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Categorized | Featured Stories, The Deep Capture Campaign, The Mitchell Report
Rolling Stone Reports that Naked Short Selling Killed Bear Stearns and Lehman Brothers
Posted on 01 October 2009 by Mark Mitchell
Tags: bear stearns, Lehman Brothers, Matt Taibbi, naked short selling, Rolling Stone, SEC
Matt Taibbi has published a story in Rolling Stone magazine that nobody should miss. It's not yet available on-line, so you'll have to pick it up at the newsstands, but here's a quick summary.
Taibbi writes:
"On Tuesday, March 11th, 2008, somebody – nobody knows who – made one of the craziest bets Wall Street has ever seen. The mystery figure spent $1.7 million on a series of options, gambling that shares in the venerable investment bank Bear Stearns would lose more than half of their value in nine days or less. It was madness – "like buying 1.7 million lottery tickets," according to one financial analyst."
Bear's stock would have to drop by more than half in a matter of days for the mystery figure to make a profit. And that is what happened.
As Taibbi explains, "the very next day, March 12, Bear went into a free fall…Whoever bought those options on March 11th woke up on the morning of March 17th having made 159 times his money, or roughly $270 million. This trader was either the luckiest guy in the world, the smartest son of a bitch ever or…Or what?"
Taibbi speculates (as has Deep Capture) that these options might have been purchased by somebody who was abusing the options market maker exemption to engage in illegal naked short selling. And Taibbi goes beyond speculation to state, as an obvious fact, that illegal naked short selling helped bring Bear Stearns to its knees.
Presumably operating under that assumption, the SEC issued more than 50 subpoenas to Wall Street firms in the wake of Bear's collapse, but "it has yet to indentify the mysterious trader who somehow seemed to know in advance that one of the five largest investment banks in America was going to completely tank in matter of days."
Taibbi continues: "The SEC's halfhearted oversight didn't go unnoticed by the market. Six months after Bear was eaten by predators, virtually the same scenario repeated itself in the case of Lehman Brothers – another top-five investment bank that in September 2008 was vaporized in an obvious case of [naked short sellers engaging in] market manipulation. From there, the financial crisis was on, and the global economy went into full-blow crater mode."
Taibbi notes that there were many other factors that made the economy weak. But he says that naked short selling is what pushed Bear and Lehman over the edge. If it weren't for naked short selling – a massive "counterfeiting scheme," in Taibbi's words — those banks would likely have survived, and we might have avoided an all-out financial catastrophe.
This cannot be stressed enough. Criminals deliberately destroyed two of America's biggest investment banks, precipitating the greatest financial cataclysm since the Great Depression. And the government has done absolutely nothing to bring those criminals to justice. In fact, as Taibbi makes clear in his story and on his blog, the most likely culprits are feted by top government officials in closed door meetings.
I'd call this the biggest financial and political scandal in the history of this country.
Certainly, it is, as Taibbi writes, "one of the most blatant cases of stock manipulation in Wall Street history." Certainly, it is, as Taibbi writes, "the two biggest murders in Wall Street history." And, certainly, it is odd that this very big story has appeared in Rolling Stone, but has yet to be covered by a single mainstream news publication.
The Wall Street Journal, The New York Times, Fortune, BusinessWeek – they have all known about naked short selling since Deep Capture reporter Patrick Byrne began hollering about it in 2005. But none of them write about it. Instead, we find a competent financial journalist, and the only major story about one the greatest financial crimes of all time, published in a slightly alternative magazine about music.
I worry for the Republic.
Mark Mitchell - who has written 87 posts on Deep Capture.
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The Israeli/Russian Mafia, through, GS and others has won.
Can we win our country back?
From Bloomberg:
Airport Runway
On Sept. 17, two days after Lehman Brothers filed for Chapter 11 bankruptcy, the number of failed trades climbed to 49.7 million, 23 percent of overall volume in the stock.
The next day, the SEC announced its ban on shorting financial companies in 2008. The number of protected stocks ultimately grew to about 1,000. On Sept. 19, the commission announced "a sweeping expansion" of its investigation into possible market manipulation.
The ban, which lasted through Oct. 17, didn't eliminate shorting, according to data from the SEC, the NYSE Arca exchange and Bloomberg. Throughout the period, short sales averaged 24.7 percent of the overall trading in Morgan Stanley, Merrill Lynch & Co. and Goldman Sachs Group Inc. on NYSE Arca. In 2008, short sales averaged 37.5 percent of the overall trading on the exchange in the three companies.
To date, the commission hasn't announced any findings of its investigation.
Pollack, the former SEC regulator, wonders why.
"This isn't a trail of breadcrumbs; this audit trail is lit up like an airport runway," he said. "You can see it a mile off. Subpoena e-mails. Find out who spread false rumors and also shorted the stock and you've got your manipulators."
To contact the reporter on this story: Gary Matsumoto in New York at gmatsumoto@bloomberg.net.
http://www.bloomberg.com/apps/news?pid=20601109&sid=aB1jlqmFOTCA
calltoaccount says:
unfortunately, you won't find gary matsumoto at bloomberg these days because in his words "No one at Bloomberg News is interested in naked short selling."
below is gm's original story followed by further commentary on why he's no longer at bloomberg.
Naked Short Sales Hint Fraud in Bringing Down Lehman (Update1)
By Gary Matsumoto
March 19 (Bloomberg) — 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.'"
While the commission's Enforcement Complaint Center received about 5,000 complaints about naked short-selling from January 2007 to June 2008, none led to enforcement actions, according to a report filed yesterday by David Kotz, the agency's inspector general.
The way the SEC processes complaints hinders its ability to respond, the report said.
Twice last year, hundreds of thousands of failed trades coincided with widespread rumors about Lehman Brothers. Speculation that the company was being acquired at a discount and later that it was losing two trading partners both proved untrue.
After the 158-year-old investment bank collapsed in bankruptcy on Sept. 15, listing $613 billion in debt, former Chief Executive Officer Richard Fuld told a congressional panel on Oct. 6 that naked short sellers had midwifed his firm's demise.
Gasoline on Fire
Members of the House Committee on Government Oversight and Reform weren't buying that explanation.
"If you haven't discovered your role, you're the villain today," U.S. Representative John Mica, a Florida Republican, told Fuld.
Yet the trading pattern that emerges from 2008 SEC data shows naked shorts contributed to the fall of both Lehman Brothers and Bear Stearns Cos., which was acquired by JPMorgan Chase & Co. in May.
"Abusive short selling amounts to gasoline on the fire for distressed stocks and distressed markets," said U.S. Senator Ted Kaufman, a Delaware Democrat and one of the sponsors of a bill that would make the SEC restore the uptick rule. The regulation required traders to wait for a price increase in the stock they wanted to bet against; it prevented so-called bear raids, in which successive short sales forced prices down.
Driving Down Prices
Reinstating the rule would end the pattern of fails-to- deliver revealed in the SEC data, Kaufman said.
"These stories are deeply disturbing and make a compelling case that the SEC must act now to end abusive short selling — which is exactly what our bill, if enacted, would do," the senator said in an e-mailed statement.
Short sellers arrange to borrow shares, then dispose of them in anticipation that they will fall. They later buy shares to replace those they borrowed, profiting if the price has dropped. Naked short sellers don't borrow before trading — a practice that becomes evident once the stock isn't delivered. Such trades can generate unlimited sell orders, overwhelming buyers and driving down prices, said Susanne Trimbath, a trade- settlement expert and president of STP Advisory Services, an Omaha, Nebraska-based consulting firm.
The SEC last year started a probe into what it called "possible market manipulation" and banned short sales in financial stocks as the number of fails-to-deliver climbed.
'Unsubstantiated Rumors'
The daily average value of fails-to-deliver surged to $7.4 billion in 2007 from $838.5 million in 1995, according to a study by Trimbath, who examined data from the annual reports of the National Securities Clearing Corp., a subsidiary of the Depository Trust & Clearing Corp.
Trade failures rose for Bear Stearns as well last year. They peaked at 1.2 million shares on March 17, the day after JPMorgan announced it would buy the investment bank for $2 a share. That was more than triple the prior-year peak of 364,171 on Sept. 25.
Fuld said naked short selling — coupled with "unsubstantiated rumors" — played a role in the demise of both his bank and Bear Stearns.
"The naked shorts and rumor mongers succeeded in bringing down Bear Stearns," Fuld said in prepared testimony to Congress in October. "And I believe that unsubstantiated rumors in the marketplace caused significant harm to Lehman Brothers."
Devaluing Stock
Failed trades correlate with drops in share value — enough to account for 30 to 70 percent of the declines in Bear Stearns, Lehman and other stocks last year, Trimbath said.
While the correlation doesn't prove that naked shorting caused the lower prices, it's "a good first indicator of a statistical relationship between two variables," she said.
Failing to deliver is like "issuing new stock in a company without its permission," Trimbath said. "You increase the number of shares circulating in the market, and that devalues a stock. The same thing happens to a currency when a government prints more of it."
Trimbath attributes the almost ninefold growth in the value of failed trades from 1995 to 2007 to a rise in naked short sales.
"You can't have millions of shares fail to deliver and say, 'Oops, my dog ate my certificates,'" she said.
Explanation Required
On its Web site, the Federal Reserve Bank of New York lists several reasons for fails-to-deliver in securities trading besides naked shorting. They include misunderstandings between traders over details of transactions; computer glitches; and chain reactions, in which one failure to settle prevents delivery in a second trade.
Failed trades in stocks that were easy to borrow, such as Lehman Brothers, constitute a "red flag," said Richard H. Baker, the president and CEO of the Washington-based Managed Funds Association, the hedge fund industry's biggest lobbying group.
"Suffice it to say that in a readily available stock that is traded frequently, there has to be an explanation to the appropriate regulator as to the circumstances surrounding the fail-to-deliver," said Baker, who served in the U.S. House of Representatives as a Republican from Louisiana from 1986 to February 2008.
"If it's a pattern and a practice, there are laws and regulations to deal with it," he said.
Fines and Penalties
Lehman Brothers had 687.5 million shares in its float, the amount available for public trading. In float size, the investment bank ranked 131 out of 6,873 public companies — or in the top 1.9 percent, according to data compiled by Bloomberg.
While naked short sales resulting from errors aren't illegal, using them to boost profits or manipulate share prices breaks exchange and SEC rules and violators are subject to penalties. If investigators determine that traders engaged in the practice to try to influence markets, the Department of Justice can file criminal charges.
Market makers, who serve as go-betweens for buyers and sellers, are allowed to short stock without borrowing it first to maintain a constant flow of trading.
Since July 2006, the regulatory arm of the New York Stock Exchange has fined at least four exchange members for naked shorting and violating other securities regulations. J.P. Morgan Securities Inc. paid the highest penalty, $400,000, as part of an agreement in which the firm neither admitted nor denied guilt, according to NYSE Regulation Inc.
Enforcement 'Reluctant'
In July 2007, the former American Stock Exchange, now NYSE Alternext, fined members Scott and Brian Arenstein and their companies $3.6 million and $1.2 million, respectively, for naked short selling. Amex ordered them to disgorge a combined $3.2 million in trading profits and suspended both from the exchange for five years. The brothers agreed to the fines and the suspension without admitting or denying liability, according a release from the exchange.
Of about 5,000 e-mailed tips related to naked short-selling received by the SEC from January 2007 to June 2008, 123 were forwarded for further investigation, according to the report released yesterday by Kotz, the agency's internal watchdog. None led to enforcement actions, the report said.
Kotz, the commission's inspector general, said the enforcement division "is reluctant to expend additional resources to investigate" complaints. He recommended in his report yesterday that the division step up analysis of tips, designating an office or person to provide oversight of complaints.
Schapiro's Plans
"Our audit disclosed that despite the tremendous amount of attention the practice of naked short selling has generated in recent years, Enforcement has brought very few enforcement actions based on conduct involving abusive or manipulative naked short selling," the report said.
The enforcement division, in a response included in the report, said "a large number of the complaints provide no support for the allegations" and concurred with only one of the inspector general's 11 recommendations.
SEC Chairman Mary Schapiro, who took office in January, has vowed to reinvigorate the enforcement unit after it drew fire from lawmakers and investors for failing to follow up on tips that New York money manager Bernard Madoff's business was a Ponzi scheme. She has "initiated a process that will help us more effectively identify valuable leads for potential enforcement action," John Nester, a commission spokesman, said in response to the Kotz report.
