t allow this to happen. Have you ever wondered why the share price of the “acquiringco” always tanks in one of these tender offers even when the acquisition is accretive to earnings? Perhaps it has to do with the massive number of securities entitlements in the share structure of the “acquiredco” is what depressed its share price levels to a point where it became attractive to the “acquiringco”.
When is all of this going to end? There is one and only one solution available. You buy-in the outstanding delivery failures older than perhaps T+6 in the shares structures of all corporations and then you make sure that this never happens again. Is there something extremely punitive to FORCING people to deliver that which they previously sold when they refuse to do so voluntarily? In any business other than Wall Street would we even be having this discussion? Can you imagine the head count on how many U.S. citizens have been screwed out of their life savings by this crime wave?
Re: post 193
istandup,
I know it’s confusing. Don’t concentrate on the “ownership rights”. In a sense there are “Official ownership rights” as recorded in the books and there are “unofficial ownership rights” that are floating around in cyber space. They’re one and the same but the DTCC and the SEC and FINRA can’t publicly admit this or else they would admit to the corruption in our clearance and settlement system because everybody knows that they don’t have the legal right to “issue” shares of a corporation.
istandup,
The crooks and the SROs and the regulators facilitating the crimes of the crooks have to make it CONFUSING because of the obviousness and heinous character of refusing to deliver that which you already sold after being given access to the funds of the purchaser.
Dr. Jim DeCosta,
Yes, I agree and do understand the Wall Street Criminals have made all their rules confusing on purpose to HIDE their crimes.
This is why I am trying to understand HOW they are confusing the issues on purpose.
Can you point me to one of your written letters to the SEC where you explain these confusing points?
istandup,
One thing I’ve failed to get across over the years is how incredibly easy it is for a market maker and its co-conspiring hedge funds to “accidentally” amass an enormous naked short position which forces him to step up his fraudulent activity. The foundation of our entire clearance and settlement system has been illegally converted to one based upon “collateralization versus payment” (CVP) versus the congressionally mandated “delivery versus payment” (DVP). This means that you don’t have to deliver that which you sell in order to get your hands on the investor’s funds. This is insane but it is what it is.
Opportunists noticed this and decided to exploit it but they still needed an opportunity. The 2 best “opportunities” today are to utilize the wishy-washy nature of Reg SHO’s “locate” requirement or to ILLEGALLY access the exemption accorded to bona fide market makers from effecting pre-borrows or “locates” before making admittedly naked short sales. There’s your OPPORTUNITY.
A corrupt MM sees a bunch of buy orders coming in and he naked short sells into those orders while pretending to be a bona fide MM worthy of accessing that exemption. He’s now established a naked short position and he’ll do everything in his power to prevent the share price from going up and to induce it to go down. Along comes a stream of buy orders which puts an upward pressure on share prices. The corrupt MM will go into “whack a mole” mode and every time a buy order pops up he’ll whack it with a matching sell order to keep him from losing money on his bet. He knows that all waves of buying must eventually come to an end so he’s not too concerned.
He also knows that with every wave of buying he survives the prognosis for the negative bet he has established and that he is “doubling down” on gets better and better as the share price starts feeling the weight of all of those readily sellable “securities entitlements” that have been procreated by his FTDs. But what if the company the MM misdiagnosed as a “scam” ends up being a real company with a major breakthrough and the buy orders just keep coming?
The corrupt MM then has several potential “outs”. He could approach a friendly hedge fund and invite them underneath his “umbrella of immunity” from making pre-borrows or “locates” before making short sales and ask them for a hand. He might also approach a corrupt financial journalist and induce him to draft a “hatchet job” making the corporation under attack appear to be destined for failure. Remember now that the company is “top heavy” with a gazillion investors that bought readily sellable fake shares all you have to do is to convince a small percentage to dump their shares in order to create a strong effect. The corrupt MM could also approach some fellow MMs/fraternity brothers and ask for a hand and promise to return the favor the next time it gets into trouble.
As you can see things can get out of hand fairly easily in a clearance and settlement system offering the bait to commit fraud associated with a foundation of mere CVP and a powerful exemption like that enjoyed by MMs. Eventually the weight of all of the readily sellable “securities entitlements” resulting from all of these FTDs will typically win out. Investors just don’t have the financial firepower to take on these billionaire behemoths on Wall Street and time is always on the side of the crooks. Recall that yet to be cash flow positive corporations can be FORCED to pay their monthly burn rate by selling shares to the public at ever decreasing price levels.
The ultimate key to the success of these thefts, however, is the ability of those refusing to deliver that which they sell to 100% count on the NSCC management NOT to provide the ONLY cure available when the seller of securities absolutely refuses to deliver that which it sold i.e. execute a buy-in. It is crucial that the party empowered to provide the cure not deploy it even if it has the congressional mandate “to act in the public interest, provide investor protection and “promptly settle” all securities transactions.
Note that in these battles the naked short sellers get to a point wherein the preexisting naked short position becomes so large that they CAN’T cover it without risking a huge financial loss. Why? Because in order to cover your short position you first need to stop your day to day “whack a mole” naked short selling. If you’ve been pretty much the only seller around because the share price is now so low that investors won’t sell then the mere halting of the daily “maintenance” naked short selling will result in a gap in the share price upwards. How in the world can you cover an astronomically large naked short position in a market that is already gapping upwards? You can’t! Now you know why the SEC stated prior to the effective date of Reg SHO that they needed to “grandfather in” previously naked short positions lest “market volatility issues” arise.
Re: 192
One problem with the SEC’s interpretation is it is often not possible for an entitlement to have all of the rights of a share.
Let’s say, for example, that Microsoft created a wholly owned private subsidiary called MS Office, Inc. and put their office product into it. They could declare a general dividend, where you get one share in the pre-IPO, non trading company MS Office, Inc., for each share of Microsoft that you own.
Now, how can the entitlements be cured? Obviously, the naked shorts don’t have access to the private shares, so they can deliver a matching dividend. Imagine the IOU’s were 2-3 times the outstanding. Then they’d never want to buy in their IOU as it would be prohibitively expensive.
This exact scenario has played out with small penny companies, trying to fight the fails and the industries solution is to just tell investors “Unfortunately, you don’t get a share in the private company, because there aren’t enough shares to go around” or “We’ll happily refund your original purchase price because unfortunately you didn’t actually buy a share”.
The whole damn thing is a ponzi scheme fraud. It’s disgusting.
Davidn, when they say ‘sorry’ it would seem that lawsuits would overwhelm them?
Sign the petition:
http://www.gopetition.com/petitions/take-action-against-the-sec.html
SEC hands out bonuses to staff:
http://blogs.wsj.com/washwire/2009/03/27/sec-hands-out-bonuses-too/
Too funny!
Dr. Jim DeCosta and ALL,
Here is a link to your paper you sent to the SEC about…
“A CLOSER LOOK AT THE NSCC’S “AUTOMATED STOCK BORROW PROGRAM” OR “SBP””
http://ftp.sec.gov/comments/s7-30-08/s73008-102.pdf
Interpretation/experts and opinions: Look life is very basic. It isn’t about interpretation.It isn’t about debating with others. It is very simple. ENFORCEMENT. And if those who are in position will NOT ENFORCE then remove them and replace them with those who will. Now we have a long list of those who want to debate and give their opinions. We can sit for hours and days and YEARS going over such nuances. Yet this is WAR. The financial system was attacked. And as that occurred this countries financial system nearly collapsed. Doesn’t matter if it is an attack on a world trade center with the intent of collapsing a system and exacting a change or attacking BSC and others to do the same. I’ve said it before in a post. Most here KNOW what has happened and HOW it happened. Heck, many even know WHO allowed it to happened or were complicit. How about we do something very simple. GET RID OF THE IRRESPONSIBLE and REPLACE WITH THE REPSONSIBLE. The FIRST step is simple. NAME THE NAMES. PUT FACES to those names. The black list is a good beginning. Let’s get it out there. Enough with the defense, let’s get offensive. Otherwise will be here 30 years from now discussing if Pearl Harbor could have been avoided? or WTC? or BSC? Of course they could!!!
Charge the no-performers in the SEC with crimes.
One of the other aspects of this fraud that I haven’t gotten across very well over the years is its “perpetual” nature. Any well-designed fraud will incorporate a mechanism to promote sustainability.
