First here is the definition I found in the online Meriam Webster Dictionary:

>> Pon·zi scheme – an investment swindle in which some early investors are paid off with money put up by later ones in order to encourage more and bigger risks.

My first thoughts when the news about the Madoff “ponzi scheme” hit the news wires was that the term “ponzi scheme” did not apply to naked shorting. Now I am beginning to think that this first thought was NOT CORRECT.

When I consider that “naked shorting” is “illegal counterfeiting,” and that the counterfeiting hedge funds and their supporting cast members might very likely have to declare bankruptcy if they were FORCED to buy in the open market all the counterfeit share they created, then there seems to be some connection between the term “ponzi scheme” and “naked shorting/ counterfeiting”.

Consider this:
“…investors are paid off with money put up by later ones”

Counterfeiting hedge funds are making easy money through counterfeiting and they are NOT explaining to their “new investors” (nor old ones) that they keep a “second set of books” which show the continually rising debt they are daily accruing for converting the counterfeit shares into genuine shares through regulatory mandated “buy-ins”.

Since the counterfeiting hedge funds are hiding their second set of books, and not explaining to investors they are accuring a hiden debt, is not this a type of “ponzi scheme?”

Thank you and the others for all you do to help us in this struggle.

I’m well aware of the “Catch 22″ here wherein a family run corporation may have already committed enough of their own funds and that you might not able to expand UNTIL you go public.

Yet to be cash flow positive development stage corporations are the prey of choice for abusive naked short selling criminals. Why? Because they can predictably put your share price into a “death spiral” which will FORCE you to sell shares into the market to fund your monthly “burn rate” at lower and lower share price levels throughout time. By the time you do become cash flow positive you are likely to have so many shares “outstanding” that any future earnings are going to be diluted by a gazillion shares and your all-important “earnings per share” (EPS) will still be negligible and your future share price will be predicated upon a multiple of EPS.

That’s why these criminals love to attack biomedical companies with new cancer cures because they know that they have huge monthly “burn rates” and that due to the nature of the FDA approval process there is no way that this company will be cash flow positive for a very long time. The decision making process for certain of these abusive naked short selling criminals becomes saving human lives versus purchasing a yacht longer than your neighbor’s yacht in the Hamptons.

Unregulated hedge funds spend $11.2 billion annually to the DTCC participating market intermediaries willing to be the most “accommodative” (break the greatest number of securities laws) to the needs of the hedge fund manager making “2 and 20″. In a “closed system” like Wall Street where do you think the billion dollar plus annual “earnings” of dozens of hedge fund managers come from?

Once a naked short position gets to a certain level the bad guys need to naked short sell all day long just to keep the collateralization requirements tolerable for an astronomic naked short position. If they merely stopped their daily naked short position then the share price will gap upwards. It’s tough to cover an astronomic naked short positon in a market that’s already gapping upwards. After covering 10% of your naked short position the price level might be at a level wherein the collateralization requirements for the other 90% might be financially prohibitive.

One has to appreciate how incredibly easy it is to “accidentally” run up an astronomically large naked short positions wherein the company under attack doesn’t go bankrupt on cue. Why not? Because maybe just maybe they weren’t the “scam” that the bad guys thought they were and there are tons of buyers more educated than the bad guys in the business that the company under attack is in.

Every single DTCC participating market intermediary is extremely financially incentivised to flood the share structures of pretty much all corporations with FTDs and the “securities entitlements” that they procreate. The coup for the bad guys ocurs when the NSCC predictably claims to be “powerless” to buy-in the delivery failures of its abusive “participants” that absolutely refuse to deliver that which they sold even though the NSCC is the “Central counterparty” to that trade that is now the creditor of that failed delivery obligation.

There could never be a systemic fraud as beautifully designed or as effectively covered up as abusive naked short selling is.

By: pleiadian
13 Jan 2009, 10:12 AM EST
Msg. 36826 of 36826
Jump to msg. #

What if the Fed Bank has been cornered and the treasury has taken it over. As far as I am concerned all the Naked SHorting of equities profits ultimately go back into the Fed bank coffers through their surrogate the DTCC..Is the Fed Bank being forced to use all the cash they have stolen and that is why all the infusion of cash that is keeping the market floating. Covering all the naked short shares. Just a thought…..

R101

Some of their wriggle language:

Transcript: “DTC is the record holder of all of those shares 12 through CDINCO”
Dave: In other words, the DTC keeps track of how to divvy Cede’s ownership among clearing house partcipants of the DTC (in most cases, not the actual broker or investor unless they use DRS)

Transcript: “All of that is in our nominee named CDINCO. The stock is not re-registered and all of the movements take place through a book-entry system at DTC.”
Dave: In other words, the DTC registers it in the name of the mysterious Cede, who they nominate to own it. It doesn’t tell you who owns Cede.