Last September, the agency instituted the temporary ban on short sales of financial stock. It also has announced an investigation into "possible market manipulation in the securities of certain financial institutions."
No Effective Action
Christopher Cox, who was SEC chairman last year; Erik Sirri, the commission's director for market regulation; and James Brigagliano, its deputy director for trading and markets, didn't respond to requests for interviews. John Heine, a spokesman, said the commission declined to comment for this story.
"It has always puzzled me that the SEC didn't take effective action to eliminate naked shorting and the fails-to- deliver associated with it," Pitt, who chaired the commission from August 2001 to February 2003, said in an e-mail. The agency began collecting data on failed trades that exceed 10,000 shares a day in 2004.
"All the SEC need do is state that at the time of the short sale, the short seller must have (and must maintain through settlement) a legally enforceable right to deliver the stock at settlement," Pitt wrote. He is now the CEO of Kalorama Partners LLC, a Washington-based consulting firm. In August, he and some partners started RegSHO.com, a Web-based service that locates stock to help sellers comply with short-selling rules.
Postponed 'Indefinitely'
Pitt began his legal career as an SEC staff attorney in 1968, and eventually became the commission's general counsel. In 1978, he joined Fried Frank Harris Shriver & Jacobson LLP, where as a senior corporate partner he represented such clients as Bear Stearns and the New York Stock Exchange. President George W. Bush appointed him SEC chairman in 2001.
The flip side of an uncompleted transaction resulting from undelivered stock is called a "fail-to-receive." SEC regulations state that brokers who haven't received stock 13 days after purchase can execute a so-called buy-in. The broker on the selling side of the transaction must buy an equivalent number of shares and deliver them on behalf of the customer who didn't.
A 1986 study done by Irving Pollack, the SEC's first director of enforcement in the 1970s, found the buy-in rules ineffective with regard to Nasdaq securities. The rules permit brokers to postpone deliveries "indefinitely," the study found.
The effect on the market can be extreme, according to Cox, who left office on Jan. 20. He warned about it in a July article posted on the commission's Web site.
Turbocharged Distortion
When coupled with the propagation of rumors about the targeted company, selling shares without borrowing "can allow manipulators to force prices down far lower than would be possible in legitimate short-selling conditions," he said in the article.
"'Naked' short selling can turbocharge these 'distort-and- short' schemes," Cox wrote.
"When traders spread false rumors and then take advantage of those rumors by short selling, there's no question that it's fraud," Pollack said in an interview. "It doesn't matter whether the short sales are legal."
On at least two occasions in 2008, fails-to-deliver for Lehman Brothers shares spiked just before speculation about the bank began circulating among traders, according to SEC data that Bloomberg analyzed.
On June 30, someone started a rumor that Barclays Plc was ready to buy Lehman for 25 percent less than the day's share price. The purchase didn't materialize.
'Green Cheese'
On the previous trading day, June 27, the number of shares sold without delivery jumped to 705,103 from 30,690 on June 26, a 23-fold increase. The day of the rumor, the amount reached 814,870 — more than four times the daily average for 2008 to that point. The stock slumped 11 percent and, by the close of trading, was down 70 percent for the calendar year.
"This rumor ranks up there with the moon is made of green cheese in terms of its validity," Richard Bove, who was then a Ladenburg Thalmann & Co. analyst, said in a July 1 report.
Bove, now vice president and equity research analyst with Rochdale Securities in Lutz, Florida, said in an interview this month that the speculation reflected "an unrealistic view of Lehman's portfolio value." The company's assets had value, he said.
'Obscene' Leverage
During the first six days following the Barclays hearsay, the level of failed trades averaged 1.4 million. Then, on July 10, came rumors that SAC Capital Advisors LLC, a Stamford, Connecticut-based hedge fund, and Pacific Investment Management Co. of Newport Beach, California, had stopped trading with Lehman Brothers.
Pimco and SAC denied the speculation. The bank's share price dropped 27 percent over July 10-11.
Banks and insurers wrote down $969.3 billion last year — and that gave legitimate traders plenty of reason to short their stocks, said William Fleckenstein, founder and president of Seattle-based Fleckenstein Capital, a short-only hedge fund. He closed the fund in December, saying he would open a new one that would buy equities too.
"Financial stocks imploded because of the drunkenness with which executives buying questionable securities levered-up in obscene fashion," said Fleckenstein, who said his firm has always borrowed stock before selling it short. "Short sellers didn't do this. The banks were reckless and they held bad assets. That's the story."
'Market Distress'
On May 21, David Einhorn, a hedge fund manager and chairman of New York-based Greenlight Capital Inc., announced he was shorting stock in Lehman Brothers and said he had "good reason to question the bank's fair value calculations" for its mortgage securities and other rarely traded assets.
Einhorn declined to comment for this story. Monica Everett, a spokeswoman who works for the Abernathy Macgregor Group, said Greenlight properly borrows shares before shorting them.
Even when they're legitimate, short sales can depress share values in times of market crisis — in effect turning the traders' negative bets into self-fulfilling prophecies, says Pollack, the former SEC enforcement chief who is now a securities litigator with Fulbright & Jaworski in Washington.
The SEC has been concerned about the issue since at least 1963, when Pollack and others at the commission wrote a study for Congress that recommended the "temporary banning of short selling, in all stocks or in a particular stock" during "times of general market distress."
Last Updated: March 19, 2009 03:30 EDT
News Media Silenced Regarding Stock Shock-The Movie
On the eve of the release of the most anticipated documentary of the year, "Stock Shock-The Movie," it has come to the attention of Satwaves that the financial news media is being silenced regarding its content and release. While I was in New York City several months ago being interviewed on film, I learned that Bloomberg had taken an interest in telling the story of Stock Shock. The documentary itself tells the tale of naked short selling and media bias as it relates to the story of Sirius XM Radio (SIRI).
Bloomberg's award winning journalist Gary Matsumoto has written extensively in regards to naked short selling. As recently as last March, Mr. Matsumoto had written an article on the subject stating that "The biggest bankruptcy in history might have been avoided if Wall Street had been prevented from practicing one of its darkest arts." Naked short selling opponents picked up this article as ammunition to further their cause.
Director Sandra Mohr had been interviewed for both a taped piece as well as a written piece while in N.Y., both of which were to be released prior to Stock Shock's June 10, 2009 debut. Satwaves has learned that neither of these pieces will ever be seen by a single American investor.
In what can only be described as apparent censorship by Bloomberg, Satwaves has acquired a copy of an email from Mr. Matsumoto regarding Bloomberg's newly adopted position on what qualifies as market related news.
Mr. Matsumoto writes:
"I'm sorry to say that I will not be covering anything related to naked short selling for the foreseeable future. To the best of my knowledge, No one at Bloomberg News is interested in naked short selling. That's all I have to say on the matter".
The tone of this response would seem to indicate remorse on the part of Mr. Matsumoto, and leaves us only to speculate on his seeming regret to no longer cover the topic of naked short selling. Has Bloomberg, a trusted source of supposed unbiased financial news put up roadblocks to the truth? If so, how can they or any other financial news media giant be trusted to deliver the news to mainstream America. Has the freedom of the American Press finally been silenced after more than 200 years? If so, can the end of the American dream be far behind?
Position: Long SIRI
WizardsOfOz says:
Complementary…
On September 21, 2008, Goldman Sachs received Federal Reserve approval to transition from an investment bank to a bank holding company.
On September 22, 2008, the last two major investment banks in the United States, Morgan Stanley and Goldman Sachs, both confirmed that they would become traditional bank holding companies, bringing an end to the era of investment banking on Wall Street.
Goldman Sachs got help from Berkshire Hathaway, which bought $5 billion in Goldman's preferred stock, and also got warrants to buy another $5 billion in Goldman's common stock. Goldman also received $10 billion of capital from the U.S. government in October 2008, under the Troubled Asset Relief Program.
clb says:
check this bullshit out;
http://meganmcardle.theatlantic.com/archives/2009/09/bear_raiders.php
Typical trash from her, she seems to make a point out of trying to trash anything that Matt Taibbi writes. Check this other line of drivel she wrote:
http://meganmcardle.theatlantic.com/archives/2009/07/matt_taibbi_gets_his_sarah_pal.php
I wish the rest of these so called "reporters" would take a cue from the Judd Bagleys, Gary Matsumotos, and Matt Taibbis of the world and talk to us like adults. Would it surprise someone like Megan McArdle to find out that even an old dumb soldier like me can make it all the way through one of her so called "articles" without having to wipe the drool off my shirt or put on a helmet?
All the misinformation could backfire on GS because mainstreet hates them.
http://www.huffingtonpost.com/2009/09/30/irolling-stoneis-matt-tai_n_304085.html
http://trueslant.com/matttaibbi/2009/10/01/on-goldmans-reaction-to-the-lobbying-post/
It's good that the anti-NSS movement is getting more publicity.
But more importantly…
You actually put the Lenon and Yoko cover as the thumbnail photo. Ha ha ha!
pashka says:
I wrote this letter to the editors of NY Times and posted as commentary in their DealBook "article" about the debate over NSS:
The illegal behavior of hedge funds and Wall Street firms that allow share price manipulation by naked shorting stocka is reinforced by a mass media white out on the subject. If you consider the extent of fraud, corruption, and regulatory incompetence surrounding naked short selling (which has caused more damage than Madoff), every major news outlet should be questioning our current regulatory framework. NY Times on the other hand, only 4 articles between Jan 2007 – Jan 2008 discussing this problem or the extent of abuse.
I appreciate Floyd Norris' attempt to write on this topic in his article titled "Goodbye Naked Shorts" (which implies that the problem has been resolved). Unfortunately , in the article Mr. Norris completely ignored evidence that regulatory loopholes (RegSHO list) and lax SEC enforcement contributed to bringing our financial markets to the brink of collapse ( http://antisocialmedia.net/short-selling-hedge-funds-and-the-global-economic-meltdown/ ). How can he imply that the NS problem is gone if we don't know the scale of the broker-level netting, pre-netting, Stock Borrow Program, ex-clearing and off-shore failures?!? The article seems intent to pacify the public into thinking that we are safe from these malpractices when we don't even the extent of their abuse.
I have been a loyal reader of your newspaper and cite it to my friends and family as my number one source of information, but if NY Times continues to ignore this massive problem and doesn't provide more thorough reporting on this subject I will have to switch to another source of daily information. One that doesn't continuously ignore collusion, manipulation, and theft within our financial industry after the Great Recession brought this country to it's knees.
Contact your Congressmen to demand NSS laws are properly enforced or changed so these crooks aren't able undermine the public's confidence in our markets –
http://www.congress.org/
And sign this easy and professional petition that will get sent to Congress within a month – http://www.petitiononline.com/mrktrfrm/petition.html
flim flam floyd, his co-conspirator hedge fund hack flack no-accountability nocera and the ny times in general have for years scrupulously avoided reporting anything of consequence on the existence and perniciousness of naked short selling– at least ever since 1998 when Gretchen Morgenson noted that wall st considered retail investors (including via mutual funds) "the dumb money," there to absorb all the risk to wall st's enormous benefit. the nyt is part of the problem and doubly to blame because they have betrayed their readers by consistently publishing misleading half truths and outright lies re the mass of institutionalized corruption on wall st.
theTurtle says:
I have not read Matt's article in Rolling Stone.
1. If I recall correctly, those put options and their strike prices did not exist prior to the trade. That is to say, somebody made a special request for them. Can anybody verify if this is indeed true?
2. There is a counter-party to those options. Somebody is always on the other side of the trade. Is it not a bit odd that nobody seems to have chirped up with a loss? Almost as if they did not lose at all? Awe shucks, maybe they were too embarrassed to scream bloody murder. Invert, always invert.
I always liked Taibbi. He's what's known as "from the shoulder."
theTurtle
WAMU taken down also:
http://www.avaresearch.com/files/20090930175434.pdf
http://seekingalpha.com/article/164404-new-taibbi-feud-with-goldman
Goldman in the Government exposed:
http://trueslant.com/matttaibbi/2009/07/16/max-keiser-goldman-sachs-are-scum/
Dr. Jim DeCosta says:
the turtle,
The seller of those put options no doubt "hedged" his position by naked short selling a truckload of shares. He probably did just fine. It's the buyers of those nonexistent shares that lost all of their money. The same holds true for the buyers of the nonexistent shares of Lehman Brothers sold as they were going under. Recall that even though the numbers of failures to deliver of Lehman Brothers towards the end went up 57-FOLD from their previous all time high the SEC, the SROs and the financial media still assert that naked short selling had no role in their demise.