Let’s assume a U.S. corporation that is critical to our national defense comes under attack. Now we’ve got issues of national defense pitted against the insatiable greed of a handful of Wall Street crooks. Who would you bet on? As the readily sellable “securities entitlements” resulting from failures to deliver that the NSCC refuses to buy-in accumulate the share price obviously has to tank. Let’s say it goes down 90% after a year or two under attack. What does this result in?
It results in a long line of prospective investors with cash in hand that sense a bargain. Perhaps the corporation is now trading at only 5% of book value. To some financially-sophisticated investors it’s a no-brainer to back up the truck and buy every share that they can afford.
As the previous investors get their retirement funds stolen a new line up of unknowing victims is more than willing to take their place. They don’t have a clue that they’re walking into an SEC, DTCC, NSCC, FINRA “sponsored” ambush. Perhaps the naked short sellers on the attack side overdid it a bit and ran up naked short positions so large that they can’t cover it without being financially decimated. What have they now got to lose being that they’re past the point of no return? Post #198 above illustrates how incredibly easy and common it is to get to this point.
Historically at this point in the battle the naked short sellers start calling in favors from any source possible. The goal now becomes to do whatever is possible to get the company delisted by the SEC. Do you want to know what would be an excellent study for the SEC’s Office of Inspector General (“OIG”) to undertake? Study the FTDs in the share structure of the last 20 corporations that the SEC delisted and compare it to statistical norms.
Dr. Jim DeCosta,
I just read your paper to the SEC…
“A CLOSER LOOK AT THE NSCC’S “AUTOMATED STOCK BORROW PROGRAM” OR “SBP””
http://ftp.sec.gov/comments/s7-30-08/s73008-102.pdf
How the Wall Street Counterfeit Machine uses the SBP to counterfeit is clearer now in my mind.
So it appears that the paragraph in GAO Report I quoted above describes HOW a theoretical honest participate would use the SBP:
“Until the securities are returned, the lending participant no longer has ownership rights in them and, therefore, cannot re-lend them. Additionally, any delivery made using the Stock Borrow Program does not relieve the participant who fails to deliver from its delivery obligation to NSCC.””
From your letter to the SEC referenced above, it is clear that the SBP program does NOT WORK the way the GAO Report states it works whenever a participant wants to Sell what they NEVER INTEND TO DELIVER – COUNTERFEIT SHARES.
I think your letter can illustrated with some drawings. I will try my hand at this.
istandup,
The “ownership” issue provides what I like to refer to as a “semantical dust storm”. Let’s say that “Acme” has 100 million shares issued and outstanding and that all are held at the DTCC in “street name”. The transfer agent’s “record of ownership” will state that “Cede and Co.” (the nominee of the DTC) is the “legal, nominal, record” owner of all 100 million shares.
Let’s say that there are 80 million yet to be bought-in FTDs. Thus there are 80 Million invisible “securities entitlements” in the share structure of Acme that are actively weighing down its share price. These could be held in a variety of locations on Wall Street. Investors bought and paid for 180 million “shares” and/or “securities entitlements”. If all investors faxed in their monthly brokerage statements they would total 180 million “securities held long”.
After grossly misinterpreting the intent of UCC 8-501 the SEC holds that the “owners” of the 80 million “securities entitlements” which are mere accounting measures to denote failed delivery obligations should be allowed “to exercise ALL of the rights that comprise that security”. A legitimate share with a paper-certificated share located somewhere to justify its existence is also defined as “the ability to exercise all of the rights that comprise that security”. This makes legitimate “shares” to be synonymous with mere “securities entitlements” which result from the sale of nonexistent shares which is a rather troubling concept. By definition this would make FTDs in essence illegal because only the board of directors of a corporation can “issue” shares.
This interpretation makes the holders of the 80 million mere “securities entitlements” which by the way are not identifiable due to the “anonymous pooling” of all shares held at the DTCC and its participants as also being in essence the “owners” of the right to exercise the rights that comprise that security.
Thus 100 million “shares” are “legally” owned by Cede and Co. or the DTC and 80 million “shares” are “de facto owned” by the unidentifiable purchasers of the 80 million nonexistent shares sold. “De facto owned” means that you have the EXACT same rights as the unidentifiable purchasers of the 100 million “shares” issued by Acme’s board of directors. For all intents and purposes at the end of the day the people that sold “securities” but never delivered them brought about the “issuance” of “shares”. Note how critical it is to the perpetration of the fraud for the DTCC to insist on holding shares in an “anonymously pooled” format.
What if all investors had their own DTCC “internet mailbox” with a camera where they could keep an eye on their own paper-certificated parcel of shares? Neither the DTCC nor the sellers of nonexistent shares have the legal right to “issue” voting rights to the purchasers of bogus shares. This would dilute the voting power of all other shareholders because there are only 100 million votes that can be cast. If you demand delivery of your paper-certificated shares then you are guaranteed to have 100% of your voting power with no dilution.
Have you ever considered interviewing the clearing firm of your b/d to see just how “dirty” they are? Your voting power is going to be illegally scaled down proportionate to the “dirtiness” of your clearing firm because all you are granted to vote is a “proportionate interest” in the amount of shares that were delivered after purchase.
Dr. Jim DeCosta,
Thank you!
By the way, did you see anything in the GAO Report that specifically explained how Manipulative Naked Shorting is harming Long Stock holders and their corporations?
I am trying to put together a list of differences between Legal Short Selling and Abusive Naked Short Selling (Counterfeiting).
I will post if for everyone’s critique and corrections after I finish the 1st draft.
It’s critical to get a handle on how the crooks provide cover via distorting “ownership” issues.
“OWNERSHIP” ISSUES IN ABUSIVE NAKED SHORT SELLING
1) When an abusive naked short seller intentionally sells nonexistent shares to an unknowing U.S. investor and refuses to deliver that which he sold a “failure to deliver” (FTD) occurs.
2) The purchaser of the failed to be delivered shares is granted a “securities entitlement” which is defined as: the rights and property interest of an entitlement holder with respect to a financial asset.
3) In their amicus curiae brief filed in the “Pet Quarters” case the SEC asserted their interpretation of UCC Article 8-501 to be that any entitlement holder is granted the right to exercise ALL of the rights that comprise the security to which he has an entitlement.
4) What is the difference between a legitimate “share” of a corporation and a “securities entitlement” to a corporation? It’s the title of being the “legal, nominal, record owner” of those shares and that’s it! “Entitlement holders” don’t “own” anything but they are entitled to the rights and property interests of the security as if they were the “legal owners”.
5) The purchaser of “shares” or “entitlements” to shares doesn’t care about whether or not she or he is the “legal owner” of the “shares” or just an “entitlement holder”. She or he wants to be able to exercise the rights attached to the shares usually in the form of the right to resell it, the right to vote it on a one share, one vote basis and the right to receive dividends.
6) The power to exercise the “package of rights” attached to a “share” is the only important part of a share to 99% of the purchasers of shares.
7) The abusive NSCC participants that sell shares and intentionally refuse to deliver them in essence accounts for the “issuance” of the only important part of a “share” to 99% of investors.
8) Due to the concept of dilution to fellow shareholders the most damaging part of a “share” or “securities entitlement” is the ability to resell it in the open market. This is because both readily sellable “shares” and readily sellable “securities entitlements” count equally in contributing to the “supply” variable of shares and/or “securities entitlements” that interacts with “demand” variable to determine share price in the “price discovery” process.
9) The abusive NSCC participants that sell shares and refuse to deliver them in essence “issue” the most damaging part of a “share” and/or “securities entitlement” when they refuse to deliver that which they sell. The most damaging part being the “resale ability” which contributes to the “supply” variable in supply/demand interactions.
10) The identity of the “legal/nominal/record owner” and whether the seller of shares is the “legal owner” or not has nothing to do with the determination of share price.
11) Since “manipulation” involves the intentional alteration of the supply and demand variables leading to share price discovery then those that intentionally refuse to deliver that which they sell manipulate share prices lower.
12) Being that the legal title of “ownership” is not being conferred to the purchasers of undelivered shares then TECHNICALLY refusing to deliver that which you sell may not constitute “counterfeiting” per se but the manipulation of share prices downwards is irrefutable unless the laws of supply and demand don’t exist.
