Native Nations bought New Jersey-based Freeman Securities in February 2001.

Stephenson has maintained that it was Freeman Securities that initially loaned the Genesis shares to MJK, beginning in November 2000.

Founder Valerie Red-Horse and other top executives resigned from Native Nations last October and have formed a new broker-dealer, Red-Horse Securities.

- Eric Wieffering is at ewieffering@startribune.com.

A tiny New Jersey brokerage agreed Monday to accept a $209.8 million judgment rather than fight a lawsuit related to the bankruptcy of Minneapolis securities firm Stockwalk Group, according to an attorney involved in the case.

Whether Native Nations Securities actually pays anything close to that figure remains to be seen, said attorney Bob Schnell. Schnell represents Minneapolis attorney James Stephenson, who was appointed to oversee the liquidation of MJK Clearing, a former subsidiary of Stockwalk.

“If they had $209 million in cash, we probably wouldn’t be having this conversation,” Schnell said. “They have something, but exactly how much and how that’s going to work out remains to be seen. We’ll go collect something, and I would guess that it will be less than that.” Stephenson sued Native Nations in late October in an attempt to recover $209.8 million that the firm owed MJK Clearing. Native Nations, which had $5 million in capital at its peak, ceased doing business in late September and defaulted on the debt, which was related to a series of stock loans between the firms. The default left MJK Clearing with too little capital to meet federal requirements and securities regulators forced it into bankruptcy.

Losing MJK Clearing cost Stockwalk more than one-third of its revenue and left the firm unable to pay $55 million in debt. Stockwalk filed for bankruptcy in February and has since received approval for a reorganization plan that would repay its debts over a decade.

Stephenson’s lawsuit against Native Nations was set for trial Monday, but was settled when Native Nations agreed to stipulate that it owes the money, Schnell said.

At the S.E.C., Annette Nazareth, the head of the division of market regulation, said the rule was aimed at assuring that new naked shorts would be cleaned up relatively quickly. Some people, she said, “are very disappointed that the impact of this rule was not to make these stocks go up.”

http://www.nytimes.com/2005/02/18/business/18norris.html?ex=1266469200&en=90f0e3a4722f0834&ei=5088&partner=rssnyt

For the record, it was Thomsen who was Director of Enforcement when the Cramer/Greenberg subpoenas, issued by the
SF office of the SEC, were squashed.

There is plenty of arrogance and fraud to go around. I do apologize. Because I’m sure they’re sorry for everything they’ve done to us, and haven’t done to the perps. I can feel the love.

Why hasn’t Dr. Byrne ever put forth a solution to the “naked short selling” issue? What would he do to correct the regulation/system?

Reinstate uptick rule, force buyin of all FTDs, eliminate ex-clearing, more transparency from DTCC/NSCC.

And why hasn’t he ever named the “small clique of terrorist hedge fund managers ” who are causing all of the problems?

They have been named here and on thesanitycheck web site. Go read if you’re interested (I doubt you are).

There’s 10,000 hedge funds in the world, are they all involved? Are they all guilty by association? There are a number of hedge funds named. The posters here go out of their way to say that there are legitimate hedge funds that do not resort to NSS to profit.

And why hasn’t he ever named the “small clique of terrorist hedge fund managers ” who are causing all of the problems? There’s 10,000 hedge funds in the world, are they all involved? Are they all guilty by association?

Pretty silly, given that the problem was not caused by, and had little to do with shortselling:

ALMOST ARMAGEDDON
MARKETS WERE 500 TRADES FROM A MELTDOWN
Comments: 55Read CommentsLeave a Comment
By MICHAEL GRAY

Click image to enlarge.
Last updated: 6:20 am
September 21, 2008
Posted: 4:16 am
September 21, 2008

The market was 500 trades away from Armageddon on Thursday, traders inside two large custodial banks tell The Post.

Had the Treasury and Fed not quickly stepped into the fray that morning with a quick $105 billion injection of liquidity, the Dow could have collapsed to the 8,300-level – a 22 percent decline! – while the clang of the opening bell was still echoing around the cavernous exchange floor.

According to traders, who spoke on the condition of anonymity, money market funds were inundated with $500 billion in sell orders prior to the opening. The total money-market capitalization was roughly $4 trillion that morning.

The panicked selling was directly linked to the seizing up of the credit markets – including a $52 billion constriction in commercial paper – and the rumors of additional money market funds “breaking the buck,” or dropping below $1 net asset value.

The Fed’s dramatic $105 billion liquidity injection on Thursday (pre-market) was just enough to keep key institutional accounts from following through on the sell orders and starting a stampede of cash that could have brought large tracts of the US economy to a halt.

While many depositors treat money market accounts as fancy savings accounts, they are different. Banks buy a variety of short-term debt, including commercial paper, with the assets. It is an important distinction because banks use the $1.7 trillion commercial-paper market to fund their credit card operations and car finance companies use it to move autos.

Without commercial paper, “factories would have to shut down, people would lose their jobs and there would be an effect on the real economy,” Paul Schott Stevens, of the Investment Company Institute, told the Wall Street Journal.

Cracks started to show in money market accounts late Tuesday when shares in one fund, the Reserve Primary Fund – which touted itself as super safe – fell below the golden $1 a share level. It had purchased what it thought was safe Lehman bonds, never dreaming they could default – which they did 24 hours earlier when the 158-year-old investment bank filed Chapter 11.

By Wednesday, banks sensed a run on their accounts. They started stockpiling cash in anticipation of withdrawals.