The question that begs to be asked is WHY would these parties feel it necessary to proffer such an absurd utterance like NSS didn't play a causative role. The answer is that they had to in order to cover up the existence of this entire abusive naked short selling "industry within an industry" and the fact that the share structure of many U.S. corporations are CURRENTLY being poisoned with inordinate numbers of delivery failures that are currently manipulating share prices downwards.
Another question begging to be asked is why would these crooks attack Lehman when the systemic risk repercussions were obvious on a global scale and they knew their actions would eventually be put under a microscope. The answer to that is once again that the crooks know that the SEC and the SROs can be counted on to sweep their actions under the rug in order to continue to cover up the existence of this "industry within an industry".
The SEC and the SROs have to do this lest U.S. investors learn that many of the investments they made in especially development stage corporations over the years never did have a chance for success simply because they were previously targeted for destruction. Our court system couldn't possibly handle the number of cases that would ensue should the truth be revealed. The Bear Stearns naked short selling had to be swept under the rug. This gave the tacit thumbs up to attack Lehman since nobody got busted for the Bear Stearns debacle. Down goes Lehman with no apparent repercussions for those crooks involved. Now that we have no "uptick rule" whose next? The systemic risk repercussions for all of us does not even register with those with the levels of unbridled greed that we see on Wall Street.
What did it finally take to get the attention of the SEC? It took the near meltdown of our entire financial system and even that has not led to any emergent reinstatement of the uptick rule or any noticeable prosecution of those responsible. What is the SEC doing now as Rome burns? They're hosting yet more "roundtables" stacked to the hilt with the financial beneficiaries of these thefts and yet more "comment periods". The concept is called "death by delay" because those U.S. corporations barely keeping their heads above water in this wonderful sea of "liquidity" these crooks provide need to be done away with to circumvent the need for the crooks to finally buy and deliver that which they previously sold and agreed to deliver by T+3. Until the FTDs residing in "ex-clearing arrangements" are removed from the share structures of these corporations refusing to go bnkrupt the SEC has to sweep all of this activity under the rug no matter what the systemic risk repercussions are for all of us. This is not rocket science! These crimes will not be addressed until "the ultimate paradox" and the role of the "security entitlement" are appreciated.
THE ULTIMATE PARADOX: All readily sellable share price depressing "security entitlements" which are induced to be "issued" with each and every failure to deliver (FTD) and each and every NSCC SBP "borrow" that occurs on Wall Street lead to the crediting of a readily sellable share price depressing "long position" to the account of the purchaser "entitling" the account holder to resell that which he purchased even if that which was sold to him never got delivered and even if that sold to him never existed in the first place.
Rather makes "The Matrix" read like a child's bedtime story, no?
People don't get widely exposed to information like this because there would be a collective conscious against what happening take place in this country, and the games would end quickly. As long as the people are 'lied' to by the lack of reporting, we are all in big trouble.
Until today after reading this article I never kneew that the SEC oversaw FINRA.
The organization is developing a reform plan based on the recommendations to be presented to its board in December, FINRA Chairman and CEO Richard Ketchum said in a letter Thursday to the SEC, which oversees FINRA.
FINRA already has taken steps to strengthen its regulatory program, including improving its routine exam programs, Ketchum said.
The special committee also recommended creating a fraud detection unit within FINRA to ensure that exams involving significant allegations get high priority — something the organization's management plans to establish.
FINRA Missed Madoff – Stanford Ponzi Schemes
http://abcnews.go.com/Business/wireStory?id=8733124
http://newledger.com/2009/10/matt-taibbi-and-john-carney-on-naked-short-selling/
So this guy comes out 18 months after the fact, and arrives on a mule walking on palm fronds, or however that went down. Great. Good for him.
Why didn't people listen while we were hollering during the act? Better late than never? Hardly. Everything is gone. Check the job numbers today. They represent real people, not that the put buyer cares . But I do.
CTC says:
Nothing changes…only the degree of transgression.
"The few who understand the system, will either be so interested in its profits, or so dependent on its favors that there will be no opposition from that class, while on the other hand, the great body of people, mentally incapable of comprehending the tremendous advantages…will bear its burden without complaint, and perhaps without suspecting that the system is inimical to their best interests."
— Rothschild Brothers of London
June 25, 1863 communiqué to associates in New York
http://rense.com/general87/topc.htm
(1) US Congress Sells Out to Wall Street
Americans get the best democracy money can money, coming more than ever today from Wall Street. "Since 2001, eight of the most troubled firms have donated $64.2 million to congressional candidates, presidential candidates and the Republican and Democratic parties." Is it surprising that they own them? As senators, Barack Obama and John McCain got "a combined total of $3.1 million."
Influential House and Senate finance and banking committee members got $5.2 million from bailout recipients like Goldman Sachs, Citibank, AIG, Fannie Mae, Freddie Mac, and others. In the last election cycle, Obama received at least $4.3 million from the same ones, investments that yielded big returns.
From 1998 – 2007, financial and banking companies "spent $1.7 billion on federal campaign contributions and another $3.4 billion on lobbyists." In 1999, Glass-Steagall was repealed, the landmark 1933 law that curbed speculation and separated commercial from investment banks and insurance companies. In January 2000, the Commodity Futures Modernization Act legitimized swap agreements and other hybrid instruments, at the core of today's problems by preventing regulatory oversight of derivatives and leveraging, thus letting Wall Street legally pillage and speculate, so they did.
The result was a financial coup d'etat "cement(ing) the gradual takeover of the government by a small class of connected insiders" who choose candidates, control elections, weaken financial regulations, and run the country for their own self-interest. As a result, Washington today is a wholly owned subsidiary of the Wall Street financial giants. What they want, they get, no questions asked.
FrankHope says:
We all know that Deep Capture has been the leader in exposing the naked short selling criminal racket. I wrote an article about the use of naked short selling and how it was used to take down Bear Stearns and Lehman Brothers titled "The Phantoms of the Stock Market". Unlike Taibbi, I give full credit to Deep Capture for your investigative work in this area. In fact I wouldn't be surprised if Taibbi used my article as a reference. I make my case in a article titled "Matt Taibbi and I".
It's clear to me that the DTCC has the information that would finger whoever was illegally profiting from the demise of Bear Stearns and Lehman Brothers, but that information has been kept secret.
I have another article I wrote titled, "How Goldman Sachs whacked Bear Stearns". There's plenty of evidence that GS and Paulson took out Bear Stearns. Fortune magazine reported about a memo from Goldman Sachs which was the death knell for BS.
"on March 11, Goldman told clients it would no longer step in for them on Bear derivatives deals."
"Goldman told Wall Street that they were done with Bear, that there was [effectively] too much risk. That was the end for them."
The reason the relevant information about naked short selling is not being made public is very clear. It's because it would lead to Goldman executives going to jail – including Paulson – if all the information were revealed. This is the financial crime of the century and its being swept under the rug.
Kudos to Taibbi for shining a spotlight on this issue, but he should also give due credit to sites like Deep Capture that paved the way for him.
I know it's retarded to reply to myself, but…
I just noticed that March 11th, the day that Taibbi reports a $1.7 million bet that Bear Stearns would fail, is the same day that Goldman Sachs sent out the memo I highlighted above stating that they would "no longer step in for them on Bear derivatives deals".
All fingers point at Goldman Sachs as a guilty party in this scam.
Matt addresses this in the full story. It's an outstanding point and one that I'd missed.
Thanks for your reply. I am just now getting up to speed on the story you have uncovered about Gary Weiss. This puts DTCC right in the middle of a smear campaign against anyone that dares to question the practice of naked short selling.
I hope that you get a chance to read my articles "Phantoms of the Stock Market" and "How Goldman Sachs whacked Bear Stearns". Probably 99% of this information is old news to you, but maybe you'll find something useful in the stories or the links I've provided in the articles.
One interesting thing that I found that you may not be aware of is that Jill M. Considine went from being chairman of the DTC to a trustee of AIG after the government bailout. Presumably a trustee of AIG after the virtual government takeover would be there to protect the interests of the taxpayer, but in the case of Considine it looks more likely that she is there to cover up any skeletons in the closet.
I also have a link to a Bloomberg article strongly suggesting that naked short selling contributed to the fall of Lehman Brothers. They quote Harvey Pitt, a former SEC chairman, as saying that naked short selling is equivalent to fraud.
Finally I write in my article about how DTCC is also involved in derivatives and specifically CDS (Credit Default Swaps) which are widely regarded as having had a major role in the 2008 financial crisis. The press keeps repeating the mantra that no one knows the size of the CDS market, but it seems to me that there is one organization that does have this information – DTCC.
I'm hopeful that Matt Taibbi's article on the subject of naked shorts will catapult this story into the mainstream. Many thanks to everyone at Deep Capture who have tirelessly pursued the exposure of this Wall St. scam.
http://www.forbes.com/2009/10/02/singer-commentary-roundtable-intelligent-investing-schapiro.html
ryanonthebeach says:
total crap… you could see this fall from a mile away. These guys where clearly bankrupt. Gambling at 35X leverage… is what destroyed the "banks"
tvfreezone says:
Rolling Stone did a pretty good job of explaining the short sell procedures that had been totally deregulated by our beloved Congress, the members of which do not know what a a short sell is, and how short selling can create havoc in the market place. Did you know the market currently is operating the way it did in 1907, when a giant crash occurred due to short selling by guys like Jesse Livermore? Did you know that deregulating the stock market is much more dangerous than deregulating the aviation transportation industry? Do you know that deregulating the way the federal government controls the flow of air traffic would cause numerous crashes? I have never heard even the brain dead republicans demand that the national aviation system be completeley deregulated. Why not? I thought deregulation would let the "market" run things just fine. So you see, the stock market is as dangerous and as explosive as the national aviation system when it is deregulated. Why do I know this and members of Congress do not? Because they are too busy being corrupt to care about such important matters.
Government subversives like Sen Shelby knew exactly what damages shortselling could inflict and were, very likely, shorting the hell out of the market themselves.
Time to audit the filthy hands of the senate.
Matt Dubuque says:
Matt is likely mistaken here. I'm a fellow who made an excellent living as a market maker in derivatives and am intimately familiar with market making in options.
Recall that two days before the 9/11 attacks some person bought an enormous amount of puts on airlines stocks. The perpetrator never claimed his money; he obviously had inside knowledge.
Here in the Bear Stearns case, this criminal very likely also had inside knowledge. But in all likelihood his criminality had nothing to do with naked short selling. It's just another crook trading on inside information who never claimed his winnings.
Matt D.,
If you read Matt T's full story, you'll find a solid explanation of the role the options market maker exemption plays in the creation of married puts and reverse conversions, which are in turn a key component of the naked shorting process.
I'll concede that there's no smoking gun evidence tying one event to the other, but given the circumstances, I'd say it should be much more than enough to spark a real investigation.
NOYBIZNIZ says:
Matt Dubuque, I remember you… you were bashing MBI for many months in 2008 on the Yahoo message board. Is that kind of activity detailed in the job description of a "market maker"?
I seem to recall you constantly dismissing the notion that naked short selling had any impact on stock prices. You're also a bongo player…
Funny, that is another stock that was targeted by the same cabal of short sellers in 2008. And MBI showed up on the RegSHO list for most of 2008.
So I guess I shouldn't be surprised to see you here defending the notion that Naked Shorting, Phantom Shares, and Failed Trades have had nothing to do with the state of our markets…..
John Olagues says:
The idea that naked short seller together with rumor mongers
brought down Bear Stearns is absurd.
Here is one piece of fact that makes it obvious.
Bear Stearns closed at 30 on Friday March 14, 2008 and opened at
below 4 on Monday March 17, 2008. Surely no one but some true
believer religious nut would hold the view that naked short
sellers made the stock go from 30 to below 4, because there were
no trades between the closing price on Friday at 30 and below 4 as
the opening price on Monday.