13) Since the DTCC statistics state that 99% of all deliveries occur on time and the overwhelming majority of the other 1% occur within a 2-day period then one could safely deem that any deliveries not made by T+6 or so could be labeled as “intentional” delivery failures done in an effort to release the damaging aspects of “securities entitlements” (dilution from resale ability) in order to manipulate share prices downwards regardless of any “ownership” issues.
14) Due to the extremely damaging nature of readily sellable “securities entitlements” any clearance and settlement system with integrity would look upon a “failure to deliver” (FTD) which always results in the procreation of incredibly damaging “securities entitlements” as an emergency needing to be tended to.
15) Since the only cure available when the seller of securities refuses to deliver that which it sold is a “buy-in” then the parties empowered to execute buy-ins would play a critical role in providing investor protection due to the damaging nature of “securities entitlements”.
16) When the employees (NSCC management) of those that routinely refuse to deliver the securities that they sell have all of the empowerment in the world to provide the only cure available (a buy-in) but refuse to do so in order to look after the financial interests of their abusive participants/bosses then a “fraud on the market” has been perpetrated.
17) If those that refuse to provide this only cure available (NSCC management) are mandated by Congress “to act in the public interest, provide investor protection and “promptly settle” all securities transactions” then these acts of fraud can become way out of control due to the “regulatory vacuum” created by their refusal to follow their mandate as well as their direct facilitation of these crimes.
18) Don’t get faked out by the tricky nature of the “ownership” of securities. In a clearance and settlement system where mere “securities entitlements” resulting from acts of fraud are for all intents and purposes treated exactly like legitimate “shares” of a corporation (excepting insignificant title issues) then the occurrence of an FTD would result in a deafening noise from the sirens and whistles going off at the NSCC. It would not result in the only party empowered to do buy-ins shirking their congressional mandates in an effort to look after the financial interests of its abusive bosses that refuse to deliver the shares that they sell for a living.
Legal Short Selling vs. Abusive Naked Short Selling (Counterfeiting)…
I am trying to make a list of general differences between these two forms of Shorting.
Help from all others would be helpful, since I am just learning about these differences and not too familiar with Shorting in general:
LEGAL Short Selling (LSS) vs. Abusive Naked Short Selling (ANSS):
A) Selling REAL Shares?
– (LSS)… Locate REAL Shares:
– PAY A FEE (%?) to owner to borrow real shares.
– (ANSS)… Sell Shares that do NOT Exist:
– PAY NO FEE to anyone since counterfeit shares are created and sold.
B) Length of Borrow Time?
– (LSS)… Length of Borrow Time is LIMITED:
– MUST PAY ANOTHER FEE (%?) to owner TO EXTEND Borrow Time beyond initial limited borrow time.
– (ANSS)… Length of Borrow Time is INFINITE:
– PAY NO FEE to anyone, since there is NO TIME LIMIT, since INFINITY is the TIME LIMIT.
C) Restrictions on Borrowed Shares?
– (LSS)… Owner Loaning Legal Shares for Legal Shorting CANNOT SELL these Legal Shares during Borrow Time as part of the FEE agreement with the Legal Short Seller.
– BORROWED SHARES ARE RESTRICTED, that is, they CANNOT BE SOLD by original owner during Borrow Time Period.
– BORROWED SHARES MUST BE RETURNED to Original Owner by a Legal Short after Legal Short does not want to extend Borrow Time by paying another Fee or Original Owner refuses to loan out share another time.
– BORROWED SHARES must be returned to ORIGINAL OWNER at end of Fee Agreement Borrow Time via Legal Short buying Real Shares in the open market
– (ANSS)… There are NO RESTRICTIONS on Shares of Naked Short Selling (Counterfeit Shares), since shares DO NOT OFFICIALLY EXIST, there are NO BORROWED SHARES, and there are NO FEES PAID, and NO BORROWED SHARES TO RETURN… Therefore the Seller of counterfeit Shares INCURS NO RESTRICTIONS….
– SINCE there were NO BORROWED SHARES before the sale, there are NO RESTRICTIONS on Borrowed Shares
– SINCE there NO BORROWED SHARES, NO SHARES have to be returned.
– SINCE there NO BORROWED SHARES, the Naked Short Seller does NOT have to buy Real Share in the open market to RETURN them to Non-Existent Original Owner.
D) – Clearance And Settlement System Used?
– (LSS)… Uses the Congressionally Mandated system “Delivery Versus Payment” (DVP).
– In exchange for 100% the price of a block of stock shares, a buyer receives real shares of stock.
– Money from buyer is transferred to seller.
– Quantity of shares purchased by buyer appear on monthly brokerage statement as “Long Shares.”
– Buyer RECEIVES Real Shares of Stock, because the Seller Delivered the Real Shares to buyer’s brokerage account.
– LEGAL SHORT SELLER MUST bear cost of purchasing shares in open market to replace borrowed shares.
– (ANSS)… Uses Illegally Converted system based upon “collateralization versus payment” (CVP).
– In exchange for 100% the price of a block of stock shares, a buyer receives non-existent shares of stock (counterfeit) via an accounting measure called “securities entitlements”.
– Money from Buyer is transferred to Seller.
– Quantity of shares purchased by buyer appear on monthly brokerage statement as “Long Shares.”
– Buyer is NOT NOTIFIED that his/her purchased shares were NOT RECEIVED (FTC – Fail to Receive), because the seller did NOT DELIVER real shares of stock (FTD – Fail To Deliver).
– ILLEGAL ABUSIVE NAKED SHORT SELLER (counterfeiting) DOES NOT BEAR COST of purchasing shares in open market to replace borrowed shares, since there were NO REAL SHARES BORROWED. Illegal ANSS has to bear the cost of ONLY 2% OF THE BUYERS PURCHASE MONEY in a special account.
E) Profit and/or Loss from Short Sale?
– (LSS)… Profit and/or Loss from Legal Short Sale is determined by the price of the shares Legal Short must buy in the open market to RETURN to the Original Owner at the end of the FEE Based Borrow Time MINUS Fees Paid.
– PROFIT… If share price goes DOWN during Fee Based Borrow Time, Legal Short makes a profit by purchasing borrowed shares in open market at a Lower price
– LOSS… If share price goes UP during Fee Based Borrow Time, Legal Short can have a LOSS when purchasing borrowed shares in open market at a HIGHER price than original price.
– (ANSS)… Profit and/or Loss from Abusive Naked Short Sale (Counterfeit Shares Sold) does NOT include the price of having to Purchase Borrowed Shares in the open market, NOR the Price of Borrowing FEES.
– Profit… If share price goes DOWN, the Seller who sold Counterfeit Shares to an unsuspecting buyer of long shares gains access to the Sellers Money and is allowed to use this money for any purpose it wishes WHILE STILL NOT DELIVERY REAL LONG SHARES IT SOLD TO A UNSUSPECTING BUYER.
– Since an Abusive Naked Short Seller (ANSS – counterfeiter) is allowed to use the illegally Converted Clearance And Settlement System based upon “collateralization versus payment” (CVP), a counterfeiter (ANSS) can guarantee its PROFIT for its illegal short sale by selling more and more and more Counterfeit Shares of the targeted company to unsuspecting long share buyers.
– Loss… If a counterfeiter (ANSS) allows a the targeted company’s stock price to rise by NOT SELLING MORE and MORE and MORE COUNTERFEIT SHARES of the targeted company to unsuspecting long share buyers, the counterfeiter will not be able to gain access to the money of the new unsuspecting long share buyers. AND MOST IMPORTANTLY, the collateralization fee for all its counterfeit shares will rise causing money to move OUT of its bank account back into the special collateralization account.
– Maximum Loss is 2% collateralization fee?????
F) Buyers of Long Shares Receive What in Exchange for 100% the Price of Long Share in a Corporation?
– (LSS)… Real Share of Stock
– (ANSS)… Counterfeit Shares of Stock, which depress the stock price by illegally increasing the total number of shares available for sale.
If you are “just learning” istandup, you should allow those who know it well to inform others. I’m learning a lot from what Jim DeCosta has provided.
Rondoc, lawsuits would work in this case, but the problem is each client would sue their own individual brokerage. It wouldn’t be a class action situation.
