NEW YORK (Reuters) – U.S. government efforts to revive a sluggish economy have cheered markets since March, but some of the most successful investors around worry these moves may only make the bad times linger.

Several hedge fund managers at an investment conference this week warned that a number of policy moves by the Obama administration, from its Chrysler intervention to Treasury’s myriad bank bailouts, will only extend the recession.

It would be better, they said, if the government let markets move unimpeded, causing pain now but clearing a path for sustainable recovery.

“The basic strategy appears to be to try to bring us back to 2006 by propping up asset prices and reflating the popped credit bubble, subsidizing bank creditors and shareholders, and delaying needed bank recapitalizations while hoping for an economic recovery,” Greenlight Capital’s David Einhorn said at the annual Ira Sohn Investment Research Conference.

Wall Street has been pilloried during the past year for making big gains as markets crumbled, and blamed for driving companies into the ground and accused of standing in the way of the recovery. U.S. President Barack Obama last month chastised several hedge funds as “speculators” when they declined to support his Chrysler restructuring plan.

The scolding prompted these fund managers to surrender, but the episode made investors less certain about the security of their interests.

“It is a very bad idea for governments to create arbitrary and unfair outcomes, or outcomes resulting from the passions and whims of the government rather than from the law, just because they have the power to do so,” said Paul Singer of hedge fund Elliott Management.

MidAmerican Energy Chairman David Sokol, who runs a utility that also owns the second-largest U.S. real estate brokerage, said short-term fixes could came back to haunt the U.S. economy.

“Government intervention could draw this out much further than is necessary and is useful, although for some areas it may feel somewhat good in the interim,” said Sokol, a contender to succeed Warren Buffett as head of Berkshire Hathaway Inc.

Several of the Ira Sohn speakers warned massive government spending today could lead to rampant inflation.

Peter Schiff of Euro Pacific Capital, who in 2006 publicly warned the subprime crisis would drag down financial markets, said Obama’s policies will only re-inflate the credit bubble.

“As any drug addict knows, if you stop using drugs you will go through withdrawal. Government is making the situation worse,” said Schiff. “We don’t need any more stimulus. We are suffering from the stimulus we have already been given.”

He joked years of misguided U.S. fiscal policy has created a Ponzi economy, where new Treasury bonds must be sold to repay existing investors just to keep Uncle Sam solvent.

“I don’t know why we have Bernie Madoff in jail,” Schiff said. “We should appoint him secretary of the Treasury.”

Einhorn observed the U.S. budget deficit has grown to 13 percent of GDP, not including the trillions of dollars of potential losses guaranteed under the government’s bailout plans. Long-dated U.S. bonds, he said, are already anticipating higher rates inflation

When it comes to bolstering banks, though, the Obama administration may be doing too little.

Einhorn, who correctly predicted Lehman Brothers needed a lot more capital to cover real estate losses, this week said U.S. banks are undercapitalized even after raising $75 billion of equity following the so-called stress test.

The government should induce investors to swap debt for equity and push banks to recognize their losses on mortgages and other debts, he said. Yet these measures would generate losses and the government has not forced the issue.

“The Obama administration disappointingly seems to be following the same path as the Bush administration,” he said.

(Additional reporting by Herbert Lash)

It’s just a matter of keeping the unlawful act in focus. In a theft, the important fact is that someone snatched someone else’s property. We don’t need to get involved in the details of how the lock was picked or the tools that were used.

When we use the term “abusive naked short selling”, we can’t avoid getting into those details. And that is just what the perps want. If we simply focus on the unlawful act of causing a sale to occur with no intention of delivering, the violation is clear. And the perps can’t deflect the dialogue into the underbrush.

Keep up the good work.

KEY CONCEPTS IN REGARDS TO ABUSIVE NAKED SHORT SELLING (ANSS) FRAUDS

Dr. Jim DeCosta

1) The fraud known as abusive naked short selling (ANSS) went into high gear back when the DTC (Depository Trust Corporation) “volunteered” to act as the surrogate “legal owner” of all shares held in “street name” ostensibly to enhance the efficiency of the clearance and settlement process. Their nominee “Cede and Co.” became the “legal owner” or “owner of record” of all shares held in “street name” as referenced on the corporate transfer agent’s books.

2) This effectively blindfolded a corporation’s transfer agent from performing his “anti-counterfeiting policeman” role as “Cede and Co.” owned pretty much everything in sight and the TA was left with no visibility of the shenanigans going on behind the scenes at the secrecy-obsessed DTCC and their DTC and NSCC subdivisions.