So that leaves us to examine the price movement on Friday March 14,
2008, when the stock went from 65 to 30. Was there massive short
sales and were these naked short sales? Remember that buying puts
are synthetic naked short sales and there was massive buying of
those. Did those put buyers influence the stock like the regular
short sales and the "naked short sales" and if so, then why are
they not identified as the cause of the drop from 65 to 30.
And if the story is true that rumor mongers who did "naked Short
sales", caused the collapse of Bear Stearns, why has no one been
arrested. Its easy to determine who the short sellers were both
straight and naked. If there were rumor mongers, then who were they.
They caused it but we can't tell you who they are.
The whole idea is absurd.
The truth is that the Bear Stearns collapse was set up months
before the event with the finishing touches put on it in the week
prior to March 14. All the put buying, the naked short sales and
regular short saled were done by persons trading on inside
And believe me that I have traded more puts, shorted more stock
than anyone who is going to visit this site. And I had substantial
positions in Bear Stears securities during the collapse.
Claiming that the shorts caused the collapse is like saying that
insiders who bought calls and stock immediately prior to an
announced takeover caused the takeover.
"All America is an insane asylum"
mdf says:
I completely agree. To correlate short sales with collapse is confusing symptoms with cause, like saying the reason the team lost the game was the spread was against them. It underscores the extent that value is in the eye of the beholder, and that negative perceptions, like positive ones, trigger feedback loops that reinforce perception in either direction. Those feedback loops – on the positive side – are much closer to being the root cause, as they related to real estate values. Anyone generating fees off the dotcommy rise in real estate prices would deride you as being a crazy for doubting the hypothesis that values always went up. Absolutely impossible that prices could ever rewind to where they were just three years previous – impossible! The other primary cause was insurance fraud. All the credit risks everyone was taking were "safe" becuase they were offset by credit default swaps, issued by institutions whose names alone implied creditworthiness: Bear Stearns, Lehman, AIG, etc… Those firms were all writing insurance policies without adequate reserves, collecting premiums without worrying about paying claims, and doing so in any other insurance context would qualify as fraud. Insurance is the financial instrument regulation was born for. The real crime was a regulatory climate that permitted and in fact encouraged this sort of fraud.
Ezra,
No one is trying to say that NSS was the only or main reason that Bear and Lehman collapsed. What people are mad at is that NSS was a major catalyst in affecting the timing of events and artificially depressing the price at a time of crisis by creating negative feedback loops.
Remember that Bear, Lehman, and the rest of the Wall St. firms would have gone BK if the government didn't step in but why should the NSS dictate the choice or timing of which firm will fail?!?
By depressing the share price NSS can diminish confidence and perception of the firms future earnings which directly correspond to the share price driving it lower. It's not difficult to comprehend supply and demand curves and how they effect the price of any product or service.
If you will recall, over the weekend of March 14-16, 2008:
On Sunday, the media was widely reporting that JPM was stepping in to buy BS for a meager $2.00 per share. THAT is why BS opened below $4 on 3/17.
Additionally, you ask us to look at the trading activity on 3/14. However, the "crazy" options purchase took place on 3/11, three full trading days before the stock dropped from $65 to $30.
RexOzone says:
Taibbi nails the situation in simplistic examples that even a corrupt wall street trader can decipher. Thanks, Matt for the explanation for the rest of us who wonder where the money went…wish you had had Greenspan's job when he was being ridden by Bush. And man, I wish I could write like that.
Do you have to necessarily "eXile" yourself before you can write with crystalline exactitude, purposeful powerful profanity and horrociously fine humor?
You all have to watc and listen to this…The SEC's report card "FAIL" Suprised huh?
http://www.youtube.com/watch?v=gUBH5vqJdis&feature=channel
RR says:
It was probably someone at Goldman Sachs since Tiabbi's article on them pointed out how they profit in good times and bad. They seem to be able to manipulate the stock market with gazillions of dollars, to make a gazillion more, but for what purpose. The dollar is a fiat currency only worth what people agree to say it is worth. If all the manipulations cause the dollar to cause the world financial markets to view it as too unstable, too worthless to use as a standard & change to the Euro (another fiat currency) we'll be truely f'd. Sometimes it seems like the Dutch Tulip Bubble of 1624.
Big kudos for Madame Schapiro's adroit handling of the shortselling crisis:
Not sure if anyone has seen the FINRA commercial that is out there ? It mentions billions FINRA has collected for their efforts in protecting investors. How convient. Just when the IG releases his failing of the institutions who are suppose to protect the investing public (SEC-FINRA), FINRA is doing damage control by means of paid commercials. Too bad they didn't mention How the failed FINRA controlled by Schapiro during its failure moved her to the Failed SEC for future failures.
If only there were a pattern of incompetence and corruption here !!!
I saw that! Did MY taxpayer dollars finance that drivel?
cry baby says:
is there a lobby group for pussy?
http://www.kansascity.com/444/story/1483704.html
Sen. John Ensign of Nevada was only beginning to emerge from a self-imposed political exile over fallout from his extramarital affair with a campaign aide. Now, tawdry new details about the case are raising fresh questions whether the Ensign can be re-elected in 2012 – or even face criminal charges over his behavior.
If Ensign was looking for signs of support among Republican leaders on Capitol Hill on Friday, he didn't get any. Senate GOP leader Mitch McConnell declined repeatedly to answer questions about Ensign or offer any support. Other Republicans, already effectively a 60-40 minority in the Senate, also met the latest developments with silence, wary of speaking out until they see evidence of wrongdoing uncovered by the Senate ethics committee or federal law enforcement.
For those proffering the argument that abusive naked short selling had nothing to do with the demise of Bear Stearns and Lehman Brothers you have to remember what a failure to deliver (FTD) represents in the post-Reg SHO timeframe. The 57-fold increase in the FTDs of Lehman over their previous highest level ever attained means that each and every one of those failed deliveries involved a "locate" or "having reasonable grounds to believe that delivery would be made by T+3" that somehow MYSTERIOUSLY went bad within a confined amount of time. Were Bear Stearns and Lehman at the edge of the cliff from their own actions? Of course. But they were indeed pushed by those selling nonexistent shares, contracting to deliver that which they sold by T+3 followed by the willful refusal to deliver that which was sold.
In essence, the Wall Street securities fraudsters selling nonexistent shares to unknowing U.S. investors took out life insurance policies on Bear Stearns and Lehman Brothers and signed themselves up as beneficiaries. The mere act of refusing to deliver that which they sold thereby willfully breaching the contract they had just entered into induced the issuance of readily sellable share price depressing "security entitlements" within the share structure of these two companies. This intentional refusal to deliver that which was promised to be delivered on T+3 resulted in pushing these damaged corporations over the cliff. Proffering the argument that a 57-fold increase in FTDs above previous high-water marks was inconsequential to causation with a straight face is pretty tough to pull off. You have to remember that there were buyers to each and every one of those sales that were unaware of the "life insurance" fraud occurring and that had fulfilled their half of the contract by tendering their funds. Unfortunately they were counting on the SEC and the SROs to provide "investor protection". One has to feel particularly bad for the purchasers of the nonexistent Lehman shares because the securities cops that had just witnessed the Bear Stearns debacle were probably assumed to have been in a hyper-vigilant mode.
Dear Dr. Jim Costa;
Would you please tell me how naked short selling influenced the stock of Bear Stearns to open at below $4 on March 17, 2008 when it closed on Friday March 14, 2008 at $30.
You logical false argument is called "post hoc ergo propter hoc".
In addition, after reading your comments, its clear you have never been an options market maker and have little understanding of how they operate.
I was market maker on the CBOE and at the PSE for 5 years each. During my time there, I was the volume leader and held the largest position there in many different stocks and situations.
Let me also say that every market maker that I have spoken with disagrees with the idea that "naked short selling" caused the collapse of Bear Stearns.
The idea that naked short selling, relative to Bear Stearns and probably Lehman, caused their collapse is an attempt to misdirect the focus away from the true criminals who arranged the collapse. Although maybe useful idiots like some commentators here truly believe the misdirection, the ones near the top are very much aware of the truth of what I say.
John Olagues
I'm sure you know much, much more than Pollack, ex head of the SEC regarding the recent debacles:
So I guess you can now spill the beans!
I feel mighty comfortable with that Schapiro gal in the SEC:
from WSJ (partial)
Report Cites Finra Lapses in Fraud Probes
WASHINGTON — The Financial Industry Regulatory Authority missed opportunities to uncover the Bernard Madoff fraud scheme and alleged Stanford scheme, a special committee for the brokerage industry's self-regulatory organization concluded in a report released Friday.
The Securities and Exchange Commission and Department of Justice have accused financier R. Allen Stanford of orchestrating a multibillion-dollar Ponzi scheme. The report, commissioned by the board of Finra, makes recommendations for improving its examination …
http://registeredrep.com/mag/finance_sec_uncovers_widespread/
http://www.investmentnews.com/article/19980907/SUB/809070708
http://www.forbes.com/forbes/97/0224/5904114a_print.html
OK JIM OLAQUES then can we all be assured you will be voluntering to do a sworn testimonty and reveal who the true crimals are and who the ones near the top know who they are as you identify here: (" is an attempt to misdirect the focus away from the true criminals who arranged the collapse. Although maybe useful idiots like some commentators here truly believe the misdirection, the ones near the top are very much aware of the truth of what I say.") Thanks for your patriotism. Can't wait to hear/read your testimony.
John Olaques,
I congratulate you on your distinguished career as an options MM. The drop from $30 to $4 over the weekend was associated with recent developments and the resultant loss of confidence in an industry based on confidence. Why would anybody place a bid over $4 on Monday morning when it became obvious that Bear Stearns was spiraling out of control? Of course there was no naked short selling over the weekend when it was not trading.
When it becomes obvious that the forces at play on Wall Street have targeted an issuer rendered defenseless by circumstances for destruction then any student of history would know enough to pull its bids in a hurry. How does one explain the incredible increase in FTDs associated with the immense run up in volume that preceded that weekend collapse? Did all Bear Stearns shareholders wake up one morning and decide to sell their shares?
In regards to Lehman Brothers in all of your experience on Wall Street how do you explain a 57-fold increase in FTDs above the prior all time high-water mark at the same time the share price was falling off of a cliff? Coincidence? As an options market maker on the front line you have zero visibility of what's going in between your clearing firm's back office and the DTCC. Your visibility of the FTDs held in ex-clearing arrangements between co-conspiring clearing firms in violation of 15c6-1 is zero as is your visibility of the number of share price depressing "security entitlements" poisoning the share structures of these companies as a result of both FTDs and NSCC SBP "borrows".
I do agree with you that there were "true criminals that caused the collapse". The question then becomes how did they cause the collapse. I would posit that it was a combination of GS telling the world they'll no longer honor BS's commitments, abusive naked short selling, rumor mongering, the timing of the pulling of credit lines, etc. I might also proffer that BS could not have been allowed to go bankrupt lest the bankruptcy judge get visibility of all of the FTDs associated with Bear's notorious clearing activities. If they would have been allowed to go BK then the NSCC's "trade guarantee" would have forced all NSCC participants to be responsible for those FTDs in a pro rata fashion based upon their utilization of the NSCC CNS system. Do you recall that little blurb that came out of BS's general counsel's mouth a while back on that conference call? I might even go way out on a limb and proffer that BS's refusal to shoulder some of the LTCM burden made them the perfect target for retaliation but what do I know I'm not an options MM.—- dr. d
Jim DeCosta
Thanks for your continued information on this topic. Could you expand on one comment you made above. You mentioned BS was not allowed to go BK because then all the FTD's would need to be covered. But Lehman DID go BK. Were their FTD's covered? What happened?
davidn says:
It is a bit pedantic to argue with John Olaques because it's the wrong argument.
A simpler argument is I don't have a margin account. I have a CASH RETIREMENT account and my contract with my broker GUARANTEES me that my asset is in safekeeping.
Can you understand why I have trouble finding out that I only own an IOU and the system is using my own money to drive my retirement investment down in value?
Talking about the VERB of Naked Short Selling is a limited hangout that keeps us from the noun of YOUR CASH RETIREMENT ACCOUNT OWNS AN IOU, NOT A SHARE.
Just because the MOB owns the banks and decides who gets elected doesn't mean they aren't the MOB.
These CRIMINALS need to be arrested for fraudulently representing that shares described on retirement cash brokerage statements exist when they actually don't.
The snowflakes are piling up and there is an avalanche coming. Just because you haven't been arrested yet doesn't mean you won't be arrested tomorrow.