The brokerage, in that case, would just give whoever started litigation the private share at the expense of someone who is more apathetic.
And what are you going to sue for? The people who wouldn’t get their shares would tend to be the smaller clients (they look after the bigger clients first), so the damages would be quite limited compared to the cost of litigation.
It can be effective, though. There was a penny stock that went from ten cents to $22 over a few weeks (Genemax, I think, something like that) when the company started assisting shareholders with lawsuits against their brokerages.
It was Genemax. Seven years ago and still nothing has changed.
http://www.rgm.com/articles/GeneMax.html
The single thing you can do now to protect yourself and family since the Goverment is not about to is buy gold and this guy is saying something I learned a few months ago from a forner European Banker.
Buy gold and silver. If you are a small fry like me buy silver first…NOW!
By: Bob Chapman, The International Forecaster
— Posted Sunday, 29 March 2009 | Digg This Article | Source: GoldSeek.com
US MARKETS
The big secret that the Illuminati don’t want you to know about is that they are gold-bugs themselves, and are even more fervent about precious metals than you are. They are, of course, closet gold-bugs, hiding their wanton desire for the “barbaric relic” to make it look like it is a cumbersome thing of the past, an ancient curiosity from a bygone era that no longer serves a valid or useful purpose. They hide their lustful desire for precious metals from the public so that the public remains moribund about owning the King and Crown Prince of currencies, gold and silver. They don’t want any monkey-see, monkey-do, from their pool of future indentured servants. Their worst nightmare is that the serf proletariat would come to own thousands of tons of gold and silver bullion like they do. All their institutions and front companies, like central banks, bullion banks, investment banks and brokerage houses, all de-emphasize investment in precious metals for one reason, to keep it out of the hands of the public.
In the meanwhile, the Illuminati are pilfering gold from their own financial institutions at fire-sale prices like the sales conducted by Gordon Brown, the King of Fire-Sale Gold, when he sold the UK’s national gold at the bottom of the gold market, or by outright pilfering as was done with the gold held in Fort Knox, allegedly by the Rockefellers. American Illuminists have been collecting their gold and silver hoards for over a century, while European Illuminists have been collecting their hoards for many centuries. All their gold and silver lies in Swiss vaults, or in secret offshore locations. These hoards serve as their insurance policy if their plans to become masters of the universe should go astray. In addition, their mounds of gold and silver might be offered as reserves for a new world currency in order to sell that concept to the public, thereby giving control of the world currency to private bankers who would operate outside of government control. Or there might still be government control, as long as they, the Illuminati, control the world government, of course.
In summary, the Illuminist gold cartel is a conspiracy of outward suppression of precious metals, while inwardly it is one of aggressive acquisition of both gold and silver. They acquired control over national holdings of gold and silver via the system of central banks around the world, and they have systematically looted their own financial institutions and gold reserves to gain control over what they know is the only real currency recognized as such around the world.
Always remember, if you lose control over your nation’s currency, you lose your sovereignty and become a bondservant to the Illuminati. As Thomas Jefferson said, central banks are more dangerous than standing armies. By extrapolation, a single world bank would be dangerous beyond your wildest imagination.
As long as the Indian public are the only commoners with gold holdings, which rival their own, the Illuminati are quite content. This is why mints around the world have curtailed the amount of gold and silver bullion that is made available to the public. This also explains why gold and silver, in what can now be termed the “physical black market,” are trading at such hefty premiums to the prices cited in the futures markets. You are being starved of precious metals intentionally and malevolently to hinder you from doing the only thing that will prevent these miscreants from bringing you to your knees financially so they can shove their one-world government down your throat.
They will grudgingly allow you to own paper gold and silver. The futures markets in precious metals, along with the mints and the new ETF’s, were set up specifically for that purpose. They knew that the demand for precious metals would grow as they intentionally sabotaged fiat currencies and economies around the world to pave the way for world government. So they set up all these paper markets as a trap for lazy investors to acquire an interest in precious metals without taking physical possession so that they could retain control of the physical inventories and therefore the price for same. In fact, all futures markets were set up so that the Illuminist interests could control prices on all commodities whether or not they physically owned or produced them. That is the real reason why futures markets were created, and not for the usual bogus reasons given, such as securing prices on commodities for future deliveries. Look at what happened to the uranium market as soon as it traded on the futures exchange. Then consider the cartel’s decades long suppression of precious metals via futures contracts, and also the recent games played with prices for oil and food futures. We rest our case.
As long as you do not take physical delivery, they will continue to control the physical supplies of gold and silver via leasing and lying, using “smoke and mirrors” and “creative accounting methods” to hide their nefarious dealings, such as those conducted through the Exchange Stabilization Fund, the London Gold Pool, the naked-shorting of shares in the silver ETF and the leasing of ETF gold and silver to cover short positions of the Illuminist commercials in the paper markets such as CRIMEX futures contracts and OTC derivatives contracts. The Illuminist financial institutions are down to the dregs as far as their physical institutional holdings are concerned, but their shortage is not being sufficiently challenged and exposed quickly enough because physical delivery is not being utilized as extensively as it should be, which allows them to lie about their bullion inventories. They will not be able to lie anymore when demand outstrips supply and they run out of precious metals in deliverable form to satisfy demands for physical delivery, which is why you should be demanding physical delivery of both gold and silver by the truckload.
Incidentally, the one-month gold lease rates are now negative again, meaning they will pay you to lease their gold. And guess who’s doing the leasing. The gold ETF’s Illuminist bank sponsors of course, at near zero or even negative profit to boot. Looks like the criminal sponsors are taking good care of their lucky investors. Yeah, they are taking care of them alright! Every time these ETF’s purchase gold or silver, the cartel’s supply of gold and silver available for suppression grows accordingly and it is immediately leased back to the bullion banks for suppressive purposes. The whole ETF debacle can be likened to a situation where you are in a shootout with your mortal enemy. He has run out of ammunition and you have him dead to rights. You then hand him your loaded weapon and tell him to shoot you! Why the hard money community just doesn’t get it both stuns and amazes us.
The miscreants who run the gold cartel use their control over paper markets, which is enabled by insufficient physical off-take caused by the diversion of hard money capital into paper gold and silver assets (other than resource stocks), to suppress precious metals prices.
This allows the Illuminist Puppet Masters and their henchmen to clean up in the paper markets with all their short positions, which are mostly naked. These short positions are monopolistic, manipulative and illegal, but regulators like the SEC and CFTC do nothing about them because our regulators are also criminals and are part of the cover up.
THE INTERNATIONAL FORECASTER
SATURDAY, March 28, 2009
032809 (8)_IF
P. O. Box 510518, Punta Gorda, FL 33951-0518
An international financial, economic, political and social commentary.
‘Naked’ Ban Is Extended by Japan
MARCH 25, 2009
By TAKASHI NAKAMICHI
TOKYO — Japan will extend its ban on the so-called naked short selling of stocks to the end of July as the country’s share markets remain shaky, Finance Minister Kaoru Yosano said.
The prohibition of the trading strategy — in which investors sell stocks they don’t own, even without first borrowing them — was introduced in late October.
[Kaoru, Yosano]
Yosano Kaoru
It is one of numerous temporary, emergency measures taken by Japan’s authorities to prevent sharper stock-market drops from worsening the nation’s recession.
The move to delay the end of the ban from March 31 suggests that a recent recovery in Tokyo stock prices to a two-month high has failed to dispel policy makers’ worries. “With the markets still unstable, we have decided it is appropriate to keep [the measure] for the time being, partly from the perspective of preventing unfair dealings in advance,” Mr. Yosano said.
Short-sellers typically borrow stocks and then sell them, profiting from a fall in price when they buy back the securities later. Naked shorting removes the need to first borrow the stock, which means that larger volumes of shares can be dumped on the market.
Short-selling has drawn fire from regulators across the world, who say it has contributed to the sharp market declines of recent months.
Falls in share prices over recent months have undermined the lending ability of Japanese banks, which hold lots of stocks, and that has exacerbated the nation’s credit conditions.
Mr. Yosano, who also doubles as economy and banking minister, expressed doubts over the sustainability of a recent pickup in the benchmark Nikkei 225 Stock Average. The index closed at its highest level in more than two months Tuesday, ending up 272.77 points, or 3.3%, at 8488.30, its highest close since Jan. 9. The index struck an intraday high of 8504.41 during the session.