3) Since the purchasers of shares were no longer the “legal owner” of that which they purchased they became relegated to being the mere “beneficial owners” of the securities purchased. “Cede and Co.” would “legally own” the shares for the benefit of (FBO) its “participating” clearing firm that in turn “owned” them FBO their client the investor. A “fiduciary” relationship was thus created between this surrogate “legal owner” and the “beneficial owner” that purchased the shares. Unfortunately for investors mere “beneficial owners” do not have the visibility of the behind the scenes actions at the NSCC like the “legal owners” enjoy. These “blindfolded” investors are forced to place their TRUST in the DTC to “act in good faith” and represent the interests of the purchasers of these shares while acting as a fiduciary in this surrogate “legal owner” capacity. History has now clearly shown us that neither the DTCC nor the DTC nor the NSCC nor many of their abusive “participating” market makers and clearing firms were up to this “acting in good faith” concept. The ability to re-route literally trillions of dollars of previously blindfolded investors’ money with very little risk of detection or meaningful penalties was just too tempting to pass up on.
4) The “beneficial owner” of securities was deemed by law to be what is referred to as a “security entitlement holder” as opposed to the “legal owner” of that which he purchased. What the investing public that hold their shares in “street name” often fail to comprehend is the tricky nature of legal “entitlements”.

5) The authors of UCC Article-8 wanted to send a “reminder” to the DTC “participants” and their nominee “Cede and Co.” that just because they were acting as the surrogate “legal owner” of all shares held in “street name” for efficiency purposes only they were never to LEVERAGE this form of public trust over the investors that they have the congressional mandate to protect. After all, it was the “security entitlement holders” that bought and paid for the shares (that may or may not have ever been delivered). As it turns out mere “security entitlement holders” have absolutely no clue as to whether or not that which they purchased ever did get delivered. The test begins; will abusive DTC participants try to LEVER the “legal owner” role and their superior view of the clearance and settlement system that the regulators and investing public entrusted them with?

6) UCC Article 8 made it clear that it was the investor clients of the various clearing firms making up the NSCC subdivision of the DTCC that were entitled “to exercise all of the rights and property interest that comprise the securities that they purchased” and not the NSCC participating clearing firms. The DTC promised that they would never think of LEVERAGING the fact that they were technically the “legal owner” of that which others purchased. Well, history seems to indicate otherwise as the “legal owner” of these securities ended up doing pretty much anything they wanted to with their “possession”.

7) UCC-8 clearly spelled out the various roles of the “legal owners” of securities versus those of the “security entitlement holders”. If the “entitlement holders” wanted to attain the “legal ownership” of that which they purchased all they had to do was to file an “entitlement order” demanding the delivery of the paper-certificated version of ownership (a share certificate) with their name inscribed on it. As the investors in corporations undergoing abusive naked short selling attacks will readily attest the DTCC often refuses to honor these “entitlement orders” in a timely fashion because to do so would often involve the NSCC management buying-in the delivery failures of their abusive bosses/participants. This process would drive share prices up and counter the share price depressant effect of “security entitlements” which those with massive preexisting naked short positions rely upon. The absolute refusal to execute buy-ins in order to service an “entitlement order” by the surrogate “legal owner” of shares obviously would be bordering on a criminal act. An unconflicted surrogate “legal owner” acting in a fiduciary capacity would obviously not facilitate the counterfeiting (via the NSCC’s SBP) of that which it has the mandate to “safeguard” and act as the “legal owner” of.
UCC Article-8-501 mandated that the clearing firms of investors that didn’t get delivery of the securities they purchased by “settlement date” (T+3) must nevertheless credit the investor’s account with “security entitlements”/IOUs/”long positions”/”phantom shares” representing the yet (if ever) to be delivered shares. Make a mental note as to the naïveté of this default assumption that ALL delivery failures on Wall Street involve securities that are about to arrive any second due to an unforeseeable but “legitimate” delay.

9) UCC Article -8 also mandated that the clearing firms holding these “security entitlements” treat their clients/”entitlement holders” as being entitled to exercise ALL of the rights and property interest that comprise the security even though they never got delivered and even though that which was sold may have never existed in the first place. OOPS!

10) Note the insanity here IF those shares sold whose delivery was theoretically “delayed” weren’t “delayed” at all but never existed in the first place and are not about to “arrive any second”. If that were to happen it’s too late because the purchaser of these “nonexistent” shares i.e. their “entitlement holder” already got permission to sell them as if they did arrive due to the wording used in 8-501.

11) Faulty presumptions about the imminence of delivery now allowed “counterfeit” shares to enter the system. The door was now wide open for securities fraudsters to take advantage of this “default assumption” regarding an imminent delivery and establish massive naked short positions by simply refusing to deliver the (nonexistent) securities they previously sold and thereby literally drown U.S. corporations with share price depressing “security entitlements” while claiming to be “injecting” much needed “liquidity”.

In regards to your question: “What happens if a long investor unknowingly sells his/her long shares which are only “security entitlements” BEFORE the FTD is cured?”