The constitution is the law of the land and property rights supercede the SEC scam intepretations.
Fred, as an example, the fails with refco were hidden by letting the brokerages that were owed shares by refco suddenly own refco.
Currently, there are hundreds of scammers that owe their clients shares, but don't enforce delivery, because they owe other scammers shares.
When a scammer can't pay, the other scammers take them over.
The result is that over time, there are less and less scammers until finally, there is only one scammer left and their customers are none the wiser because their brokerage statements are printed in gold leaf and trust us, if the statement says you own a share and not an IOU, then you own a share and not an IOU.
We are the monopoly brokerage and the government reports to us.
If this story was to be broken to the people, it would be broken on government bonds.
When a state or federal agency borrows money, the interest is set by supply and demand. Extra supply means we all pay more taxes to cover the interest.
How ridiculous is it that brokerages would naked short government debt. The investor takes a crazy low interest rate, thinking they have the people backing the bet, but the bet is only backed by the sleezeball criminal brokerage.
That extra supply causing us all to pay extra taxes to cover the extra fake interest.
How private equity rapes companies:
http://www.nytimes.com/2009/10/05/business/economy/05simmons.html?_r=1&hp
Can't naked buy a stock.
http://satwaves.com/blog/2009/10/05/the-truth-revealed-about-sirius-xm-goldman-sachs-naked-short-selling/
The NSCC subdivision of the DTCC issues what is referred to as a "trade settlement guarantee". This gives market participants confidence to participate in our markets and it pretty much eliminates what's referred to as the "contra-party risk" that a buyer and seller on Wall Street would otherwise incur. The "trade settlement guarantee" IMPLIES that should an NSCC participant become insolvent then all other NSCC participants will step in in a pro-rata fashion to effect either the delivery of undelivered shares or payment for unpaid for shares. The problem is that it's a total crock because when insolvency does occur in cases like Thomson Kernaghan or Adler Coleman there are no buy-ins that ensue. The FTDs are merely "RECAPPED", rolled back in age to T+1 and then sent back to the NSCC's self-replenishing SBP "car wash" for a new "curing". Here one impossible to identify parcel of shares can be simultaneously loaned in a dozen different directions to "cure" a dozen different FTDs. Why? Because the recipient of the borrowed shares used to cure a delivery failure (the buyer in the transaction resulting in an FTD)becomes the "legal owner" of those shares with all of the right in the world to re-donate that parcel of shares right back into the SBP lending pool AS IF THEY NEVER LEFT IN THE FIRST PLACE.
Theoretically "legal" short selling in our clearance and settlement system is also corrupt as the purchaser of the borrowed shares once again becomes the "legal owner" of them and has all of the right in the world to lend those borrowed shares to yet a different short seller. Non-decrementing "legal" short selling is corrupt as all get out; abusive naked short selling is flat out criminal.
The other thing you have to realize is that in the above example wherein one parcel of impossible to identify shares (due to the "anonymous pooling" of shares demanded by the DTCC) that is being simultaneously rented out to a dozen different short sellers after being "replicated/counterfeited" there are 12 different Wall Street firms earning rental fees for the loaning of that ONE parcel of impossible to identify shares. If those shares happen to be "hard to borrow" which equates to "expensive to borrow" then the Wall Streeters are making an absolute fortune at the expense of the decreased prognosis for success of the U.S. investors' investment.
People aware of this "self-replicating" of shares on Wall Street do not use margin accounts. When you sign a margin agreement you approve the "re-hypothecating" or loaning out of your shares. That's fine. You did not, however, approve of the "counterfeiting" of your particular parcel of shares a dozen times over and the simultaneous renting out of your parcel of shares to 12 different parties intent on bringing down the company you invested in. The DTCC,the parties earning all of that rental income and the parties doing the short selling all argue that the "anonymous pooling" of shares at the DTCC is a necessity because it is so darn "efficient". You have to keep in mind that the purchasers of the one authentic parcel of shares as well as the purchasers of the 11 "knock offs" all have the right to resell that which they purchased. This increases the "supply" of that which is readily sellable which causes the share price to crash.
How do you both test the existence of this theoretical "trade settlement guarantee" of the DTCC and also circumvent the counterfeiting abuses associated with "anonymous pooling"? You demand delivery of your certificated shares out of the DTCC. What does the DTCC do each and every time the shareholders of a corporation under attack get organized and try to defend against these abuses by pulling their shares out of the DTCC? They put a "chill" on your shares and refuse to deliver them to you in violation of UCC Article 8 which mandates that "securities entitlement holders" (the buyers of bogus shares) have the right to demand delivery of that which they purchased by filing an "entitlement order". The DTCC's "trade settlement guarantee" which gives investors confidence to partake in our markets and confidence that what they buy will indeed get delivered is only valid if you promise not to access it. Now what do the abusive naked short sellers, the lenders of a parcel of shares in a dozen different directions simultaneously and the abusive market makers and abusive clearing firms have in common? They are "participants/co-owners" of the DTCC.
Rolling stone video of naked shorting.
http://trueslant.com/matttaibbi/2009/10/05/caught-on-tape-a-naked-swindle/
Fred, you shouldn't have gotten me started!
What can our totally "captured" SEC and SROs be counted on to do when they see a corporation doing one of these totally DEFENSIVE "certificate demand programs"? They'll threaten to bust the management of the corporation daring to put up some defense against these crimes with "attempted manipulation" of share prices upwards. Our clearance and settlement system has illegally adopted a "fractional reserve" foundation to enable and facilitate these thefts by their "co-owners".
A "certificate demand program" in an illegal clearance and settlement system is the analogue of a "run on the bank" for a "fractional reserve" banking system. You can't legally advertise a "trade settlement guarantee" or follow your Section 17 A congressional mandate to "promptly settle" all securities transactions in a clearance and settlement system illegally adopting a "fractional reserve" foundation to enable thefts by its co-owners.
GS to get $1 billion if CIT fails.
http://tinyurl.com/ya4rhun
"A "certificate demand program" in an illegal clearance and settlement system is the analogue of a "run on the bank" for a "fractional reserve" banking system."
This is where they are extremely vulnerable. Our custody system is supposed to be backed 100% with real shares. When they only fractionally back the ownership, they are committing fraud.
I'd like to see the states start arresting the owners of some of the clearing brokerages that operate in their jurisdiction.
A classic was MJK Clearing that went down on September 11, 2001 taking down 100,000 customer accounts (funny it didn't make the news even though Milken's secretary and Adnan Khasshogi were behind it). That fraud was all about an x-clearing daisy chain that in my mind was criminal in nature, yet no one was ever charged with a crime and no one was ever arrested.
Dirk of the Netherlands says:
Dear Mark,
Thanks for posting the information.
I am wondering: isn't anyone [in the U.S.] capable of connecting the dots here?
Both the subjects of naked shorting and the the truth behind 9/11 are a total no go area for the mass media corporations.
Just a coincidence…or??
I have valid reasons — did my own thorough research — to proclaim that we're dealing with a secretive, U.S. based, criminal enterprise that is behind both types of terrorism.
[Hope to catch up with you anytime soon via mail; I've been very busy over the past months.]
Dirk.
ravenseye says:
Matt Taibbi Slams Naked Short Selling Again On Imus
Lawrence Delevingne|Oct. 5, 2009, 12:58 PM
http://www.businessinsider.com/matt-taibbo-slams-naked-short-selling-again-2009-10
Matt Taibbi Taibblog
Oct. 5 2009 – 11:02 am
Caught On Tape: A Naked Swindle
More on Jim Cramer….still think he came to Jesus and confessed his sins?
http://shockedinvestor.blogspot.com/2009/09/cit-crashes-straddles-in-play.html
This is what I am talking about right here.Go Harry!!!
Markopolos: SEC Should Improve or Die
Harsh words for banking regulators as well
By Pamela J. Black
¦Advertisement
Whistleblower Harry Markopolos slammed the Securities and Exchange Commission on Saturday, saying the federal agency should reform itself or perish, as he outlined how the agency ignored his evidence of the multi-billion dollar Ponzi scheme run by financier Bernard Madoff.
"The SEC has to get better or die or be killed,'' Markopolos said in a presentation Saturday at the Investment Management Consultants Association (IMCA) Fall Professional Development conference in Atlanta. It was the latest criticism leveled by Markopolos at the SEC over the Madoff scandal. The SEC has been hammered with condemnation from its own inspector-general to Congress for failing to detect Madoff's wrongdoing that led to investors being bilked out of billions of dollars.
Markopolos, a fraud investigator and former chief investment officer at Rampart Investment Management Co. in Boston said the SEC needs "to hire capital markets people instead of lawyers and they need to pay whistle-blowers enough money to make them comfortable." Markopolos began investigating Madoff's returns as far back as 2000.
In his speech detailing how he and a team of three others investigated the Madoff fraud, Markopolos called the SEC lawyers probing the Madoff firm "untrained and unskilled." He said: "Sending the SEC lawyers against derivatives traders is like sending guppies against sharks."
http://www.financial-planning.com/news/markopolos-sec-reform-2664137-1.html
The video must be effective. They are claiming it is a hoax without any proof.
http://www.businessinsider.com/john-carney-matt-taibbi-falls-for-naked-short-selling-hoax-2009-10
Dr. Jim DeCosta,
Do I remember correctly that you stated some months ago that the United States is now the only country in the world that allows Naked Shorting?
Is it true that other countries have banned naked shorting and the U.S. is the only left which allows naked counterfeit shorting?
drmark2006 says:
If anyone doubts that seriously irregular – if not criminal – activity occurred in the trading of Bear Stearns shares in March 2008, or in Lehman shares in both July & September 2008, I suggest you take a close look at the daily trading volumes for those companies during those months.
Assuming a finite number of shares _and_ a strict adherence either to the T+3 rule or to actual-location rules for short-sales, then you could never have trading volume in a _single day_ greater than 100% of outstanding shares. Agreed? But that's exactly what happened with Bear Stearns in March 2008 (161% on Friday 3/14, 144% on Monday 3/17, and again 144% on Tuesday 3/18).
Nor could you have 89% of outstanding shares trade on a Thursday only to see 88% of outstanding shares trade on the succeeding Tuesday. But that's what happened with Lehman Brothers in September 2008.
From my ignoramus's point of view, you don't need to count "fails-to-deliver" as evidence of illegal naked-short-selling of a company's shares. You only need to determine whether the cumulative trading volume in any three-consecutive-trading-day period exceeds 100% of outstanding shares.
All those market-technicians and momentum-traders who chart moving averages to "dampen noise" and "see trends" could probably detect those illegal actions if they set their moving average windows appropriately.
impossibly high trading
Ravenseye and all, this could be the smoking WMD that we have been waiting for!! Thanks for posting
istandup,
No, in fact Canada's disparate provincial regulators have no problem at all with the abusive naked short selling of U.S. securities. In fact a significant percentage of their brokerage system is predicated on that. Technically NSS is "legal" in the U.S. but ONLY if it is being done by a truly "bona fide MM" and only when he is acting in a truly bona fide MM capacity.
A truly bona fide MM provides liquidity by being willing to sell nonexistent shares when order imbalances occur with buy orders dwarfing sell orders. But a truly bona fide MM also covers that naked short position on the next downtick when sell orders predominate over buy orders. Here is where the typical U.S. MM is nowhere to be found. Thus he illegally accessed that "bona fide MM exemption". You can't determine the illegality of a MM's actions until the next downtick occurs after the naked short selling transpired. Since the SEC's Enforcement Division almost never,never, never brings cases for illegal accessing of that exemption then the abusive MMs have been pretty much given a free ride. The new 242.204 partially plugs that loophole by mandating a "borrow or purchase" before the opening of trading on T+6 after an FTD is registered BUT ONLY IF THE NEW LAW IS ENFORCED WILL WE NOTICE ANY DIFFERENCE. What's interesting is when a MM is forced to explain how buy orders were dwarfing sell orders while we was doing nonstop selling from the $10 level to the 50-cent level. Shouldn't share prices go up when buy orders dwarf sell orders for extended amounts of time?
drmark2006,
Your observations above are bang on but let's take it a step further. If 161% of Bear's "outstanding" shares were sold in one day during the collapse what % of their "float" of readily sellable shares does that encompass? Perhaps 300%? Combine this with the number of Lehman Brothers FTDs being registered during their meltdown weighing in at 57-times their previous all time high level.