“Stocks [often] betray people’s expectations,” he said.
Write to Takashi Nakamichi at [email protected]
( http://online.wsj.com/article/SB123787796767322847.html )
Everyone knows that these guys are amongst the dirtiest on Walll Street yet I guess since they own every major goverment position in the Treasury they can get away with murder huh?
On The Cover/Top Stories
Did Goldman Goose Oil?
Christopher Helman and Liz Moyer, 03.25.09, 06:00 PM EDT
Forbes Magazine dated April 13, 2009
Lloyd Blankfein’s Goldman Sachs turned up everywhere.
How Goldman Sachs was at the center of the oil trading fiasco that bankrupted pipeline giant Semgroup.
When oil prices spiked last summer to $147 a barrel, the biggest corporate casualty was oil pipeline giant Semgroup Holdings, a $14 billion (sales) private firm in Tulsa, Okla. It had racked up $2.4 billion in trading losses betting that oil prices would go down, including $290 million in accounts personally managed by then chief executive Thomas Kivisto. Its short positions amounted to the equivalent of 20% of the nation’s crude oil inventories. With the credit crunch eliminating any hope of meeting a $500 million margin call, Semgroup filed for bankruptcy on July 22.
But now some of the people involved in cleaning up the financial mess are suggesting that Semgroup’s collapse was more than just bad judgment and worse timing. There is evidence of a malevolent hand at work: oil price manipulation by traders orchestrating a short squeeze to push up the price of West Texas Intermediate crude to the point that it would generate fatal losses in Semgroup’s accounts.
Yahoo! Buzz”What transpired at Semgroup was no less than a $500 billion fraud on the people of the world,” says John Catsimatidis, the billionaire grocer turned oil refiner who is attempting to reorganize Semgroup in bankruptcy court. The $500 billion is how much the world would have overpaid for crude had a successful scam pushed up oil prices by $50 a barrel for 100 days.
What’s the evidence of this? Much is circumstantial. Proving oil-trading manipulation is difficult. But numerous people familiar with the events insist that Citibank, Merrill Lynch and especially Goldman Sachs had knowledge about Semgroup’s trading positions from their vetting of an ill-fated $1.5 billion private placement deal last spring. “Nothing’s been proven, but if somebody has your book and knows every trade, it would not be difficult to bet against that book and put the company into a tremendous liquidity squeeze,” says John Tucker, who is representing Kivisto.
What’s known for sure is that Goldman Sachs, through J. Aron & Co., its commodities trading arm, was in prime position to use such data–and profited handsomely from Semgroup’s fall. J. Aron was Semgroup’s biggest counterparty, trading both physical oil flowing through pipelines and paper oil, in the form of options and futures.
When crude oil peaked in July, Semgroup ran out of cash to meet margin requirements on options contracts it had with Aron, contracts on which it had paper losses of $350 million. Desperate to survive, Semgroup asked Aron to pony up $430 million it owed on physical oil. Aron said no, declared Semgroup in default on its contracts and demanded immediate payment of losses.
Some answers may emerge in late March when former FBI director Louis Freeh releases a report on the trading surrounding Semgroup’s demise. He was hired by Semgroup and given subpoena power by the bankruptcy court judge in Delaware. Meanwhile the Securities & Exchange Commission is investigating, and lawyers involved in the bankruptcy say that Manhattan District Attorney Robert Morgenthau’s office is looking into the actions of New York firms in the collapse. His office declines to comment.
Comment On This Story
Goldman says only that any allegations of oil price manipulation are “without foundation.” Merrill and Citi (nyse: C – news – people ) declined comment.
Goldman and Aron (where Goldman Chief Executive Lloyd Blankfein got his start) have had a deep connection with Semgroup. In 2004 two former Goldman bankers bought a 30% stake in Semgroup for $75 million through their New York private equity firm, Riverstone. Both men, Pierre Lapeyre and David Leuschen, had helped form Goldman’s commodity trading business, and Leuschen had been a director at Aron.
In late 2007 Semgroup entered into an oil-trading agreement with Aron. The companies began trading both oil futures and physical crude. Aron sent much of the oil it bought from Semgroup to a Coffeyville, Kans. refinery in which Goldman owns a 30% stake.
Semgroup’s troubles mounted in the first quarter of 2008, when it had to post $2 billion in margin to cover losses. Goldman offered to underwrite a $1.5 billion private placement. Kivisto’s attorney Tucker and others believe that it was in the Wall Street research for this offering that Semgroup’s trading bets became fatally exposed. In April the banks (Merrill Lynch and Citibank were co-underwriters) required that Semgroup submit its trading positions to a stress test, a process one source describes as a “proctology exam.” Goldman ended up abandoning the placement as investors balked at braving the liquidity crunch.
Meanwhile the futures markets had gotten wacky. On June 5, with no news catalysts, oil futures spiked $5 a barrel, the biggest one-day jump since the outbreak of the first Gulf war. The next day, on no news, the price jumped another $10 to $138. Traders say that in the days leading up to the $147 peak on July 12 there was the smell of blood in the water. “We just kept bidding the market higher,” one trader says.
According to a trading summary submitted with court documents, Semgroup had entered into some terribly costly trades with Aron. In February 2008 Semgroup sold Aron call options on 500,000 barrels of oil for July delivery with a strike price of $96 per barrel. That meant that at the peak Semgroup’s loss on each of those barrels was $51, or $25.5 million on that trade. Goldman says it “can’t comment on the trading positions of counterparties.”
Shortly before it filed for bankruptcy, Semgroup sold its trading book to Barclays (nyse: BCS – news – people ) Capital. Barclays’ bold bet was that the price of crude would fall, erasing the losses. It is believed that 30 days later Barclays was sitting on a $1 billion gain as oil indeed fell, to $114 a barrel. Barclays wouldn’t comment other than to confirm it still owns the book. That prices plunged after Semgroup failed is more evidence of manipulation, says Catsimatidis: “With the portfolio in Barclays’ hands they could not squeeze the shorts anymore. The jig was up, and oil collapsed.”
Since the bankruptcy, Aron has agreed to pay Semgroup only $90 million to settle up accounts. That’s not enough for the dozens of oil producers who still haven’t been paid for $430 million in oil that Semgroup delivered to Aron. “We sued J. Aron because Semgroup didn’t do it,” says Phillip Tholen, chief financial officer of oil company Samson Resources. “I can’t fathom why they wouldn’t file against J. Aron for those monies.”
One possible answer: the Goldman connection. Going after Aron’s cash would complicate matters with Riverstone, which still wields sway over the board. The creditors have reason to keep Riverstone and Goldman happy; the duo has teamed up to buy myriad energy assets in recent years, most notably a $22 billion leveraged buyout of pipeline king Kinder Morgan. They are likely to team up again to buy choice Semgroup assets out of bankruptcy.
http://www.forbes.com/forbes/2009/0413/096-sachs-semgroup-goldman-goose-oil.html
In order for this to be cleaned up all ofthese “Financial Institutions” must be allowed to g Bankrupt, so all can see the real toxic crap they have on their books!!
Bank Of America’s Ponzi Problem
Asher Hawkins, 03.27.09, 5:20 PM ET
Bank of America aided and abetted common law fraud by acting as banker to a $400 million Ponzi scheme, according to a civil complaint filed Thursday. The complaint was filed in the U.S. District Court for the Eastern District of New York on behalf of a would-be class of mainly blue-collar Long Islanders by attorneys seeking class-action status.
Bank of America declined to comment.
The case involves Nicholas Cosmo, former owner of Agape World Inc. Cosmo was charged by federal authorities in January with investment fraud. He allegedly lured investors with the prospect of investing in high-interest loans but instead used the proceeds to trade commodities futures.
The investments that Cosmo misrepresented ultimately cost investors $400 million in losses and were used to feed a Ponzi scheme, according to the civil complaint. Bank of America was so deeply involved with Cosmo’s firm that a bank employee had an office next Agape World’s board room, it added.