Assume that an NSCC participating clearing firm has 10 million Acme shares in its NSCC participant “shares account”. Let’s also assume that it sends out monthly statements “implying” that it is “holding long” 30 million shares of Acme for its clients. It is thus “naked short” 20 million shares.

If the phone rings and a client wants to sell his Acme purchases by default he will be determined to be one of the lucky ones that did get delivery of that which he purchased. That’s the beauty of “anonymous pooling” to cover up frauds. If there were a “run on the bank” scenario in which the purchasers of all 30 million Acme shares at that broker wanted to sell their shares simultaneously it still wouldn’t matter.

Since 90% of people hold their shares in “street name” because it’s so “handy” that broker could always borrow some from across the street and repay the borrowing later. The “fraternity brothers” at the DTCC take very good care of each other. I’ll post a blurb from book #9 in a second re: the tricky nature of “security entitlements”.

Above you spoke about the “security entitlements”.

What happens if a long investor unknowingly sells his/her long shares which are only “security entitlements” BEFORE the FTD is cured?

Do these shares somehow “magically” become “cured” because these shares somehow get lost in the anonymous pool of stocks?

One anomaly that I notice recently in writing my 2nd draft is that Wall Street tells us that the SBP program “cures” the Failure to Receive.

The question that comes to mind is:

How is it possible for a buyer to RECEIVE the stock they purchased when their money was NEVER USED TO BUY STOCK?

You said:

“My point is that we should not be accusing anyone of ANSS. We should not use the phrase “abusing naked short selling”, or its abbreviation. That term does not help our cause. We should emphasize that the perps are fraudulently selling shares with no intention to deliver. That’s what is already illegal under current law.”

I am not sure what you mean by “That term [ANSS] does not help our cause.” But as I have stated before the phrases “Naked Short”, “Naked Shorting” and other such “NAKED” phrases do not communicate to the common man and woman investor that a crime has been committed against them.

The following naked short cartoon illustrates the essence of what is communicated to the common man and woman by these “NAKED” phrases – naked men:

http://media.npr.org/blogs/globalpoolofmoney/images/2008/09/naked_2.jpg

On the one hand I think I agree with your statement, yet on the other hand I disagree with your statement….

It seems to me that there are at least two audiences that we need to communicate with:

1 – Common Man and Woman Investor who do not understand the crimes being committed against them.

2 – The Courts, the lawyers, the SEC, the Financial Self Regulators in the legal system.

These two audiences require us to communicate with them in different ways. The Common Man and Woman Investor does not understand these “Naked” phrases, yet those groups in the legal system require the use of “Naked” phrase because these phrases are part of the financial industry’s standard vocabulary.

Dr. Jim DeCosta excels in communication with the legal system. And for those willing to enter into the struggle to climb the required learning curve, Dr. Jim DeCosta written explanations are an excellent learning tool.

On the other hand, if I were to hand most of Dr. Jim DeCosta’s detailed explanations of “The Wall Street Counterfeit Machine” to the Common Man and Woman, their eyes would probably roll back in their heads after reading the phrase “NAKED SHORT” the first time. The visual image of a “Naked Man” in their mind created by the phrase “Naked Short” would be so absurd their mind would shut down.

I am here to study and learn from everyone including Dr. Jim DeCosta with the hope that I can learn enough to create some type of explanation for the Common Man and Woman investor that will clearly show them that financial crimes are being committed against them.

So if what you mean by “That term [ANSS] does not help our cause.” is that the Common Man and Woman Investor will not understand this term ANSS, then I agree. But I do not agree that we should never use this term.

http://www.latimes.com/business/la-fi-briefs23-2009may23,0,3541132.story

They just aren’t very quick to act are they?

“In a statement, SEC Chairman Mary Schapiro acknowledged weaknesses and promised reforms, including tougher rules governing trades and a new system for tracking trades.

“It only makes sense that we have a world-class compliance program — just as we expect from those we regulate,” Schapiro said. “The employees at the SEC have a well-deserved reputation for integrity and professionalism. These measures will further bolster our standing by helping to prevent not only an actual impropriety, but the appearance of one as well.”

http://www.washingtonpost.com/wp-dyn/content/article/2009/05/22/AR2009052203331.html?hpid=topnews

Did The Financial Press Miss The Meltdown?

NPR broadcast with
David Wessel, economics editor for The Wall Street Journal

Dean Starkman, former WSJ, assistant managing editor for the Columbia Journalism Review

http://www.npr.org/templates/story/story.php?storyId=104310605

My point is that we should not be accusing anyone of ANSS. We should not use the phrase “abusing naked short selling”, or its abbreviation. That term does not help our cause. We should emphasize that the perps are fraudulently selling shares with no intention to deliver. That’s what is already illegal under current law.

I certainly do not think the dialog on this board is silly. But we do play into their hands by allowing them to obfuscate the simple fraud that is going on when we get tied in knots haggling of the fine points of how it gets carried out.