Now combine that with the fact that the financial media, the SEC and the SROs to this very day refuse to acknowledge that abusive naked short selling played a role in the near collapse of our entire financial system and what do you come up with. Why the need to proffer such blatantly obvious lies to U.S. citizens? The answer has to do with the "contingent liabilities" associated with these crooks being forced to once and for all cover their preexisting naked short positions in the U.S. corporations they attacked but couldn't kill before this truth was revealed. If there was any silver lining associated with the demise of Bear and Lehman and the associated carnage it was the revelation of the truth in regards to this abusive naked short selling "industry within an industry" and the need for the SEC and the SROs to cover it up no matter how silly they look in doing so.
Anonymous in response to you post re: Taibbi's video. He himself has responded already. Check this out. He's primetime and ready for the fight.
Taibbi debunks the "hoax" charge
Insta-Reporting, Clusterstock-Style!
Today he posted a video allegedly showing a "day trader" shorting tens of billions of shares of a stock with a float of only 5.5 billion shares. The trader allegedly executes his trades through the clearinghouse Penson.
via Matt Taibbi Falls For A Naked Short Selling Hoax Video.
The idiots at Clusterstock, just one week removed from making the uniquely asinine (even for them) claim that there is no difference between short-selling and naked short-selling, have struck again, proving once again that it is always best to actually put down your paper bag full of airplane glue fumes before you make blog posts.
Business Insider writer John Carney here seems to have read my recent post on Penson and taken from that that I was reporting that someone had executed a short sale of tens of billions of shares in a company whose float was only five and a half billion. This would, indeed, be ridiculous. Except that is not at all what I reported.
What I published was a tape of a trader asking for a locate of tens of billions of shares. It is the size of the locate, and the speed with which it is approved that is the issue, not the trade. The actual trade, if Carney had bothered to read the text, was only for 100 shares.
Carney then goes on to claim in another post that the "system" worked because a second trade was rejected at :27 on the tape. But this is a second trade for a larger amount of shares that was rejected not because of the locate but because the trader in question had insufficient funds in his account to make the short sale. It has nothing to do with the locate and is completely irrelevant to the story.
Nothing like good old-fashioned, fact-checked journalism by the good folks at Clusterstock! No wonder they're on such good terms with Goldman Sachs, who was good enough to provide them with the full version of the fact sheet they distributed to Congress last week, and which I first reported here on this site. Hilariously, Clusterstock was in that instance unable to accurately report information given to it by its own sources at Goldman. They originally wrote that Goldman had "denied circulating a fact sheet" to politicians.
Then they came out shortly afterward and admitted that they had had a "miscommunication" with Goldman, and that what Goldman was telling them was not that they hadn't circulated a fact sheet to politicians, but that the fact sheet they had circulated was not about naked short-selling. Which wasn't true either, but whatever.
It is really not easy to fuck the reporting process up that badly that many times in a row. But some of us, it seems, are just born with the magic touch. God bless these guys.
http://trueslant.com/matttaibbi/2009/10/05/keystone-clusterstock-strikes-again/
Lets see if the SEC can be held accountable after all !!!
http://news.bostonherald.com/business/general/view/20091003harry_markopolos_to_write_memoir/srvc=home&position=also
"A Harvard University Law School graduate, Kachroo worked until earlier this year for Boston firm McCarter & English. But she struck out on her own because that firm generally represents defendants in lawsuits, not those who bring cases.
So far, some 600 Madoff victims from across the globe have hired Kachroo to file lawsuits on their behalf.
The lawyer said the first target will be the SEC, "because by its own admission, (the agency) was guilty of gross negligence in this case."
According to this, if you demand delivery of the asset you purchase, you are a leftist.
http://newledger.com/2009/10/naked-short-selling-and-the-financial-crisis/
http://www.businessinsider.com/john-carney-matt-taibbi-responds-it-wasnt-a-trade-just-a-locate-2009-10
@Jim DeCosta,
Regarding that exceptional trading in BearStearns shares prior to its collapse…
I guess I posted it here for about a year ago.
[Though no one seems to have responded at that time?]
A very influential Dutch investor — Mr. Rienk Kamer — told last year on Dutch TV: that because Bear Stearns aimed to offload a huge position in CDS', it was JP Morgan that had to act. IF Bear Stearns had dumped those CDS' at that time, at any given market price, it would have forced JP Morgan to reassess the value of its CDS portfolio. Due to the fact that JP Morgan was packed with CDS' — according to this mr. Kamer –, it had to act rapidly and had to sink Bear Stearns before the latter had a chance to dump its CDS' portfolio.
So if JP Morgan was involved…do the math? They are untouchable IMHO.
The SEC's silence and inactivity regarding criminal enforcement is IMHO plausible due to JP Morgan's alleged involvement.
Not sure if the Bear Stearns story told on Dutch TV is correct…but bear in mind: this Mr. Kamer maintains narrow contacts with super-powerful groups like the Carlyle Group.
For me personally, since I have been a long time follower of Kamer's visions: I can claim that Mr. Kamer is a very reliable source.
Hope this helps?
Good find, Dirk.
Also look to Bear Stearn's clearing business. A lot of secrets went to the grave and IOU's were netted when this company was killed.
http://www.nytimes.com/1999/06/24/business/bear-stearns-is-seen-nearing-accord-with-sec.html
They won some precedent cases where they could clear for boiler rooms with no responsibility to the retail investor as their trust agreement was the boiler room, not the retail investor. From their point of view, the boiler room was the beneficial owner of the shares, not the retail investor.
"After Baron collapsed last July, Mr. Morgenthau's office and various regulatory agencies began to examine whether clearing brokers should have any responsibility for policing the firms whose trades they process — a duty which might bar misbehaving brokers from the Street, but which would also greatly increase the risks and reduce the profits of the clearing brokerage business, a mainstay for many large Wall Street firms like Bear Stearns."
http://www.nytimes.com/1997/06/03/business/new-accusation-in-investigations-of-bear-stearns.html
Attack the messenger.
http://business.theatlantic.com/2009/10/matt_taibbi_turns_software_critic.php
Penson letter available here, from none other than that lil gw socket puppeteer.
http://garyweiss.blogspot.com/2009/10/was-matt-taibbi-victim-of-hoax.html
Wait a minute, I must have be reading this wrong. Does Gary Weiss actually come out and admit that NSS can be used for market manipulation? Here it is in his own words:
"See, while I've said numerous times that naked shorting conspiracy theories are overblown hooey, the fact remains that if someone actually did use naked shorting to drive down the price of a stock, that would be market manipulation."
(source is link in previous post, Gary Weiss's own blog)
Was that a pig that just flew past my 3rd story window?
And Gary goes on to write:
"If a trading system or clearing firm allows naked shorting that could drive down the price of a stock, it's a big problem."
Did Bizarro Gary Weiss come and take over the regular Gary Weiss's blog?
HOW THE F**K DOES THE SEC COME UP WITH THINGS LIKE THIS WHEN WE WE ALL CALLING FOR AN UPTICK??!!??!!??
"It plans to introduce new restrictions on short selling — betting that a company's shares will fall — that would often require traders to pay a small premium to place such bets. That may reduce the number of short sales."
http://www.washingtonpost.com/wp-dyn/content/article/2009/10/05/AR2009100503933_2.html?sid=ST2009100600096
Senator Kaufman, please HELP!
The SEC won't be happy until the train is off the track and Soros and Goldman are infinitely richer and we, infinitely poorer.
They MUST be stopped.
Proposing a little cost-of-business surcharge for shorting…
Are they NUTS?
I have seen nothing new on this site or on Matt Taibbi's site about Bear Stearns or Lehman, other than Taibbi is trying to hold two contradicting opinions of "naked short selling" a) NSS brought down Bear and Lehman b) maybe NSS didn't bring it down but it certainly happened prior to the collapse.
I tend to favor b). But then who brought it down. It seems that in one of his pieces he was talking about millions of fails in Bear on Mar 12 indicating short sale 3 days prior or on the 7th and 10th. or earlier.
That was three days before all the fakers at the Senate hearings said they found out about the pending collapse and one day before the Bernanke lunch and around the time that the options exchange were agreeing to open far out of the money March and April puts to accommodate the lucky speculators.
I wrote the attached article on March 27, 2008, ten days after the Bear Stearns event, although there were some additions later. It was written before the NSS bogey man raised his head. I understand the SEC thinks the NSS are hiding in a cave in AftBogeyland and his leader is a cat named Macavity.
http://www.optionsforemployees.com/articles/article.php?id=130
Good work when you can get it huh??
http://www.cnn.com/video/?iref=videoglobal
Clip titled sucess after Madoff.
I would love for everyone to read this and see what our small companies have to deal with.. This is absolutely incredible.
" Energy Source Inc. Announces New Action for Investors
LONDON, Oct 6, 2009 (GlobeNewswire via COMTEX) — Over the last four years the company (Other OTC:BCIT) has made every effort for the resumption of trading of its stock by complying with all requests made to it by all pertinent agencies. It has done this at great expense and effort but as it has complied; it has found its efforts to be unfairly obstructed. Even with the findings of various government agencies showing Energy Source to be innocent of any wrong doing one private organization continues to block the rights of the company, the Depository Trust & Clearing Corporation (DTCC).
The DTCC its officials and lawyers lead the company to understand that on the completion of all the normal regulatory requirements it would clear its stock for normal trading. This position was reached by mid 2007 after an exhaustive and costly process. The DTCC despite the company being fully filed, having possession of an 15c211 as required by FINRA, consent from NASDAQ to trade the DTCC refused to clear the company's shares unless the company supplied sufficient shares to the DTCC to cover the counterfeit shares it had allowed to enter the market by its gross negligence as well as supporting a tide of naked short selling by its client owners and brokers. The company out of disgust and frustration, had stopped their corporate filings and contemplated what else they could possibly do after spending over $800,000 to that point. The company had complied with all requests, was accused of no wrong doings, yet was not permitted the rights it deserves, to do business….
http://www.marketwatch.com/story/energy-source-inc-announces-new-action-for-investors-2009-10-06?siteid=nbsh
MNKD under similar attack, but by shorts.
It seems to me that the following story reflects what the Rich and Powerful, who use the Wall Street Counterfeit Machine to steal money from the common man and woman's investments, think about Wall Street Reforms:
Church of England defends hedge funds
(AFP) – 1 hour ago
LONDON — Much-maligned hedge funds have found an unlikely defender in the form of the Church of England, which expressed its concerns on Wednesday at a proposed new EU directive to regulate the industry.
The Church Commissioners, the Church's investment arm, joined five other leading charitable foundations to warn of "serious consequences" from the measure in a letter to the House of Lords.
"We are concerned that the directive as currently drafted will significantly restrict our ability to generate funds to pursue our charitable missions and thus reduce our impact for public good," said the letter.
"The directive as currently drafted will severely restrict our access both to non-EU funds and to non-EU fund managers. This will impact access to private equity funds and to hedge funds," it added.
It points out that up to 95 percent of global hedge funds are currently either not domiciled in the EU or have non-EU managers.
The Church Commissioners said they feared that the legislation would lead to "a significant risk that many of the best (funds) will stop raising capital in Europe rather than attempting to comply with onerous EU regulations".
This would "limit the scope and potential return of our investment portfolio", they said in the letter to the House of Lords' EU Committee, which is scrutinising the directive.
The support for hedge funds — highly speculative financial products which have been blamed for fuelling instability in financial markets — represents a sharp change in tone for the Church.
As the financial crisis raged last September, the outspoken archbishop of York, John Sentamu, called traders who cashed in on falling prices "bank robbers and asset strippers".
And the head of the Church of England, Archbishop of Canterbury Rowan Williams, said last month that the financial sector has failed to repent for the crisis, and feared it was returning to its bonus-giving business as usual.
The crisis had a severe impact on the Church's investments, with accounts filed in May showing their value dropped from 5.7 billion pounds in 2007 to 4.4 billion pounds in 2008.
http://www.google.com/hostednews/afp/article/ALeqM5iKPQ285PiPnt09rApVdBCrvFZRhA
No one on Wall Street has the right to steal money from unsuspecting investors via the Wall Street Counterfeit Machine and by calling their counterfeiting "market efficiency" and "liquidity".