Cosmo had a checkered history prior to his alleged involvement with Bank of America. In 1997, while a licensed stockbroker, he admitted to misleading investors and forging documents. He was later sentenced to nearly two years in prison, ordered to undergo therapy for a gambling problem, had his brokers’ license revoked and was barred from associating with any members of the National Association of Securities Dealers. Yet by 2004, Cosmo was back in business at Agape, which promoted itself as a provider of bridge loans to commercial borrowers.
“Bank of America ignored banking compliance standards and did not file any suspicious activity reports as $400 million was run through numerous BofA accounts by a convicted felon,” says Jacob Zamansky of Zamansky & Associates, one the plaintiff’s lawyers in the lawsuit. “This case highlights the role of financial institutions in assisting Ponzi schemes.”
Yesterday’s complaint accuses Bank of America of housing 13 accounts used by Cosmo and his brokers, some of whom had criminal records of their own. The bank did nothing to intervene as investor money was commingled, wired to commodities futures brokerages and used to pay off Cosmo’s personal expenses, according to the complaint.
The five plaintiffs named in the complaint filed yesterday are all from Long Island. They include a schoolteacher, a police officer, a retired police captain, a clothing store employee and a massage therapist. They lost a total of $405,000 they’d invested with Agape, the complaint says.
The scheme may have suckered in as many as 6,000 investors from across the country, but mainly from Long Island, according to Zamansky.
Even before you buy gold turn to God.
Everthing we see shows we need this as a country more than anything.
History, both secular and Biblical has this ruin of empires, one right after the other. Rome being the one most are familiar with but there have been one after another for more years before Rome then from Rome to now. Common to all have been the loss of any moral restraint. The whole NSS/FTD is just a example of a lost morality. Wrong has become ‘smart dog eat dog business of legendary investors’ CMBC talking heads proclaim….The Bible as well as our founding laws ans mores say it is theft…plain and simple.
Think about it!
ginger,
You stated:
“If you are “just learning” istandup, you should allow those who know it well to inform others. I’m learning a lot from what Jim DeCosta has provided.”
I understand your point of view. On the other hand, my personality does not let me just let the experts speak.
My disclaimer lets everyone see I am not an expert.
We, the common man and woman in the United States, need to take this fight to the streets. When I am standing the street talking to my neighbor, I will not be able to have Dr. Jim DeCosta standing next to me so the can explain things.
From my point of view, I have to come into a better and better understanding of the WALL STREET COUNTERFEIT MACHINE so I can talk to people without the experts standing next to me.
So please forgive me for not following your suggestion.
One final point… as I struggle to better understand the complexities created by all the Counterfeit Machine Lawyers and reflect this back into this forum, some experts here might see where further clarification on their part will strengthen the legal arguments they have been developing.
Take care and keep learning.
The deep capture of our economic system by the financial interests and their political courtesans is becoming far more widely acknowledged with each passing day.
The following introduction from Simon Johnson’s excellent essay, “The Quiet Coup”, an article which appears in the May 2009 Atlantic, nicely reflects the growing recognition of the reality that Patrick Byrne has tirelessly chronicled:
The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.
The full essay is available here:
http://www.theatlantic.com/doc/200905/imf-advice
Is there such a thing as a Short Squeeze with shares created via Manipulative Naked Shorting?
Since by definition, Naked Shorting does NOT borrow real shares, there is no obligation to purchase real shares…
Since Naked Shorting has an NO delivery date, or an infinite delivery date, there is not obligation to delivery by a certain time…
So it appears there is NO SUCH THING as a Short Squeeze with Naked Short Shares.
The only thing I rememeber is the Collaterialization fee expense. If a Counterfeiting Hedge Fund as a guest of a Market Maker creates a zillion counterfeit shares, its Collaterialization fee becomes more and more expensive as the price goes up.
So is this a Collaterialization Squeeze?
Shortselling scumbucket Soros:
http://www.budapesttimes.hu/content/view/11517/221/
From the article on Soros:
Shares in OTP bank continued to fall through October as the economic crisis in Hungary deepened. They are now trading at roughly half the price they did before the Soros Fund Management deal. PSZÁF said its investigation had revealed that Soros Fund Management had borrowed 390,000 OTP shares on the same day in order to carry out the “short sell”.
Stop and incarcerate these sociopaths now, or we’re doomed.
If you can follow the below article then you’ve attained a very solid understanding of the brilliant nature of abusive naked short selling.
DEAR REGULATORS; MENTALLY REMOVE THE ASTERISK
It should come as no surprise that there are brilliant lawyers employed by the “banksters” and hedge funds that comb the text of the securities laws searching for loopholes that can make money for their bosses which in turn justifies their salaries. One line in one obscure securities law could be worth trillions.
The best way that I know of to learn which particular loophole is being utilized is to study the abusive naked short selling suits filed against the DTCC, DTC, NSCC, market makers, “banksters”, prime brokers, clearing firms, hedge funds etc. and see what shakes out. Two things keep “shaking out”. One is that the SEC to this very day still holds that the NSCC’s “Automated Stock Borrow Program” (SBP) is just fine and dandy no matter how corrupted it has become. The second is that UCC Article-8-501 FORCES us (as if at gun point) to allow the holders of “securities entitlements” resulting from yet to be bought-in failures to deliver (FTDs) to exercise ALL of the rights and property interest that comprise the “security”.
So what’s so clever about leveraging the wording of 8-501? It has to do with the incredibly damaging nature of the “securities entitlements” that result from FTDs and the fact that the ability “to exercise all of the rights and property interest that comprise a security” for all intents and purposes is a “share” of a corporation. The following flow diagram might help understand this concept.
FTDS → SECURITIES ENTITLEMENTS → SHARES*
In this flow diagram a “share*” is a “share” of a corporation EXCEPT FOR THE FACT THAT THE “LEGAL OWNERSHIP” TITLE IS NOT INCLUDED BUT FOR ALL INTENTS AND PURPOSES THE “LEGAL OWNERSHIP” TITLE IS 100% MEANINGLESS WHEN “THE ABILITY TO EXERCISE ALL OF THE RIGHTS AND PROPERTY INTEREST THAT COMPRISE A SECURITY” IS ALREADY INCLUDED IN THE “SCURITIES ENTITLEMENT”. This phraseology renders the “legal owner” title to be a moot point to an investor but an excellent cover up for fraudulent behavior to “opportunists”. Have you heard of the term “red herring”?
In order to fully understand the brilliant design of abusive naked short selling frauds you need to MENTALLY REMOVE THE ASTERISK! Unaddressed failures to deliver for all intents and purposes result in the “issuance” or perhaps “release” of new “shares”. The critical “right” to focus on in the “package of rights” that comprise a “share” is the right to resell the “share” at a time of one’s own choosing. This is also the most damaging “right” as share prices are predicated on the “supply” of that which is readily sellable, whether technically a “share” or a “securities entitlement” independent of who the “legal owner” is, as it interacts with the “demand” variable to determine share price through the “price discovery” process.
After mentally removing the 100% meaningless asterisk we are left with FTDs in essence resulting in the “issuance” or perhaps “release” of “shares” out of thin air. Now that’s a loophole worthy of abusing. Just think about it; there is a “2-for-1” bargain also accessible. The mere act of refusing to deliver that which you sold firstly creates a naked short position and secondly the conversion of the resulting “securities entitlement” into a “share” (without the meaningless “legal owner” title) which in turn depresses the share price of the security by adding to the “supply” of that which is readily accessible which in turn creates value for your naked short position.
Does it make sense that the “legal ownership” title is indeed 100% meaningless when a “securities entitlement” ALREADY grants you the right to exercise the rights that comprise the security? There is nothing to a “share” above and beyond the ability to exercise the rights attached to the “share”. Does it make sense that to fully appreciate this fraud you need to MENTALLY REMOVE THE ASTERISK? The crooks that perpetrate these frauds want you to concentrate on the asterisk.
The crooks and their facilitators will proffer the argument that TECHNICALLY the number of “shares outstanding” does not increase with naked short selling so it can’t be very damaging i.e. concentrate on the asterisk. What they don’t tell you is that “shares outstanding” refers TECHNICALLY to shares “issued” by a company’s board of directors that their transfer agent is aware of. These shares with the meaningless asterisk are not visible to a company’s transfer agent, management team or existing or prospective investors yet they are 100% as damaging from a dilution point of view as a “share” without an asterisk.