MYTH: “The typical U.S. market maker injects much needed “liquidity” especially into the markets of thinly-traded securities”

BACKGROUND INFORMATION: broker-dealers known as “market makers” in a security by definition must stand ready to buy and sell the security on a regular and continuous basis at a publicly quoted price, even when there are no other buyers or sellers. Depending upon share price levels there are minimum amounts that must be posted on the bid and the offer. There are very few barriers to entry in becoming a “market maker”.

A truly “bona fide” market maker has been exempted from making pre-borrows or “locates” before making admittedly naked short sales. This is theoretically because markets move very quickly and there often isn’t time to go out and arrange a pre-borrow or “locate”.

A truly “bona fide” MM accessing the (universally abused) “bona fide” MM exemption must stand ready to sell shares into buy orders in markets characterized by order imbalances involving buy orders dwarfing sell orders WITH THE SAME INTENSITY that he buys back those previously sold shares in markets characterized by sell orders dwarfing buy orders amidst falling share prices. Both buy side liquidity as well as sell side liquidity need to be injected as needed in order to legally access that exemption. The legality of the accessing of the bona fide MM exemption cannot be determined until share prices downtick wherein a truly bona fide MM will cover his preexisting naked short position. The trading data clearly reveals to any interested and unconflicted SRO or regulator as to when that exemption has been illegally accessed.

MARKET MAKING IN A CLEARANCE AND SETTLEMENT SYSTEM BASED ON “CVP”: In a clearance and settlement system whose foundation has been ILLEGALLY converted to a foundation based upon mere “collateralization versus payment” (CVP) instead of the congressionally mandated “delivery versus payment (DVP) abusive MMs can easily reroute the funds of unknowing investors into their own wallets.

In a “CVP” system the sellers of securities like MMs theoretically addressing an order imbalance are unconscionably allowed access to the funds of investors EVEN IF THEY REFUSE TO DELIVER THAT WHICH THEY SOLD. This is because they are only asked to “collateralize” the monetary value of their failed delivery obligation on a daily “marked to market” basis.

Unfortunately for investors MMs that do nothing but sell shares that they don’t own into buy orders but refuse to ever buy them back can easily put the share price of the involved corporation into a “death spiral”. This is due to the accumulation of the share price depressing “security entitlements” that result from each FTD and each SBP “borrow” used to theoretically cure the FTD.

This unconscionable policy of the DTCC results in the temptation of would be “bona fide” MMs ILLEGALLY accessing that exemption and doing nothing but selling into buy orders but refusing to inject buy orders when sell orders dwarf buy orders as share prices drop. Why would you ever cover your preestablished naked short position if you can gain access to the investor’s funds without ever having to spend the money needed to do so?

THE ROLE OF THE ISSUING OF SHARE PRICE DEPRESSING “SECURITY ENTITLEMENTS”: Due to the phraseology used in UCC Article -8-501 every failure to deliver securities and every NSCC “Stock Borrow Program” (SBP) “borrow” on Wall Street results in the issuance of IOUs known as “security entitlements”. UCC-8 also mandates that the clearing firms holding these “security entitlements” on behalf of their investor/clients that did not get delivery of the securities that they purchased or whose shares did arrive but were subsequently loaned out through the NSCC’s SBP to treat these “security entitlement holders” as being entitled “to exercise all of the rights and property interest of the securities that did not get delivered”. This policy has a tendency to “blindfold” investors as to whether or not that which they purchased ever got delivered or not or for that matter whether or not it ever existed. Either way the investors are allowed to resell that which was credited to their account whether it was a real share that got delivered or a mere “security entitlement” signifying the lack of deliver of that purchased. Their monthly brokerage statement in either case will indicate that these shares or “security entitlements” are being “held long” for them by their clearing firm. This “blindfolding” of the U.S. investors about to be robbed is critical when a crime as obvious as refusing to deliver that which you sold to a party after having been given access to his funds is being committed.

THE REALITY: “Thinly-traded” securities are the most expensive to borrow for legal short sellers. The two main sources for legal borrows are long term institutional investors and margin accounts. The thinly-traded nonmarginable securities of development stage companies have very few shares in either location.

Abusive naked short selling circumvents the need to pay usurious lending fees for these typically “hard to borrow” i.e. “expensive to borrow” securities. The excuse provided that these “thinly-traded” securities are in desperate need of the injection of liquidity happens to fit in rather nicely with their being expensive to borrow. The fact that these development stage U.S. corporations are relatively defenseless to these attacks while developing in the incubators provided by the lesser trading venues doesn’t hurt either.

These corporations also are typically yet to be cash flow positive. Abusive naked short sellers can easily force these corporations to service their monthly “burn rate” by selling shares at steep discounts to current share price levels (due to the implied high risk) that can be put into a “death spiral” by simply refusing to deliver that which you sell. The resultant accumulation of readily sellable share price depressing “security entitlements” inflates the “supply” of that which must be treated as being readily sellable as per UCC Article-8-501 which by definition decreases share prices.