Every counterfeiter of $100 bills would agree with Wall Streeters that every counterfeit $100 Bill they create increases "efficiency" and "liquidity" of their bank account.
The only difference between counterfeiters of $100 bills and Wall Street Stock Counterfeiters is that $100 Bill Counterfeiters are arrested, tried and convicted; whereas Wall Street Counterfeiters are lauded as Brilliant and are rarely if ever arrested, tried, or convicted.
And so Yes… we must forget… the Wall Street Counterfeiters have a federal regulatory agency, the SEC, that continually seeks to protect the Wall Street Counterfeit Machine and their fraternity brothers who use this Counterfeit Machine.
Would Jesus Short?
WJS
Sean, that company should sell out for shares to a profitable company, with the understanding that the profitable company will start paying a small dividend. That dividend becomes a failure to deliver tax as the system will have to match the dividend payment 1 to 1 on every fail until they finally go into the market and cover.
It doesn't matter if the company that is being acquired has any value or any real business. The fact is the fails have value. The fails represent pent up buying in the acquirer's stock and the dividend is the way to cause them pain.
Taibbi must be effective. He's getting a ton of press and spooking the counterfeiters to reply.
http://dagblog.com/business/video-proof-matt-taibbi-naked-short-selling-dupe-937
I find that as soon as this hack Wolfrum jumps on board, it's a sign that the bottom of the barrel has been officially scraped.
Who is this guy and what motivates him? I googled and see he seems tied to lil gw and has it out for ostk for some reason.
From my point of view, the more they defend their crimes, the more they wake up the public to what they've been doing.
Correction – need to add "NOT":
And so Yes… we must "NOT" forget… the Wall Street Counterfeiters have a federal regulatory agency, the SEC, that continually seeks to protect the Wall Street Counterfeit Machine and their fraternity brothers who use this Counterfeit Machine.
And as is very evident on Wall Street…
When the Wall Street Counterfeiting Criminals are told that they can SELF-REGULATE themselves, they clearly understand that this means that there is NO REGULATION of the Criminal Activities.
For example, the murder of Bear Stearns and Lehman Brothers…
The SEC position when we look at their actions in regard to these two crimes must be that NO CRIME WAS COMMITTED, because Naked Counterfeit Shorting is legal.
And the Wall Streeters who murdered these two companies are self-regulated so they can do anything they want to as self-regulated companies.
This article explains what rule allowed Cede & Co. to own your shares, why it was supposed to be temporary and why netting is not needed now. With fiber optics and high speed computers, it should be trivial to register shares in the actual names of the buyers (rather than intermediaries). That would get rid of all the fail to deliver fraud and could be instituted by congress.
Why can't we have the first best solution, now, ya know, the one that's good for Mainstreet and bad for Wallstreet counterfeiters?
http://publikationen.ub.uni-frankfurt.de/volltexte/2007/4885/pdf/ILF_WP_068.pdf
"Congress, in the 1975 Securities Acts Amendments, took the extremely unusual step of legally imposing a single technique for settlement on the markets. The effect on securities settlement was somewhat comparable the effects of a law that would require all computers plugged into the internet to run on DOS. As amended, § 17A Exchange Act requires the SEC to "use its authority . . . to end the physical movement of securities certificates in connection with the settlement among brokers and dealers of transactions in securities . . .", i.e., to impose the immobilization of securities certificates in a depository. In this way, what was considered an "interim step" on the way to the "certificateless society" became the permanent basis of U.S. securities settlement. Given the SEC's role as an independent regulatory agency expert in the technicalities of the securities market, the choice of Congress to regulate down into the details and impose a system that was generally considered a short-term, second-best solution is curious."
davidn,
You have presented a Very interesting idea here!
I have to read this paper you linked to!
To continue from above….
When the Wall Street Counterfeiting Criminals are told that they can SELF-REGULATE themselves, they clearly understand that this means that there is NO REGULATION of theIR Criminal Activities.
ON WALL STREET… SELF-REGULATION for Wall Streeters MEANS…
NO REGULATION…
@Davidn,
Thanks for the discussion.
I am fully aware of the pivotal role Bear Stearns played in being the clearing house for several MOB-connected criminal brokerages. Several of those criminal brokerages were financed by one single NY based family. How do I know this? I've been investigating those ties and the interconnecting who-is-who's for over 7 years now. My personal research reveals: there's no such thing as a 'Chinese Wall' between the elite / politicians and the MOB in NY. As a matter of fact: NY is the 'Chigago' or crime city of our time. Due to my personal thorough research I can claim that the same guys that are looting America via the Financial Markets, are also those that were behind the 9/11 terror attack. And guess what where all the money goes, made by criminal stock market counterfeiting? Most of the money made by illegal counterfeiting schemes — naked shorting — goes straight to covert funds, runned by those same crooks, and is used for artificialy inflating the Dow Jones index. So young innocent NASDAQ based companies are being killed, by naked shorting, for the sake of false picture of a healthy U.S. stock market i.e. a rising DJ index. That's my personal opinion, based upon 25 years of experience in the various world wide stock markets and 7 years of thorough inquiries into the organised crime on Wall Street. So mind my words and you saw it first here on DeepCapture.com;-)
pashkavl says:
Everyone who has a an issue NSS needs to submit a public comment to the SEC – http://www.sec.gov/spotlight/shortsales.shtml
A good template/petition can be found at – http://www.petitiononline.com/mrktrfrm/petition.html
If we don't demand change from the government than we don't have a right to complain!
They really have to desire to change naked shorting or even put in the uptick:
http://www.marketwatch.com/story/sec-losing-its-taste-for-fighting-short-selling-2009-09-30
They need to feel the pitchfork.
Dirk of Netherlands says:
@Pashkavl, Jim Hall,
Forget it guys and you better wake-up, because 'your government' i.e. a U.S. government elected upon honest democratic principles, ceased to exist from the moment whereupon pres. Kennedy got killed. Its not even a 'Government Sachs' that is running the show in your country. 'Government Sachs' is just some sort of a butler for the 'dark powers' that run your country.
Take my advice: the best solution for the problem of 'naked shorting' is to avoid investing on Wall Street. Question: have you guys ever asked yourselves of why the Arab countries, China, Iran and Russia are demonised in your mass media? In those countries they know how to deal with fraudsters and corporate crooks. They are either hanged, locked-up in Siberian prisons or get a shot in the head. And what's happening in the U.S…? Right; corporate crooks and swindlers that make substantial donations to either the Dems or the Reps…either live in $50 million NYC based penthouses or in castles located in Connecticut and if they're not at home? They are either in Aspen or in the Hamptons.
So why not invest your money in China and Russia, where they know how to deal with crooks? Would you invest in a country where crooks are being pampered and where those same crooks are running the government, control the Law Enforcement Agencies and the Judicial system? What do you say? That's a Banana Republic? 100%!
Face the facts: America has been Bankrolled and is corrupted till the bone. All well organised by the same powers. So I am sorry for you guys:…if you think you can change the system, IMHO you're dreaming and are living in La La Land. So don't try to change the current system. My advice: just expose it and let it implode. Once your financial system has been imploded, the powers that screw you now, won't be able to control the masses.
The best way to fight 'naked shorting' is IMHO not to invest your money in the U.S. markets.
Extremely well put, however dire the import.
Dear Jim, Sean,
Thank you guys for the discussion:-)
I think, regarding the naked shorting issue, we need to apply some Ross Perot wisdom.
Ross Perot once stated that the difference between him — as a entrepeneur — and IBM could be explained in a simple metaphor. Mr. Perot stated that if the people at IBM would encounter a snake, a committee or a task force would be formed and this committee would spend months on the question: 'What to do with the snake?' The answer and solution by Mr. Perot was quite simple and effective: 'I would just kill the snake.'
Now let's put this 'snake metaphor' in the context of the U.S.' financial markets and let's witness some facts?
Posted by calltoaccount, october 3 — scroll upwards –, some phrases out of an article written by Gary Matsumoto.
Quote, 1.: "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.'"
> And what exactly did Harvey Pitt do at the SEC, when he was in charge? Totally nada, nothing.
2.: "While the commission's Enforcement Complaint Center received about 5,000 complaints about naked short-selling from January 2007 to June 2008, none led to enforcement actions, according to a report filed yesterday by David Kotz, the agency's inspector general."
> Article dates back from March 19, 2009…and before we know…it will be March 19, 2010. So all crooks will still have a Merry Christmas and won't have to eat fried crow @Club Fed…thanks to Mr. Kotz.
3.: "The way the SEC processes complaints hinders its ability to respond, the report said."
> So what happened over the past months? Any signs of appropriate activities? I guess not.
4.: "Yet the trading pattern that emerges from 2008 SEC data shows naked shorts contributed to the fall of both Lehman Brothers and Bear Stearns Cos., which was acquired by JPMorgan Chase & Co. in May."
> Ahhh…well…, right…thus the 'smoking gun' is to be seen in all the trading records. Though if that's the case, why don't we see any appropriate acts by the Federal Enforcement Agencies…any indictments due…or?
5.: "Abusive short selling amounts to gasoline on the fire for distressed stocks and distressed markets," said U.S. Senator Ted Kaufman, a Delaware Democrat and one of the sponsors of a bill that would make the SEC restore the uptick rule."
> Well, so far we can witness following: all those Armani suits wearing 'arsonists', that are active in the Financial Markets and are called brokers, have no fear and neither aim to run from the crime scene. And about restoring the uptick rule? What kind of BS is that? The SEC receives thousands of complaints…but there's no follow-up in terms of criminal enquiries. How about introducing the 'downtick rule': if you're once caught in illegal trading schemes, you get a hell of a fine and if caught twice: the shop will be closed, all of the senior staff goes to jail and will be stripped from their private assets.
6.: "Reinstating the rule would end the pattern of fails-to- deliver revealed in the SEC data, Kaufman said.
> Yeahhh…a new Bill will close the hole in the roof. New Bills as the miracle cure! Anti-drug abuse Bills have lead to a total cease of drug abuse and similar counts for Bills against DUI. Just create a new Bill and all problems are solved? Is this Sen. Kaufman perhaps on crack?
7.: "The SEC last year started a probe into what it called "possible market manipulation" and banned short sales in financial stocks as the number of fails-to-deliver climbed."
> Ohh thank G*D…finally! But look, who's running the SEC and who's sponsoring the members of the following Congressional Committee: http://en.wikipedia.org/wiki/United_States_Senate_Banking_Subcommittee_on_Securities,_Insurance,_and_Investment?
Chairman Jack Reed D. is IMHO just a wh*re of the perpetrators? http://www.opensecrets.org/politicians/contrib.php?type=C&cid=N00000362&newMem=N&cycle=2010
And…so, factually said: illicit naked shorting schemes are only met with appropriate acts…when U.S. Banks and Brokerages are the subject of malicious trades? Pretty dismal I would say.
8.: "On its Web site, the Federal Reserve Bank of New York lists several reasons for fails-to-deliver in securities trading besides naked shorting. They include misunderstandings between traders over details of transactions; computer glitches; and chain reactions, in which one failure to settle prevents delivery in a second trade."
> Well, that's all BS.
Pivotal question: who's running the show at the Fed. Reserve Bank of New York? I guess…no I am sure: exactly the same crooks that fund the Senators…which have to control the SEC and have to take care of proper oversight? Everywhere outside of the U.S. such is called either bribery or corruption.
9.: "Suffice it to say that in a readily available stock that is traded frequently, there has to be an explanation to the appropriate regulator as to the circumstances surrounding the fail-to-deliver," said Richard Baker, who served in the U.S. House of Representatives as a Republican from Louisiana from 1986 to February 2008. If it's a pattern and a practice, there are laws and regulations to deal with it," he said.
> Sure, the U.S. judicial system can apply lots of fines and penalties. He hey..there's even a possibility to lock people up! Since Mr. Baker is from Lousiana, he sure knows that a lot of African Americans are every year being caught and subjected to fines, penalties and prison terms. However…if you're a white male American…have donated to political parties and are working at a major U.S. Bank…you can rob the Bank or even sink it…nothing will ever happen to you….despite all the fines and penalties.
Perhaps Congress should prepare a Bill that calls for more jobs for African American males in the Financial Markets. Would such a Bill stop all criminal acts in the Financial Markets? I don't think so, but I am sure that we will witness some more prosecutions; U.S. Law Enforcement Agencies do go after African Americans. So I guess its well worth a try?
