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Those who would hijack the legal institutions shielding society from Wall Street perfidy must hijack the political institutions overseeing them, hijack the media’s discourse about those institutions, and hijack social media’s discussion of all of it. The capture must run deep to be stable. So deep, in fact, that records of the past become untrustworthy. Stories have disappeared from databases and video clips from websites. This chapter will serve as an archive of material to which the rest of DeepCapture may link. Those who wish to take issue with DeepCapture’s archiving and deconstruction of their copyrighted articles and videos (and, perhaps, emails) know where to find us.
SEC Chairman Christopher Cox appeared before a US Senate commitee to discuss the Bear Stearns implosion. Be sure to watch this video to the last second. To decode the Washington-speak, note that Senator Tester asked Chairman Cox about short selling, not naked short selling.
Posted in 10) The Archive |
May 24th, 2008 at 1:35 pm
Don’t get your remark. Yes, the senator’s question mentioned “short selling” (without the qualifier “naked”), but Cox’s reply included “market “naked short selling”
May 24th, 2008 at 1:38 pm
Sorry browser messed up my comment.
Don’t get your remark. Yes, the senator’s question mentioned “short selling” (without the qualifier “naked”), but Cox’s reply included “market manipulation” and “illegal naked short selling”.
I can’t get a read on what the SEC may or may not be doing about NSS, even with this testimony. Is Cox serious about going after it?
May 24th, 2008 at 1:42 pm
At the very end, when the Senator says that he will interpret the answer the same way everyone else in the room does, to what is he referring?
May 24th, 2008 at 8:25 pm
It seems to me that the conspiracy must be so widespread amongst government ‘insiders’ like the committee itself that the Senator’s question was a slow speed softball, delicately asked and then Cox’s hushed reply was rather nervous and guilt-ridden. (Maybe he was thinking of a possible 20 year term in jail he may still be getting at some future date, under the new Administration, for allowing the theft of billions from BS stockholders and the taxpayers, so that pigs from J.P. Morgan and the NS Sellers–whomever THEY are– can party on? I certainly have not seen any investigative journalism yet, on the real identities of the perpetrators of this heinous Crime, but if I went out to rob my corner grocery store of $ 20 I might wind up on page one of the SF Chronicle. Cox’s fidgety response signals he knew exactly who they were. They are probably all friends, Inside Insiders, etc.
May 25th, 2008 at 9:02 pm
Is Cox really telling Senator Tester that Wall Street is now under attack by the Body Snatchers who have been attacking Main Street? Is he signaling that while Naked Short Sellers can assume the exact physical likeness of Short Sellers…these aliens (like those in the classic sci-fi movie Invasion of The Body Snatchers) possess no human emotions and, like plants, are concerned only with propagating themselves and eventually subsuming the earth. Cox appears to be telling Tester (in code) it’s hard to tell who’s a person and who’s a pod (think Jim Cramer) and they’re at a loss for what to do, especially when it seems that there are increasingly more aliens than humans on Wall Street. So we are not just dealing with counterfeit shares…was Bear Sterns just snatched by the pods?
May 26th, 2008 at 4:15 am
No need to worry about the so-called Al-Qaeda threat while we have the REAL Al-Qaeda running this Country at this very moment.
May 26th, 2008 at 12:35 pm
i have never understood the blame America first crowd.
America is and has been and will continue to be the most generous nation on the face of the earth.
it boggles my mind to think there are those in my country, America, who would think the worst of this great nation.
with all our faults we are the best nation on the planet.
lawrence if you care to discuss your comment you may register here and are welcome to join this chat room.
http://www.buzzen.net/chatui.aspx?rm=%25%23America!%5cbLoveIt-HateIt!%5cbDebateIt!
May 29th, 2008 at 10:36 am
I take the Senator’s comment at the end to mean that he and everyone else understands that there is an ongoing criminal investigation which they do not want to compromise by disclosing details before the perps are apprehended. Let’s hope.
May 30th, 2008 at 5:33 pm
I love this blog!!! Patrick_the_mensch.
Naked (or uncovered shortselling), WOW what a subject.Every Prime brokerage client working with any US Prime brokerage was able to naked (or uncovered short sell) if and “ONLY IF” the client had mega bucks to get it wrong. Seems ridiculous yes? Short sell a security and it goes UP in your face…so what do Prime Broker Client do? Double and triple down!!!! HA!
Who knows? THEY ALL DO!!! every SEC chump, every NASDAQ putz,every FINRA berk, ALL OF THEM KNOW. Most have known for DECADES.
May 30th, 2008 at 5:53 pm
Rabbi,
Thanks. Do I know you, landsman?
Patrick
May 30th, 2008 at 8:44 pm
Patrick,
I think that its fair to say ‘Yes” and I consider you a freind & mishpucha.
Rabbi W.E Schmeickalle.
May 31st, 2008 at 1:22 pm
Mr. Byrne,
You asked: “At the very end, when the Senator says that he will interpret the answer the same way everyone else in the room does, to what is he referring?”
It sounded to me like he was answering the question about whether short selling was a factor in the BSC collapse, that he was answering in the affirmative and that everyone in the room would interpret it that way.
I think we have to change the language surrounding this serious issue.
Short selling is a normal market activity that involves borrowing shares and selling them with the intention of buying them back and returning them to the owner.
Naked short selling is done only with larceny in mind. The shares are not even always borrowed, just a sale is made– there is never the intent to settle the trade.