Truly “bona fide” market makers that are allowed to legally access the bona fide MM exemption from performing pre-borrows or “locates” before making admittedly naked short sales will address order imbalances involving excess buy orders and excess sell orders by taking the other side of these trades. Ever since our DTCC-administered clearance and settlement system was illegally converted to a foundation involving mere “collateralization versus payment” (CVP) instead of the congressionally mandated “delivery versus payment” (DVP) foundation involving the “prompt settlement” of transactions abusive market makers realized that they could sell nonexistent shares into buy orders all day long, refuse to deliver that which they sold and still gain access to the funds of the unknowing investor. The key was the ability to rely on the NSCC management to pretend to be “powerless” to buy in these delivery failures.

In a CVP environment all abusive naked short sellers are asked to do is to collateralize the monetary value of the failed delivery obligation on a daily marked to market basis. As the share price predictably plunges due to the inflation of the “supply” variable of that which must be treated as readily sellable so too did the collateralization requirements. Thus the investor’s money would unconscionably flow to the seller of nonexistent shares even though he continued to refuse to deliver that which he sold. This is the hallmark of a clearance and settlement system that has been illegally converted to a CVP foundation.

Abusive MMs would sell truckloads of fake shares into buy orders in markets characterized by order imbalances involving buy orders dwarfing sell orders but they were nowhere to be found when share prices were dropping when sell orders outnumbered buy orders and the injection of buy side “liquidity” was needed. In order to legally access the “bona fide” MM exemption a MM has to inject buy side “liquidity” as share prices drop with the same vigor that he injects sell side “liquidity” when buy orders predominate.

The problem is that selling even nonexistent shares makes you money in a clearance and settlement system using “collateralization versus payment” but covering those naked short positions costs you money. As share prices dropped abusive MMs were nowhere to be found injecting buy side liquidity and if anything were busy selling yet more nonexistent shares in order to reroute yet more investor money into their pockets and enhance the value of the short/negative bet they had earlier placed.

By far and away the most effective way to deter these thefts is for the NSCC management to “buy-in” these delivery failures on approximately T+6 when it becomes obvious that their abusive “participant”/boss had no intent to ever deliver that which it sold. In other words, the default presumption of the NSCC that all FTDs are associated with temporary delays in delivery was not accurate and thus the “security entitlements” were “MISTAKENLY” issued.

The NSCC management after attaining 15 of the 16 sources of empowerment to execute buy-ins and while having the congressional mandate “to act in the public interest, provide investor protection and to “promptly settle” all securities transactions” still has the audacity to plead to be “powerless” to buy-in the delivery failures of its abusive “bosses” when they absolutely refuse to VOLUNTARILY deliver that which they sold even after being given access to the previously blindfolded investor’s money.

The “injection of liquidity” argument posits that investors can buy shares at cheaper levels when these theoretical “shareholder advocates” known as market makers “generously” sell shares at levels below which investors otherwise might have had to pay. The problem is that many abusive MMs that have “accidentally” run up gigantic naked short positions due to greed are merely putting a “lid” on the market so that their collateralization requirements and short position doesn’t cost them a fortune in losses.

When an abusive MM that has been pretty much the dominant seller in the securities of a corporation that refuses to go bankrupt on cue decides to cover his naked short position he has to do two distinct things. First of all he has to stop the daily “maintenance” naked short selling done to pin the share price down. This alone is going to cause the share price to gap upwards in thinly-traded securities. Secondly he has to buy back a truckload of shares out of the open market as the market is gapping upwards. This could be cost prohibitive. Since there is no risk of being bought in by the NSCC management (the abusive NSCC participant’s employees) then an abusive market maker would be insane to EVER cover a pre-established huge naked short position.

At first glance it’s wonderful to be able to buy shares cheaper due to all of this sell side “liquidity” being provided but if it comes at the expense of no chance in the world to have a profitable investment then I would rather buy in at a higher level in a market not “rigged” to go down. The problem is that it is incredibly easy in a clearance and settlement system based on CVP for a MM to run up massive naked short positions and get himself into trouble.

The NSCC subdivision of the DTCC is in essence handing out “free money” to its abusive participants just for their refusing to deliver that which they sold. They even intentionally withhold the only source of meaningful deterrence to these thefts as well as the only cure available when the sellers of securities absolutely refuse to VOLUNTARILY deliver that which they have already sold i.e. execute the much needed “buy-in”.

The problem is that in a zero sum game like Wall Street in a CVP clearance and settlement system the free money they’re handing out is that of the previously blindfolded investors that thought that the NSCC was an SRO (self-regulatory organization) mandated “to act in the public interest, provide investor protection and “promptly settle” all securities transactions”. When the seller of securities absolutely refuses to voluntarily deliver that which it sold there is only one way to “promptly settle” that transaction and that is via executing a “buy-in”.