With the phraseology used in UCC 8-501 literally FORCING the securities intermediaries on Wall Street to “issue” new shares every time an FTD occurs you can see why these frauds have grown totally out of control. The problem is that UCC Article 8 also has plenty of phraseology that provides a backstop for abuses. The law also states that sure you can basically do the equivalent of “issuing” new shares when FTDs occur but you’d better OBTAIN and MAINTAIN the “shares” in your vault system to match any incredibly damaging “securities entitlements” or “shares*” you issue. This particular law is 100% ignored on Wall Street.
Another part of UCC-8 forbids the “issuance” of “securities entitlements” and therefore “shares*” if the sum of the number of legitimate “shares” already outstanding plus the number of mere “securities entitlements” or “shares*” issued exceeds the number of shares “authorized” by a corporation’s Articles of Incorporation. This law is also 100% ignored as there is no SRO or regulator keeping tally of the number of mere “securities entitlements” that have been “issued”. Thus the crooks and the SROs and regulators that facilitate these frauds have chosen to “cherry pick” UCC-8 and follow the parts that allow them to steal from investors but ignore the parts that provide investor protection. UCC Article 8 as well as all securities laws are a “package deal”.
The following flow diagram might help understand this concept even better.
Legal: Public Company → Finance business venture → SHARES
Illegal: Broker-Dealer → FTDS → Security Entitlements → SHARES*
Maybe “Lawful” and “Unlawful” would be better terms than “Legal” and “Illegal”
If the SEC banned all naked shorting, it wouldn’t stop the problem. All you have to do is route your short sale through Germany or Canada. Even if the buyer is American, the SEC has no authority to force the German or Canadian brokerage to deliver the share.
They would have to create a rule to forbid American brokerages from trading with foreign brokerages that don’t deliver.
Anonymous,
I got this e-mail this morning from a Canadian colleague:
“This morning a general notification went out to clients of most CDN. brokerage houses that effective march 30, 2009 no short sales of US stocks can occur until the house has first confirmed the availability of shares to cover the short sale by settlement date. ” this is to comply with the requirements of US regulation SHO”. All short sells will be held until such time as the house can confirm the availability of shares to borrow, the length of any delay will be specific to each stock and will be indeterminate in advance”.
After 4 years of listening to my “telephonic tirades” over Canada’s facilitation of abusive naked short selling I actually befriended (or wore them down) some of the Canadian securities regulators. They will tell you up front that the abusive naked short selling of U.S. corporations has become such a large % of their securities business that they had trouble in getting rid of it. As far as Germany I remember well the “Berlin Bremen debacle” wherein a thousand or so U.S. corporations woke up one morning to find out that their shares were unknowingly trading over in Germany. I’ve always told my clients to be careful listing over in Frankfurt just in case.
It has been unconscionable over the years that the DTCC has allowed the Canadian b/ds to “pigtail” into our NSCC despite their history.
Do you remember in one of Patrick Byrne’s
videos where he told the story of being at a cocktail party in Manhattan with a bunch of Wall Streeters and he overheard a conversation involving 2 guys talking about how the SEC was coming down on naked short selling and one of the guys commented “No big deal: we’ll always have Canada”?
This is good news, but they’ll just route the orders through Berlin, UK or Malaysia.
The DTCC allows foreign depositories to have negative share positions with them for arbitrage purposes. The seller just claims that he is selling in one country and buying in another to take advantage of arbitrage, but no one checks to make sure he actually has a long position.
This is the CDS (Canadian equivalent of the DTCC) site and I just went through the news and rules and can’t find anything that says they can’t naked short as of end of March.
http://www.cds.ca/cdsclearinghome.nsf/Pages/-EN-Participantrules?Open
The most recent rule on SHO seems to be from 2006 and it seems to only apply a buy in to brokerages using the cross border service and not brokerages located wholly inside Canada.
Dr. DeCosta, do you have a link to the new rule?
It is unlikely that Canadian regulators will alter the rules with respect to short-selling because the imperatives for further regulatory action do not appear as compelling in Canada.
http://www.langmichener.ca/index.cfm?fuseaction=content.contentDetail&ID=10505&tID=244
An article from 2003 when the SEC banned companies that had large naked short positions from withdrawing from the DTCC and continuous net settlement system.
http://www.otcjournal.com/archive/listserv/20030518-1.html
Would someone explain the foreign exchange problem? If we have rules in place to stop NSS domestically, why wouldn’t that protect all account holders at US brokers? (If you have an account at a foreign broker, that’s different.) Their shares must be settled in T+3, regardless of who the seller was. It’s the responsibility of the US brokers and DTC participant. If we enforce our rules, non-delivery would cause a buy-in. I know we don’t have jurisdiction in another country, but we can require delivery in our markets, even by a foreigh participant.
Previous posts here seem to indicate that stopping NSS domestically won’t protect us from the foreign exchange loophole. I don’t get it.
G.M stock [declared null and void in a ‘quick rinse’ bankrupcy] that is right now being counterfieted ,sold and never intending to be delivered, is making someone richer.
I can’t do it.
You can’t do it.
We are not market makers.
EVERY SHARE MUST BE BOUGHT IN .
To allow G.M. to be devoured by wall street while the government not only does not help G.M. survive it helps wall street kill it.
How blatent does this have to get people?
No one will ever know how many shares of G.M. are fake.
Thats just how wall street wants it .
No witnesses.
Goodbye another chunk of what was the great U.S. economy.
http://onlinejournal.com/artman/publish/article_4521.shtml
Commentary Last Updated: Mar 30th, 2009 – 10:40:19
Bankrupting the world
By Jerry Mazza
Online Journal Associate Editor
Mar 30, 2009, 00:25
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The so-called Public Private Partnership Investment Program (PPPIP) introduced last Monday, by Treasury Secretary Timothy Geithner not only stands to bankrupt America but the global financial system as well. This is the worst yet of the bailouts, a swindle if ever there was one, which will cause President Obama’s approval rating to plummet. In fact, count me among those coming to the president’s aid. I really don’t think he understands what this means.
Consider Geithner as the face, the voice though not the brain, for this program which advocates turning over the keys to the banking system to a bunch of hedge fund sharks, and all at taxpayer’s expense. The cost could more likely end up being $6 trillion than the $1 trillion in starter money. In fact, it’s more likely that the dastardly plan was launched like a missile from jolly old London, which is in line to lose big if their offshore hedge fund empire is shut down.
So, we are not dealing with just your typical political blunder. This is a policy fiasco built to bring down the United States altogether. I believe it’s coming from a London-based financial oligarchy out to do in the US altogether. Speaker of the House Nancy Pelosi and House Financial Services Committee Chairman Barney Frank and the one and only Larry Summers, head of the Whitehouse Economic Council, are completely complicit in what amounts to an act of treason in recommending this.
Parenthetically, remember that it was Summers who, as Treasury secretary under Bill Clinton worked indefatigably to repeal the Glass Steagall Act of 1933 in 1999. And Summers worked to replace it with the 11/12/99 Gramm-Leach-Bliley Act, which was enacted on Nov. 12, 1999. The first Glass-Steagall Act was passed in February 1932 to stem deflation and expand the Federal Reserve’s power to offer rediscounts on more types of assets and issue government bonds as well as commercial paper.
The second Glass-Steagall Act was passed in 1933 when FDR took office to shore up the collapse of a large portion of the American commercial banking system. It established the Federal Deposit Insurance Corporation (FDIC), still indispensable to this day, and included banking reforms which were created to control speculation. Its most notable feature was that it prohibited a bank holding company from owning other financial companies. It made sure that a commercial or investment bank and a savings and loan bank were separate entities and never the twain should meet.
This meant you couldn’t have the likes of Citigroup, the now defunct Lehman-Brothers, Bear-Stearns, Merrill Lynch, Morgan Stanley, Deutsche Bank, et al playing spin the derivatives with your checking account or savings account money. Yet this separation of investment and savings, almost as good as separation of church and state, removed a major source of capital available to the casino side of the stock market, particularly the hedge funds like AIG’s Financial Product arm, a hedge fund stuck onto the world’s once largest insurance company, now practically worthless.
In fact, to gain a sense of the worthiness of the Glass-Steagall act, China still maintains its principle: a separation between commercial banking and the securities industries. In the wake of world financial distress, Chinese support for this grand concept remains strong. But to free market Wall Street and financiers, the Glass Steagall Act remained a moving target from day one to 1980 and on.