Banks, which usually keep an average of $2 billion in excess reserves earmarked for withdrawals, pumped that up to an astounding $90 billion by Wednesday, Lou Crandall, chief economist at Wrighton ICAP, told The Journal.

And for good reason. By the close of business on Wednesday, $144.5 billion – a record – had been withdrawn. How much money was taken out of money market funds the prior week? Roughly $7.1 billion, according to AMG Data Services.

By Thursday, that level, fed by the incredible volume of sell orders pouring in from institutional investors like pension funds and sovereign funds, had grown to $100 billion. It was still not enough to stem the tidal wave.

The banks knew something drastic had to be done. So did Paulson.

The injection of capital into the market was followed up by calls from Treasury Secretary Hank Paulson to major money market players like Bank of New York Mellon and State Street in Boston informing them that federal money was in the market and they should tell their clients the Feds would be back with a plan to stem the constriction in the credit market.

Paulson knew the $105 billion injection was not a real solution. A broader, more radical answer was needed.

Hours after Paulson made his round of calls to calm the industry, word leaked out that an added $1 trillion bailout of banks was being readied. Investors cheered. At about 3 p.m., news of the plans was filtering up and down Wall Street, fueling a 700-point advance in the Dow Jones industrial average through 4 p.m. Friday.

By that time, Paulson had announced the plan. It included insurance on money market accounts, a move that started in quiet Thursday morning, when the former Goldman Sachs executive saved the country from a paralyzing meltdown.

mgray@nypost.com

http://www.nypost.com/seven/09212008/business/almost_armageddon_130110.htm

This story is too important to be understood by just a few “buffs” who have read up on it in detail. If change is gonna come, millions of folks will need to pressure their state and federal representatives.

Patrick: how about a ten minute condensed version of “Dark Side” for YouTube?

Congratulations for your fine work to all who have contributed here.

I don’t think we will see that since so many in power whould be exposed…or shot!

They HAVE maliciously attacked America. Not with guns, not with knives, but with the public market and with the media and for what? Money.

And in this war with ‘ terrorist hedge fund managers’….so far America is losing.

5 investment banks get the SEC to increase their leverage.

Illiquid bonds get marked down according to an artificial index that was recently created rather than face value or the value of the performance of the bonds over time.

Investment banks appear insolvent with these mark-downs. Competitors short the index and facilitate the “insolvency”.

Shorting and NSS drive the price of these investment banks securities down, keeping them from accessing the capital markets.

BSC gets taken out. Same BSC that did not win friends when they didn’t participate in the SL bailout. Taxpayer backup.. Paulsen and FED making decisions and this is made to look like an emergency.

SEC stumbles and puts in temporary stopgap measures.

This appears to be a classic bear raid. Get someone highly leveraged. Drive the price down, create a margin call, (in this case, a potential bankruptcy), get all the assets at discount prices.

New kinks.. get the treasury involved as a backstop on the first takeover so that the public has been innoculated and believes that this is how it is done.

FNM and FRE… same thing. Do it on the weekend to make it look important.. Raid the treasury again.

Don’t change the rules for accounting that would allow the bonds to be priced on performance. Don’t enforce the laws on naked shorting or reinstate the uptick rule.

Create a crisis.

Solution.. Educate Congress as to what just happened.

JPM didn’t need that backstop. If they thought that BSC were worthless, they wouldn’t have bought it. They were just taking market share.

When the bonds get marked back up, the CEO’s will award themselves big bonuses.
After all, they survived the credit crisis that they created.

Paulsen has been given complete control over FNM and FRE and their assets. We’ve been told that the taxpayer could actually profit from this. If the paper is that good, why all the hubbub?

We need for the SEC to change accounting rules, reduce leverage to previous levels over time.

Banks and Investment banks need to be separate. Go back and rework the amount of leverage so that banks are not so speculative.

The very people who created this “crisis” are the people who asked for more leverage, created the ABX and traded in it. These people are supposed to get everything straight. More likely, they will get everything and the method is complex enough that Congress can’t understand how it happened.

I get that they made out like bandits. As long as the Mortgage loan monies were coming in, things were all good, but when the housing market collapsed, didn’t that just shut off a big source of liquidity in the markets? Maybe I am a moron, but it seems to me that it was something the Big Banks were depending on, because they sure didn’t live long with out it.
Some Naked Short Sellers as you say, made off like bandits. That implies deliberation if not intent. I mean, it isn’t as if the whole industry didn’t know about Naked Short Selling…. and was participating in it at one level or another! I think its all linked. The buying and selling of Mortgages was a HUGE business just a year and a half ago.

That’s simply not the case. When home defaults started to rise, it was the proverbial weak link in the economic food chain. This allowed the Miscreants to attack many companies that had some vulnerabilities. Were the vulnerabilities significant enough to actually cause these traditionally sound companies to face sudden crises of confidence. Since confidence is the cornerstone of our economy (and especially so for financial institutions), the combination of media onslaughts, flooding the market with non-existent shares, and engaging in all the other standard tactics that we’ve all read about here on Deep Capture become even more dangerous to these companies and their shareholders.

Just think about the monumental changes we have witnessed in the past six months: Bear Sterns, Fannie Mae, Freddie Mac, Lehman Brothers, Merrill Lynch, AIG, and now the entire financial sector either out of business or being bailed out by the Fed.

Anyone who has engaged in the Naked Shorting of any of these companies in the past six months has made out like bandits (pun intended).

And the first question we must always ask is this: WHO BENEFITS???

The answer seems to be: The Miscreants.

The next question is: WHO PAYS THE PRICE?

Unfortunately, the answer to that seems to be: All of us.