The actual crime being committed here is the illegal accessing of that exemption that can only be legally accessed if the market maker is willing to cover his preestablished naked short positions should share prices drop. As mentioned one doesn’t know if a market maker illegally accessed that exemption UNTIL the next downtick in share prices. This is when a truly bona fide MM covers his previously established naked short position. The illegal accessing of that universally abused exemption leads to the 100% predictable “manipulation” of the share price downwards which in turn leads to the theft/conversion of the unknowing investor’s money.

The obvious solution here is to force any market maker labeling a sale as “short sale exempt” which signifies that he is formally accessing that exemption to place a bid for an equal amount of shares that he is naked short selling at perhaps 2% below the level at which the naked short sale was made. In essence a MM accessing that exemption must be forced to PROVE that he is acting in a “bona fide” market making capacity. Being put on the “honor system” amidst trillions of dollars of temptation historically just didn’t cut it. Imagine that!

Abusive MMs constantly proffer the argument that it’s their job to sell nonexistent shares into markets when buy orders dominate sell orders and it is and they’re right. But as the share price drops from $10 to 10-cents how could there have been a preponderance of buy orders dwarfing sell orders while the share price was falling off of a cliff because the trading data shows that you were selling the whole way down?

Back to the myth: “The typical U.S. market maker injects much needed “liquidity” especially into the markets of thinly-traded securities”. The injection of “one-sided liquidity” meant to reroute the investment funds of previously blindfolded investors into one’s own wallet is not “much needed” by any U.S. investor.

A good learning tool is to notice the “cyclicality” of this crime wave. The bad guys sell nonexistent shares, refuse to deliver that which they sold and the share price falls out of bed. The investor’s money flows to the bad guys that are only asked to collateralize the monetary value of their failed delivery obligation.

The defrauded investors get mad, seek legal counsel, file suit against the DTCC, the hedge funds and the Wall Street misbehaving market makers, prime brokers, clearing firms, etc. The suit gets stalled into perpetuity which favors the deep-pocketed Wall Street behemoths. Fearing that the case might go on to the all-revealing discovery process the SEC comes to the rescue of the bad guys and tells the Judge that they did indeed approve of the (100% corrupt counterfeiting machine known as the) NSCC “Automated Stock Borrow Program” or “SBP”.

The defense of the bad guys tells the judge that short selling is a good thing and that there isn’t even a formal legal definition of this myth known as “abusive naked short selling” and therefore it probably is just an urban myth. The merits of legal short selling are listed to the judge as the injection of liquidity, hedging opportunities, pricing efficiency, etc. This is meant to reframe the debate away from the crux of the matter which is the yet to be formally defined “abusive naked short selling”.

The goal of the bad guys as well as the SEC is to do whatever is necessary to keep the truth from coming to light. This means to do whatever is necessary to kill the case in its tracks and prevent it from going on to discovery where the truth can be revealed. Since 1995 and the PSLRA legislation the plaintiffs need to make their case up front in order to advance on to discovery. The problem is that the trading records which show the truth can’t be accessed UNTIL discovery rights are granted.

The best learning tool I’ve seen is to study the amicus curiae briefs filed by the SEC in an effort to kill the case. I’d suggest the Nanopierce and the Pet Quarters cases for starters. Note how the SEC defends the indefensible NSCC SBP program and how they tell the judge that since the number of shares technically “outstanding” and since the “legal ownership” of shares technically does not increase then everything’s hunky doorie. What they refuse to tell the judge is that the “supply” variable that interacts with the “demand” variable to determine share price includes not only the number of shares “outstanding” but also each and every “security entitlement” resulting from each and every FTD in the system PLUS each and every FTD theoretically “cured” by an SBP “borrow”. How can the SEC lawyers argue that the supply and demand of that which is readily sellable in a corporation’s share structure no longer determine share price?

Yes, every single FTD theoretically “cured” by this wonderful SBP results in the issuance of incredibly damaging share price depressing “security entitlements” that are hidden in the NSCC “C” sub accounts away from the public view. So much for this wonderful SBP program. Any judge aware of that one fact would let these cases go on to discovery. The SBP simply allows the SAME parcel of shares to be “beneficially co-owned” by dozens of different U.S. investors. The key to this entire crime wave is EDUCATION! Thank the Lord for the Patrick Byrne’s of the world and the deepcapture.com type of classroom.

Suggested legal definition of “abusive naked short selling”: A form of share price manipulation in which the share structure of a corporation targeted for destruction is intentionally flooded with readily sellable share price depressing “security entitlements” that result from each and every unaddressed failure to deliver in the system as well as each and every FTD addressed by an NSCC “Stock Borrow Program” cure.