Returning to Geithner’s Public Private Partnership Investment Program (PPPIP), it would permit worthless or semi-worthless debt paper on the books of these “everything banks” to be bought up by taxpayer dollars at some 80 or 90 cents on the dollar, then turned over as assets for the very offshore hedge funds that have played such a major role in the unfolding of the financial debacle. Because the stakes are so great, and the president himself seems like he’s listening to the wrong people, notice must be taken, now. Promises were made to the American people to protect their assets.
This PPPIP is really an extension of Paulson’s TARP, throwing a trillion dollars in the air for hedge fund grabs. Meanwhile, the “investors” themselves would only put up a tiny fraction of the capital. The lion’s share would come from taxpayer money, pumped through the Treasury Department and the Federal Reserve. This is part of a continuing financial conspiracy. Also, to the extent that any private funds are railroaded into this black hole in financial space, it further dries up private funds for any kind of productive investment.
Its object is to force the government to come up with one giveaway program after another, which could easily end up creating massive hyperinflation.
Derivatives themselves were introduced in October of 1987, on the heels of a bust as big as the Depression of 1929, by none other than former Fed “Guru” Alan Greenspan. They amounted to nothing more really than a form of casino gambling. We can thank Greenspan and his derivatives for much of the financial devastation we see around us, particularly the AIG Financial Products disgrace.
The question now is why would we want to light a financial flame under derivative speculation with another trillion dollars from the PPPIP hedge fund bonanza, and in so doing set the global financial markets on fire? Will President Obama take hold of this situation and realize his presidency and his administration are dancing on the edge. To tie this nearly worthless mortgage paper to the economy, this paper tied to a derivatives market valued in the hundreds of trillions, dwarfing the market itself, would be to sink our economy and the world economy with it. Cut the cord.
What needs to be done is to look at the banks through the Glass-Steagall lens. Those parts of the banks that meet with Glass-Steagall standards should be protected, and be protected with available credit, not with “buy-offs.” The garbage securities should simply be frozen and saved for later inspection. We can’t bail out the garbage. It will bankrupt the United States. In fact, as Lyndon LaRouche suggests, this would be an excellent time to have a bankruptcy reorganization.
The alternative is a financial meltdown, followed by major citizen blowback, followed by the beginning of the end. And it ain’t gonna be pretty. Not for Obama, Pelosi, Frank, Geithner, Summers and the whole gang! So stop the PPPIP now!
Jerry Mazza is a freelance writer living in New York City. Reach him at [email protected]. His new book, “State Of Shock: Poems from 9/11 on” is available at http://www.jerrymazza.com, Amazon or Barnesandnoble.com.
available at http://www.jerrymazza.com, Amazon or Barnesandnoble.com.
Fred, the settlement rules would apply to the seller. Since the SEC doesn’t regulate foreign sellers, they wouldn’t have any power to force those foreign sellers to deliver shares to you, the buyer.
That’s why I’m calling for a new rule, where the buyers in America are not allowed to deal with foreign sellers that refuse to deliver.
You know, kind of like the rule the NASD came out with five years ago that was working before the SEC killed it and replaced it with SHO.
Just a suggestion to the moderators here, maybe beefing this site up with a separate message board would be a good idea? One where the users could create different threads based on separate content? Not to detract from the wealth of information that this thread contains, but I scrolled through it mainly to see what the public’s findings were concerning the Wikipedia test, and haven’t seen many posts that even reference that original question (towards the top there were a few, but none really answered what was asked of us to try). For what its worth, I tried to create an account at Wikipedia and edit the Naked Short Selling article with some quotes from the above list Patrick provided, but was unable to do so (there was a lock on the top of the page). But, I am a brand new user there, and according to the first post by Max Leverage;
“Are you misreading the protection policy? There’s a lock on the upper right hand corner of the article; if you click it you learn the page is “semi-protected”, that is, protected against edits from anonymous users and those who are not ‘autoconfirmed’ (for example, not a high enough edit count).”
…so I guess I attribute my inability to edit the article to the fact that my account is brand new.
Per the information given throughout all the other posts in this thread, it has been top notch and I have learned a lot from everything I have read, so I don’t want to sound like I am complaining about content. The issue I raise is relevance though, as all of these posts by Dr Jim DeCosta, iStandUp, Jim Hall, Fred, sean, ginger, and others all have done a wonderful service towards helping me understand the bigger problem of NSS, but none have really addressed the whole wiki issue. Just figured I’d float that idea, as it seems that there are more than enough individual users here who seem motivated to leave comments, I would imagine that this would lead to some very healthy conversations/threads with input from multiple people sharing their different points of view.
To add to my post above, my reason for recommending a separate forum for everybody is mainly because I believe it would ease up on Patrick or anyone else having to sift through all of the other comments to compile their evidence from this inquiry. I say again, the information listed here is powerful, but I doubt that Patrick needs any more explanations as to the definition of NSS.
Anon
Regarding the foreign broker loophole, I still don’t get it. Let me make my question clear. The rules we are discussing require a buy-in if the selling broker does not deliver in T+3. The buy-in is done by the buy-side broker (or the DTC), to protect his exposure, and he then bills the account of the foreign selling broker through the DTC. (Alternatively, the DTC can do the buy-in.) This is all done under US jurisdiction. If the foreign broker wants to maintain his account at the DTC, he must meet the buy-in cost. He can only prevent this by delivering the shares.
French President Sarkozy from today’s Washington Post:
“World growth will be all the stronger for being sustained by a stable, efficient financial system and by the kind of renewed confidence in the markets that would enable resources to be better allocated, encourage lending to pick up again and foster the return of private investment capital to developing countries.
We agreed in November that not one financial player, institution or product could be beyond the control of a regulatory authority. This rule must be applied to credit rating agencies, speculative investment funds… ”
and this too:
“We must reform the required disclosure standards and levels of prudential oversight for financial firms. Sadly, in many countries, this issue has not been getting the attention it deserves.”
http://www.washingtonpost.com/wp-dyn/content/article/2009/03/31/AR2009033103200.html
Add this to Russia and China sending us messages about out dollar, I think we can see quite a few global leaders recognize our tolerance of lawlessness on Wall Street. It’s not the free market if you’re being robbed at gunpoint.
HI,
I think, It is the mission of DeepCapture to show you, dear reader, that the financial world you inhabit, a world vouched-for by actor-spokesmen in dulcet Midwestern tones, a world inhabited by honest brokers looking after your money interacting through self-regulating exchanges overseen by diligent regulators, themselves overseen by elected politicians looking out for their constituents, themselves challenged by an adversarial free press maintaining a critical posture towards it all, is in fact a “world that has been pulled over your eyes, to blind you from the truth.” It doesn’t exist: it is a socially constructed reality designed to keep you complacent as you feed your savings to the machine.
i understand that it takes 13 days before dtc can buy-in a short position that has failed to deliver. true?
years ago i created fmcnet settlement in Canada between investment managers, dealers and custodians. at that time we were t+5. when i found out the uptick rule was repealed in the us i was flabbergasted. it was obvious the hedge fund managers would precipitate price free-falls for their own profit. of course all they needed to make really big money was the ability to ignore collateral requirements. so much money has been taken from pension funds 401’s mutual funds. i do believe this is the key to the credit problems. its an easy fix to not allow trades to go through until collateral has been established. DTC needs a good housecleaning. they have been turning a blind eye. usually there is an executive bonus structure based on revenue. if a dtc exec is getting say a $200,000 salary with a $2,000,000 bonus, their incentive will be to preserve that bonus. this is a constant throughout the industry. call it executive crack. it’s not going to be easy to change those habits.
I have also noticed censoring and bias towards financial institutions on Wikipedia. One must realize that the press in generated is owned by the same plutarchs that own the government and control the capital. Only independent voices provide a hint of the truth.
Your blog naked short selling is behind covered-up through manipulation of Wikipedia | Deep Capture: exposing the crime of naked short selling was interesting when I found it on Sunday by accident while searching for australia day activities canberra online. It’s funny what you could find on the internet sometimes. I’d have to agree on what you have to say, although it may seem like a wrong choice, but nontheless an interesting subject. Enough said, keep up the good work my friend!
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