If regulation SHO were enforced, if every trade had to settle against money or else, then this crime would evaporate overnight.
I think it should be called, as you called it, ‘Failure To Deliver’ and nothing else.
June 2nd, 2008 at 8:41 am
Had lunch with a powerful individual (the uncle of one of my best friends) who is big-time in Washington and apparently tight with Treasury Sec Paulson. I was asking him about how they are able to manage inflation with all the stuff I’m reading about that makes it sound like were “printing” money hand over fist, the fed’s taking on all these questionable securities and all the auctions being set up–his response was that Bear Stearns was taken down by naked short selling.
I literally choked, because other than Patrick and sympathizers, I have yet to find a solid source that definitively acknowledged the existence of the practice, let alone it being a problem. Him assuring me that nss does exist was pretty mind-blowing. Apparently the Chamber has been on the cause for awhile?
Of course, to him, it is a small piece of the big picture where so much wealth and liquidity exists, that nss (and the housing market) are barely a drop in the bucket. And while he is sympathic to the individuals and businesses that are effected by these problems he says that on the grand scale neither are disasterous issues as the media likes to portray them.
June 29th, 2008 at 10:17 pm
Although there was massive short selling (naked and straight) prior to the collapse, the idea that Bear Stearns was “taken down” by naked short selling is absurd. It certainly had no effect on the stock going from a closing price of 30 on March 14 to opening below 4 on March 17, because there was no trading at all in between.
Had the New York FED, in fact, bailed out Bear Stearns rather than J.P. Morgan with the $55 Billion, the stock of Bear Stearns would have gone up on March 17 and squeezed the short sellers.
All the short selling and put buying was done by those who knew the collapse was coming.
This deal was set up months prior to the event and was finalized on March 11, 2008 at the luncheon in the offices of the NY FED.
The CEO of J.P. Morgan, MR. James Diamond sitting as a Board Member of the NY FED approved the deal, which benefited J.P. Morgan and himself which is a violation of USC Title 18 Chapter 11, section 208.
John
June 29th, 2008 at 11:00 pm
John,
You write:
“…the idea that Bear Stearns was ‘taken down’ by naked short selling is absurd. It certainly had no effect on the stock going from a closing price of 30 on March 14 to opening below 4 on March 17, because there was no trading at all in between.”
On the issue of “It certainly had no effect on the stock going from a closing price of 30 on March 14 to opening below 4 on March 17, because there was no trading at all in between” we are in agreement. By then the die was cast.
On the issue of whether “the idea that Bear Stearns was ‘taken down’ by naked short selling is absurd” I’d respectfully reply:
1) You are attacking a straw man. I posted a video of Cox answering Tester’s question: he seems to suggest that it may have had a role (or at least, that the SEC will investigate the possibility).
2) BSC’s CEO has said that Bear was taken down by (as I recall) “illegal manipulative short selling.” I suspect he was right, with “illegal manipulative short selling” understood as some combination of factors, such as ones you have written about, and media manipulation such as Mark Mitchell describes here http://www.deepcapture.com/did-a-cnbc-reporter-help-destroy-bear-stearns/, and naked short selling/abuse of the option market maker exemption. I do not pretend to know the true mix of these elements. I do know, however (and should probably post this graph in a blog) that the levels of FTD’s in BSC spiked massively as BSC began its collapse. I do not pretend to know, however, whether that was a cause, or an effect, or just a bet. The truth is, no one can know the effect of just one of these dynamics in isolation.
Patrick
June 30th, 2008 at 5:45 am
Patrick:
There is a fallacious logical argument called “post hoc ergo prompter hoc”, which I am sure you know means “after this therefore because of this”.
I do not deny that there was massive naked short selling prior to the collapse. But I do question the idea that in this instance, that the Bear Stearns collapse was caused by the short sellers, whether they were naked, straight or whether they were buying puts.
I do, however, concede that selling long, selling short (naked or straight), selling calls and buying puts all put pressure on the market price of the stock especially in the short run.
The view expressed by BSC CEO Schwartz was:
” I would say that, as an observer of the markets, it looked like more than just fear. It looked like there were people who wanted to induce a panic. There’s lots and lots of reasons why people could have a financial motivation to induce a panic. There’s a lot of trading that would point to that.”
The generally expressed reason for the collapse was that rumor mongers caused the collapse by creating a “run on the bank”. This was expressed as the cause by Schwartz and others at the hearing.
I have read the Mark Mitchell article and although, I have not listened to the David Faber interview of Alan Schwartz but once or twice, I respectfully disagree with his conclusion that there was a co-ordinated effort with Faber as a player to create the collapse. This conclusion requires the ignoring of Jim Cramer’s statements on March 11 or 12, 2008 that Bear Stearns is just fine and that listeners would be silly to take their money out of Bear Stearns.
Mitchell’s conclusion also ignores the statement by Chris Cox that he was comfortable with the liquidity levels of Bear Stearns and others made March 11, 2008.
Were Cramer and Cox trying to prevent the collapse and making expressions that ran counter to Faber’s.
On a final point, I do not know how Mr. Paulson or Mr. Richard Fuld could conclude naked short selling brought down Bear Stearns without demonstrating how and by whom.
The naked short sales were probably made by the Options Market Makers doing reverse conversions using their exemptions to accommodate the true short sellers.
In my view, even if no naked short sales were made, Bear Stearns will still have been collapsed. The insider traders, who knew about the deal in advance, would have made less money but probably bought more puts or sold more calls straight out to compensate.
Cheers;
John