I agree with you in a general way. but….

The problem is that if the Wall Street COPS do not have a definition for “abusive naked short counterfeit selling”, then the COPS say no crime as been committed.

This explains to me what the SEC Enforcement Division stated about the report from the SEC Inspector General concerning 5000 naked short complaints receiving ZERO enforcement:

“there is hardly unanimity in the investment community or the financial media on either the prevalence, or the dangers, of ‘naked’ short selling.”

As you stated, “The problem is lack of enforcement.”

Yes, there is “no enforcement” because the Wall Street COPS say no crime was committed, because they have NO DEFINITION for any such crime.

So I do not agree with your statement about “these silly debates”… because although this should be a silly debate, it is not. When the SEC, acting as Defense Lawyers for the Wall Street Criminals, is able to say there is no definition for any such crime, it can then claim this ambiguity prevents them from acting. This lack of definition also means that these SEC Defense Lawyers are protected from being fired for doing nothing.

So we need a legal definition.

You don’t need a definition for ANSS. When you execute a sale and don’t intend to ever deliver anything, that’s already illegal, against existing laws.

It’s not a problem of insufficient or ambiguous laws. The problem is lack of enforcement. And the perps have taken control of the dialogue to get us into these silly debates about what exactly is illegal.

It is truly amazing how the Wall Street Counterfeit machine continues to run year after year after year.

I think the word I first saw you use “blindfolding”/”blindfolded” is the very word that describes how the Wall Street Criminals have been able to continue their crime spree for so long.

The SBP software using anonymous pools of stock was designed to be “blindfolding” software to prevent anyone from seeing the truth.

The RECAPS program is a “blindfolding”/ program to prevent outsiders from seeing the truth.

The 5.5 month delay in reporting the FTDs is a “blindfolding” program in which the Wall Street Criminals can change the numbers to hide the truth. I suspect that during this delay RECAPPING is used to clean up the FTD numbers. Yes, it may be that the FTD numbers are being changed through some type of back dating process.

Today I came upon one of your letters to the SEC while searching for information about the RECAPS program and it struck me how one thing you stated was a HUGH “blindfolding” point:

“SIFMA strongly supports the SEC’s stated goals of addressing potentially abusive “naked short selling” practices. Though not defined, (Comment: This lack of a formal legal definition for “abusive naked short selling” (ANSS) is itself an absurd concept that needs to be addressed before any meaningful reform can be accomplished. After all how can a regulatory authority deal with a crime that has no formal legal definition?”
( http://www.sec.gov/comments/s7-08-08/s70808-491.pdf )

Yes, the SEC refuses to define what “abusive naked short selling” (ANSS) is. Without a definition of WHAT “abusive naked short counterfeit selling” (ANSCS) is the legal system is seemingly “blindfolded.” And a “blindfolded” legal system seems to be one of the greatest deterrents to having the Wall Street Criminals prosecuted.

The SEC and all its fraternity brothers have to date successfully “blindfolded” just about everything in the Clearance and Settlement System.

But there is hope that educating the public, as you have said, will turn this whole thing around. I am here today and many others also after seeing the Wall Street Financial Terrorist bring the whole world to the brink of a global depression. Their criminal actions have mobilized a new army of citizens willing to learn the details of their crimes so others can be educated to take up arms against them.

The overall concept is very simple, its all about delivering what you sell. If you exchange money for a product or service, you should receive that product or service, not be given an “IOU” that never gets settled. Or worse even, be given an “IOU” that nobody bothers to tell you is only an “IOU”. Even a young kid with a paper route will tell you, you can not expect to collect a payment from someone without actually delivering their newspaper. Unfortunately for us though, this doesn’t seem to be the way things currently work on Wall Street.

Its a little tough jumping into one of Dr. DeCosta’s explanations without having read most of his previous posts, he has a knack for getting deep into the nitty-gritty, and each post he writes tends to build upon the last. His explanations make tons of sense if you have been following them for a while though, I highly recommend that if you have the time and your curiosity is piqued, dig through the rest of the articles on Deep Capture and check out his earlier posts (be sure to read the articles as well, the Deep Capture team has done a remarkable job of breaking this stuff down to a level everyone can understand), you’ll find that this stuff isn’t all that confusing at all.

This letter speaks for itself. If you have the type of specific, actionable information she requests, please send it to her.

If you know of a specific document that has been removed, tell her the details. I believe someone on this board mentioned something Brodigliano (sp?) was involved in. Also if you posted a comment letter which did not get posted, please give date, etc. I hesitated to post the details of this person who responded to me out of concern that it would cause a flood of inappropriate letters to her. So please only send actionable information.

Thanks

Use email address OIG@SEC.gov

Dear Mr. (Fred)

Thank you for your e-mail to the Office of Inspector General (OIG) of the U.S. Securities and Exchange Commission (SEC). We appreciate your expressing your concerns to us. Inspector General H. David Kotz requested that I reply to your e-mail on his behalf.