10.: "Since July 2006, the regulatory arm of the New York Stock Exchange has fined at least four exchange members for naked shorting and violating other securities regulations. J.P. Morgan Securities Inc. paid the highest penalty, $400,000, as part of an agreement in which the firm neither admitted nor denied guilt, according to NYSE Regulation Inc."
> Whhhhàààt…? NYSE Regulation Inc.?
Excuse me…but what's next?
MS 13 Punisment Inc. or MOB Executions LLP? Or Wal-Mart Court Corp.?
IMHO if NYSE catches a member on violating the Law, the NYSE should call in the appropriate Law Enforcement Agency.
OK…guys…its about dinnertime overhere in Europe…so I got to stop now.
Hopefully all DeepCapture readers can witness what exactly is happening. There's a snake inside your Financial Market and all what Congress does, is just selling Snake Oil. So if you want some Snake Oil in order to get cured from being naive, please keep your money invested in the U.S. Markets. Sooner or later…but you will get cured, that's guaranteed!
So I reiterate my advice: the best way to act against naked shorting a.o. is: to withdraw your money from the U.S. Markets.
You have a chilling gift of insight.
Naked short selling had NOTHING to do with Lehman or Bear's collapse. Naked short selling may have make the trend down more powerful but it was not the cause.
You, like many on this site, confuse CAUSATION will CORRELATION. You see rich Hedge Fund managers live in mansions and drive luxury cars while you it in your pleather chair coming up with theories because companies implode.
Let me shed some light on WHY companies like Lehman and Bear Stearns rightfully been put out of their misery.
It is called LEVERAGE. They were over levered and in Lehman's case 40x…. yes F O R T Y. A regular stock brokerage account gives people 2x. A day trading account gives you 4x. And most people don't sit there with their accounts fully maxed out. But the morons at Lehman were sitting there pretty at 40x with underlying assets tied to the fantasy bubble housing market. Now you're trying to tell people that naked short sellers are the cause of their demise???
It's not that hard, just think about it for a second. Yes shove your conspiracy theories aside and THINK.
What we witnessed was wonderful, the free market was able to act and took those clowns out of business.
Your little conspiracy theories about Goldman would be better if they too were retarded and levered at 40x but somehow miraculously survived.
Maybe what's wrong with this world is not the Goldman's of the world but sites like this that spread misinformation and actually hurt people. This post will probably get deleted but I hope not, for everyone's sake.
J, I guess you failed to listen to Geithner this week when he talked about the bailout. While Goldman likes to claim that they would have survived without the bailout, many of the experts do not support those views. Goldman was bailed out in many different ways and the bailouts came after Lehman and Bear had already been taken down.
The real question is, if the bailout happened sooner, would BS and Lehman have likewise survived?
Your views, my views, and all others views are just that views and theories. We will never know the extent of the banking risks out there because each were protected by a bailout once Lehman went down.
Personally, I think Blankfein is a liar and he is lying to protect his reputation. Cayne went down amidst a continued plea that he was well capitalized right up until there became a run on the bank. But down he and BS went. Blankfein could never prove that such a run on GS would have resulted any differently and Geithner and others think very differently about what outcome would have taken place.
I disagree with you on soooo many levels regarding demonization of China, Russia, Iran, or any other undemocratic nation. I am immigrant from the former USSR so I know first hand how corrupt and inneficient a government can get so you understand I am not being biased.
All of the nations that you have listed are much worse than the US because the government is the defacto Mafia and unlike this country their citizens can not change or influence the system through their vote or voice. If they try to change or speak out against the powers at be than they are censored, thrown in jail, or hanged.
The beauty of the US is that political power can change drastically as they have in the 2008 election without a single drop of blood spilled. What happens in Iran, Russia, or China when the power in control get threatened with political change?!? Recall Tiananmen Square or the recent protests in Iran…
On the other hand, if US citizens get educated, empowered, and demand change many politicians would have to listen because otherwise they will lose their office – this is why I advocate people to write their congressmen and SEC officials.
http://www.sec.gov/spotlight/shortsales.shtml
http://www.petitiononline.com/mrktrfrm/petition.html
Pashka
Dear Pashka,
Slightly off-topic:
Let me put this straight: the situation for ordinary civillians in countries like many Arab countries, China and Iran are worse compared to the situation in the U.S.
However, since I dare to claim that I am 'above average' informed about world politics a.o. things: I say wait and see.
Just witness for example the 'silent marriage' between the U.S. Police and the U.S. Army…aimed at controlling the U.S. civil population. And as I am a fequent watcher of independent filmmakers like Michael Moore and Alex Jones — I don't agree with all their claims and visions — I do witness how the average American police officer reacts when those journalists are filming…in public space. Isn't the broader American public ignoring the fact that non-influential tourists from Japan or Denmark…can film almost anywhere in NYC and Washington…whilst guys like Moore and Jones are always being harrased and hindered by either the American police or men from 'secret services'? So I do not see that much of a difference — regarding free press — between the 'free and democratic' U.S. of America and countries like Iran and Russia.
Secondly: I do not consider myself to be a member of the camp of 'conspiracy theorists' like Alex Jones or a staunch supporter of Mike Moore. I watch and read what they tell and then I'll make my own judgements. FYI: I spent over 6 years in investigating a secretive criminal enterprise, active in NYC — even today –, which consists a.o. the most influential financial and political elite of America. I spent thousands of hours on thorough investigations and turned all sorts of public databases inside out. [Pashka: if you only knew 25% of what I know…and possess…]
Seen in the light of the latter: the political systems of Russian and America do not differ that much on basic fundamentals, but only on details. The elite in the U.S. has for example a better PR machine. So as you've claimed: "the government is the defacto Mafia and unlike this country their citizens can not change or influence the system through their vote or voice."
What I can tell and advice you: open your eyes? In the U.S. there's just a false image of a democratic system. I say: the elite runs both sides of the political spectrum, they own both 'horses' and the racing track; i.e. Dems and Reps candidates are just puppets of the ruling elite. John Kerry…Hillary Clinton..true Dems or Republicans in disguise? And about Obama…what kind of real change have we witnessed so far? Obama is IMHO a classic personification of a false prophet.
And about a real Mafia / MOB in the U.S.? Yes, the ruling elite in the U.S. succesfully fought the American-Italian Mafia families. Big PR shows, headlines in the media and so on. However were MOB crime bosses like Meyer Lansky and Bugsy Siegel Italians…? And how about the influence of the MOB on Wall Street? I know who financed some of the former MOB brokerages like A.R. Baron & Co and D.H. Blair & Co on Wall Street and I do know which major Banks facilitated the MOB on Wall Street. And I can tell you, based upon my own inquiries: there's still a MOB active on Wall Street and this MOB is directly related to the ruling elite. And again: I do not claim this upon someone else research or what I saw in books or whatsoever.
In the U.S., the ruling elite saw what the MOB did and decided to take over those lucrative ventures. Drugs? Call the CIA? The money made is being invested in collusive activities that serve the interests of the ruling elite. Mass scale stock fraud and obvious manipulations in the markets? Who runs the SEC and who's controlling the people that have to control the SEC? And where do the, as what seems to be unlimited, funds come from, that artificially inflate the DJ and Nasdaq indexes?
In Europe, for sure in Western-Europe, there's a strict separation between 1, the governments, 2, the political parties, 3, the Judicial system. Though in the U.S.? I can tell you: there's no such thing as a separation between the Judicial system, the political system and Law Enforcement. Just have a look of how Bush eliminated a substantial number of 'independent' DA's?
So I do NOT claim that all is well in Europe; far from that. But I do claim that there's, below the visible surface, really not much of substantial difference between the way China and Russia are runned in comparison with the way the U.S.A. is runned. And say what you want to say about Russia, but current Russia under Putin and his gang, is IMHO a true blessing to the world. In about 50 years from now, the importance of the Putin era and its influence on the world, will be acknowledged by many Americans. Putin is also a warcriminal, but if you look of how he managed to embrace Turkey and how he managed to lure the Turkish elite out of the camp of the Jewish-American neocons; IMHO Americans owe Putin great respect as he's the man — accompanied by China, Brazil and some Arab countries — that effectively can block the ongoing major world problems, as caused by the American elite and Jewish-American neocon warmongers. Obama's bow to the Muslim world? The cause of that event? Its Russia's successful friendship with the Turkish government — humiliated by Israel — and America's elite's wish to have the Nabucco gaspipe trough Turkey….to tackle Russia's gas revenues.
And yes I do recall Tiananmen square and the recent events in Iran. But do you recall the state of chaos during the Jeltsin era in Russia? Do you know that the grandson of former pres. Roosevelt and the father of gen. Norman — Desert Storm — Schwarzkopf did during 'operation Ajax' vs. the democraticly elected government of Iran? China's change from the Communism based dark ages, to more freedom and economic prosperity for its citizens, is entirely based upon the Singaporese model. So forgive me but: the Tiananmen murder was a nescessary evil event. And in Iran? Some guys will get hanged that couldn't resist CIA funds; so they are traitors and quislings. Trust me on this one: as soon as Iran gets the A-bom, the ruling Ayatollahs will give more freedom to the Iranian people.
Regarding the issue of educating the American people: Yes! I do fully agree on that issue. I stated it already in my posts above: expose the crimes committed…but stay away from the U.S. Stock Exchanges.
However, since I myself have several times informed the SEC, in detail, on criminal offenses and nothing ever happened, I am open for any sensemaking reason of why anyone should write petitions to the SEC?
Factually: the real power over the SEC…is in Congress. And I myself would suggest to expose those d*mned whor*s, those U.S. Senators, that are being bribed by the crooked Banks and Brokerages. These wh*res are IMHO factually the root cause of naked shorting and other kinds of criminal offenses; they look the other way, whilst innocent American investors and entrepeneurs are being screwed on a daily basis.
The Senators that have to control the SEC…are democraticaly chosen and thus owe a fiduciary duty to the American voters. However…they only dance for the powers that fund their election campaigns; i.e. Banks like J.P. Morgan a.o.
So if one wants to fight naked shorting and a fundamental change at the SEC? Aim at the crooked Senators and expose them! Open a website called: wallstreetwhores.org ?? Portray the particular Congressional subcommittee as a criminal enterprise, runned by Senators that act as docile prostitutes to criminal Bankers, allowing them to Bankroll America and [thus] are committing election fraud. These Senators are selling nothing but snake oil to the American public.
So my strategy would be: 1., expose the crimes on Wall Street and 2, expose those Congressional prostitutes.
Attending 'round table events' at the SEC, as Judd did? [No offense intended.] He's entitled to make his own decisions. Though the last time I went for witnessing a total charade, was when I was still very young.
OK, that's it for now;-)
A salute from Europe,
> next part II
Dirk..sadly I think you are very right!!! Thank you for your post.
As a producer for an upcoming documentary film about the fall of Bear Stearns, I'm inclined to give Taibbi's thoughts on Naked Shorting some shrift, though smart people like Gary Weiss and others have largely debunked the 'problem' of Naked shorting.
However, there's something being missed in all of this. I asked a lawyer friend of mine at the SEC the following question:
'If a large hedge fund who has a sizable prime brokerage acct (let's say $1B) at a provider of such services were to suddenly yank that money out and short the stock, is that legal?' The answer was yes.
Understanding that a decision by a business such as Bear Stearns to have big clients like that who could have an adverse effect on their operations; its something altogether different for that client to be able to pull money out of Bear and then simultaneously short the stock. If a firm is in trouble, a prime brokerage client may pull his/her funds from the firm, that is w/out question. They should, however, be restricted from shorting shares in said firm for a period of 30 days. There is no doubt that large hedge funds were pulling their funds out of Bear which was obviously having a deleterious effect on the firm's outlook, AND WAS NOT PUBLICLY KNOWN information. Meanwhile, these firms were also shorting the stock having this inside information. The SEC undoubtedly knows who these firms are due to their wide ranging subpoenas issued many many months ago.
I don't doubt that naked short selling was hurting the firm, but actions like that described above, in addition to manipulation in the CDS market were bigger things that brought down the Bear….
"Smart guys like Gary Weiss"?
Surely you jest.
(Can't be too bright yourself, Mr Producer…)
Can anyone explain how naked short selling, that happened after the collapse of Bear Stearns, be the cause of the collapse?
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