Transcript: “we issue a proxy card to all our registered proxy holders, including CDINCO, which then issues an omnibus proxy card to all the people that they held chairs for, including all the brokers, who then issue proxy cards for all their
voters. And the shares that are loaned out, then they get another proxy card.”
Dave: But you can’t vote proxy cards. At the end of the day, the proxy cards are only directions as to the wishes of all the various entities that have claims on IOU’s and they finally get reconciled into netted directions / wishes for Cede and as far as I can tell, Cede generally votes in accordance with those wishes.

But the reality is that as Senator Metcalf was told by the lawyers, Cede has the right to vote as it sees fit as it literally owns the shares and only has a trust agreement with the beneficial owners which is only governed by contract law.

The penalty for voting against instructions is just damages for civil breach of contract.

It just seems bizarre to me that the DTC wouldn’t more clearly disclose the relationship between themselves and the actual owner of the shares.

Cede must have a board of directors and domicile and corporate charter. What is it? Are the shares encumbered or subject to counterparty risk? Why does the DTC need Cede? Why not just register electronically each night in the clearing participant’s name at the company transfer agent? How would the computer horsepower required to move actual ownership be any different than moving beneficial ownership, which they do each night today?

This is a link to an SEC “Roundtable” addressing voting issues. Starting on the 11th page is a good summary of how the DTCC is “wired”. When you see “CDINCO” substitute “CEDE and Co.” the nominee of the DTC. The “Broadridge” citation refers to the old “ADP” due to a spin off.

Senators Raise Questions About Geithner’s Nomination at Treasury

By JONATHAN WEISMAN

Sen. Charles E. Grassley, ranking Republican on the Senate Finance Committee, is raising questions about a housekeeper who worked briefly for Treasury Secretary-nominee Timothy Geithner without proper immigration papers, and multiple years when Mr. Geithner didn’t pay Social Security and Medicare taxes for himself.

Senate Finance Committee Chairman Max Baucus (D., Mont.) has summoned committee members to his office this afternoon to air the matter ahead of any public confirmation hearing.

According to people familiar with the matter, Mr. Geithner employed a housekeeper whose immigration papers expired during her tenure with Mr. Geithner, currently president of the Federal Reserve Bank of New York. The woman went on to get a green card to work legally in the country and federal immigration authorities didn’t press charges against her, these people said.

The second issue involved taxes due while Mr. Geithner worked for the International Monetary Fund between 2001 and 2004. As an employee, Mr. Geithner was technically considered self-employed and was required to pay Social Security and Medicare taxes for himself as both an employer and an employee.

He apparently failed to do so, resulting in Internal Revenue Service audits his last two years at the IMF. As soon as the IRS brought the issue to his attention, he paid the taxes with interest, these people said.

It’s unclear how much of an impediment these issues will be to Mr. Geithner’s nomination. On its merits, his ascension has been widely praised. Mr. Geithner spent most of his career managing government responses to financial crises, from the 1990s bailouts of Mexico, Indonesia and Korea, to the market meltdown that has brought Wall Street to its knees.

At the same time, similar issues have derailed nominations in the past. President Clinton’s first and second choices for attorney general both withdrew amid allegations that they failed to pay taxes for household help. President George W. Bush’s first choice for Labor secretary withdrew after it emerged that she had employed an illegal alien.

Obama aides said they didn’t believe these issues would present a problem, given the minor nature of the infractions and the gravity of the role he has been nominated to take.

On the tax front, Mr. Geithner’s oversight is not uncommon. The IRS has mandated loose rules for U.S.-born IMF employees unaware of their obligations to pay payroll taxes.

Sen. Baucus nonetheless decided to hold a closed-door meeting to allow the two matters to be aired before Mr. Geithner’s public confirmation hearing.

“It’s important that I talk to senators, which I’m going to be doing,” Sen. Baucus said as he went into the meeting.

Democratic senators plan to defend Mr. Geithner, saying that the nature of the complaints pale in comparison to the gravity of the crises he has been asked to face, a severe economic recession, turmoil in the financial markets and the collapse of the U.S. auto industry.

Write to Jonathan Weisman at jonathan.weisman@wsj.com

Source: Geithner failed to pay personal taxes

WASHINGTON – Treasury secretary designee Timothy Geithner is meeting with senators to discuss why he failed to pay personal taxes and check the immigration status of a housekeeper.

An official with President-elect Barack Obama’s transition office says Geithner (GYT ner) answered senators’ questions during a meeting he requested Tuesday. The person requested anonymity because the source is not authorized to speak publicly on Geithner’s situation.

Obama’s transition team was expected to release a statement about the issue later Tuesday.

Obama named the 47-year-old Geithner as his pick for Treasury secretary in November, citing as a top priority tackling the nation’s financial crisis.

Is there any chance there could be enough opposition to her nomination to cause Obama to rethink this one? I am afraid she just isn’t up to the tough enforcement that is required here. We need someone like maybe Gary Aguirre, Patrick Fitzgerald, or meybe even Robert Shapiro. Who will be involved with her confirmation hearings? Can we influence these folks? Can we encourage them to either block her or get her to hire one of the above for the enforcement division?