Please be advised that the OIG’s primary functions are to perform audits of SEC operations, programs, activities, functions and organizations, and to conduct investigations of alleged staff (and contractor) misconduct. If you have specific information about or evidence of SEC employees improperly removing documents from the SEC website or not posting comment letters to the website, we would appreciate it if you would provide that information to us. Please include (1) the identity of the SEC employee(s) involved; (2) a description of the documents, including comment letters, that were improperly removed or not posted, including the dates of these documents and any identifying numbers; (3) why you believe the documents were improperly removed or not posted; and (4) the rules, regulations or statutes you believe were violated.

Providing us with this information will assist us in being able to address this matter. Thank you for your cooperation.

Sincerely,

Natasha Dandridge

Legal Assistant
On behalf of the Office of Inspector General
Of the U.S. Securities and Exchange Commission

The NSCC goes through all kinds of gyrations with trades to present the facade that the involved trade legally “settled”. Whether it’s the RECAPS program or the NSCC “Automated Stock Borrow Program” or “SBP”. It’s as if they’re busy trying to get each trade thrown into a “trade settled” box whether or not the trade legally “settled” or not. Every single delivery failure theoretically “cured” by an SBP “borrow” results in the issuance of a share price depressing “security entitlement” over and above the # of shares already “outstanding”. Since “security entitlements” are redily sellable this is referred to as “share price manipulation” due to supply and demand interactions. In an “SBP” borrow only the “failure to receive” is “cured” but the failure to deliver “FTD” lives on in the form of the “security entitlement”. A trade does not legally “settle” without a fraud being committed until that which was thought to be being purchased is delivered “in good form”. The NSCC has the congressional mandate to “promptly settle” all securities transactions. The mere posting of a share price depressing IOU/”security entitlement” does not accomplish “good form delivery”. These trades don’t legally “settle” promptly or any other way. You can’t accomplish “good form delivery” by borrowing shares out of a self-replenishing lending pool and then allowing the receiver of the borrowed shares to redonate the very same parcel of shares right back into the very same lending pool as if it never left in the first place. There it sits ready to “cure” yet another delivery failure. The sleight of hand here is allowing the purchaser of shares whose purchase involved a failure to deliver and therefore needed an SBP “borrow” to cure the delivery failure to become the new “legal owner” of that parcel of shares. The NSCC then argues that as the new “legal owner” this NSCC “participant” has all of the right in the world to redonate that parcel of shares right back into the very same lending pool.This is a Ponzi scheme. How the hell stupid do you at the NSCC think we are? Congress told you in Section 17 A to “promptly settle” all securities transactions.

When one of your abusive participants absolutely refuses to deliver the securities that it sold then there is one and only one way to “promptly settle” that trade and that is to “promptly” buy-in that delivery failure not to credit share price depressing “security entitlements” to the “C” sub account of the firm whose donated shares were chosen to “cure” the delivery failure which results in the rerouting of the investors funds to the party refusing to deliver that which it sold. Crediting the “C” sub account of the donor party does not equate with the “good form delivery” of that which the investor purchased. It is legally referred to as “kiting” which involves the intentional abuse of a “float period”. The “float period” here is the time period in between the previously agreed to T+3 “settlement date” and the date wherein “good form delivery” is effected which is never with the SBP.

I found an answer to my question:

Do you know how the word “aged” is defined by the DTCC? (aged FTD = 5 days)

The User Manual for RECAPS states (www.dtcc.com/products/documentation/cs/RECAPS User Guide.pdf):

“Participants submit equity, municipal bond, zero coupon, corporate bond, and UIT fails that are at least five business days old to the RECAPS system. RECAPS recompares previously compared transactions that are being carried as open fails.

RECAPS moves matched CNS-eligible fails into CNS. Transactions that remain unmatched are identified for brokers to research and follow up.

RECAPS also re-nets open fails and assigns a new settlement date for the newly netted positions; this settlement date replaces the original settlement date for the original fail. RECAPS reprices these open fails to the current market value.”

Mr. Altomare’s whistleblower status on the perils of Naked Short Selling is now confirmed by the very publicly covered press on this governmental agency cover up . However, what is not covered is the reasons why the SEC and its supporters destroyed this small, growing, innovative public company. Liquidating its assets for fractions of what they were worth, firing hundreds of employees, and placing their CEO in maximum security prison for 83 days for not having the money to pay their astronomical fines from one life-appointed judge.

Our goal is simple. To showcase the facts that have not made it to the front pages of our newspapers and screens of our television sets.

We hope this site further uncovers what the SEC and other supporters of their unchecked power DO NOT want average Americans to read about.

-Universal Express Shareholders Worldwide

http://www.richardaltomare.blogspot.com/