What the Rest of the World Says About Naked Short Selling

    Speaking at a panel discussion in Australia this week, Zarinah Anwar, the chairman of the Malaysian Securities Commission, said that Asian emerging markets had learned an important lesson.

    Following the Asian financial crisis in the 1990s, regulators in the region allowed short selling, but strictly enforced an uptick rule and a ban on naked short selling. As a result, Anwar said, Asian markets were better able to withstand this year’s market turmoil.

    Anwar also spoke at length about “regulatory capture,” noting that in some countries government bodies were subject to influence from those whom they were supposed to be regulating.

    Probably, she was thinking of the United States Securities and Exchange Commission, and it’s failure to stop the naked short selling that helped topple the American financial system.

    How strange that everyone in the developing world seems to understand this issue, and the American media still does not have a clue.

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    44 Responses to “What the Rest of the World Says About Naked Short Selling”

    1. Dr. Jim DeCosta says:

      Here’s a link to a paper I just filed with the SEC on abusive naked short selling (ANSS) frauds and the role of the SEC therein.

      http://www.sec.gov/comments/s7-30-08/s73008-78.pdf

    2. Dr. Jim DeCosta says:

      THE NSCC-THE “FORGIVING FRATERNITY”

      Our DTCC administered clearance and settlement system utilizes a system involving the legal concept of “novation”. “Novation” means “to create anew”. Originally when a trade is executed in the U.S. the selling party owes the buying party the delivery of the securities it sold. During “novation” the delivery obligation of the selling party is “discharged” and the NSCC as the “central counterparty” (CCP) to the trade “assumes” this delivery obligation owed to the buyer and promises to “execute” on it “eventually” despite the fact that they have the congressional mandate to “promptly settle” all securities transactions.

      After “novation” the original selling party now owes the NSCC (and no longer the party it sold the securities to) the delivery of that which it sold and the NSCC then promises as the CCP to forward those securities on to the buyer “eventually”. The difference in the timeframe between the congressionally mandated “prompt settlement” of securities transactions and the NSCC dictated “eventual” delivery of that which was sold serves to facilitate the multi-trillion dollar fraud know as abusive naked short selling or ANSS.

      For 29 years I’ve been writing on how tricky “novation” can be especially if the selling party that might so choose to refuse to deliver that which it sold is a card carrying member and “co-owner” of the party that “assumed” the delivery obligation it recently “discharged” and promised to “execute” on i.e. a “participant” of the NSCC. If the CCP, the NSCC in this case, refuses to act in good faith in promptly “executing” the delivery obligation it just “assumed” then the financial system supported by that clearance and settlement system is in deep trouble. This is especially true should the larger banks that act as the pillars of support for the financial system become targeted by those orchestrating these NSCC-sponsored abusive naked short selling attacks.

      In slow motion what happens in “novation” is that an NSCC “fraternity brother” sells securities to somebody half way around the world. Two seconds later it now owes the CCP (the NSCC) of which it is a “co-owner” the delivery of those shares. This NSCC also just so happens to act as the “fraternity headquarters” for the buying and selling brokerage firms that are co-owning “fraternity brothers”. The seller of securities all of a sudden now owes itself as a fraternity member and its fellow fraternity brothers the delivery of that which it just sold but refused to deliver.

      The NSCC just so happens to qualify as an extremely “forgiving fraternity”. The headquarters of a “forgiving fraternity” says to its fraternity brother debtors now that your debt is owed to yourself and to your fraternity brothers you don’t necessarily have to deliver that which you sold previously as long as you at least collateralize the monetary amount of your failed delivery obligation. The clever part is that as all of these failures to deliver (FTDs) that give rise to readily sellable “securities entitlements” invisibly pile up in the share structure of the corporations targeted by fraternity brothers for destruction then the share price of the corporation predictably plummets. As the share price plummets so too do the fraternity imposed collateralization requirements. Why? Because they are “marked to market” on a daily basis based upon the current share price.

      As the collateralization requirements plummet the money of the unknowing investor on the buy side of that trade involving a failure to deliver flows to the fraternity brother making the sale despite the fact that he still absolutely refuses to deliver that which it sold. In fact, in a clearance and settlement system administered by a “forgiving fraternity” that which was sold never needed to exist in the first place.

      Now how clever is that? You sell something that doesn’t exist and two seconds later you owe the debt to yourself and your extremely forgiving fraternity brothers. As if by magic this then automatically results in the investment proceeds of the investor getting defrauded to flow into the wallet of the fraternity brother that just has to merely refuse to deliver that which he sold. But don’t you have to worry about the fraternity headquarters (this SRO known as the NSCC) forcing the fraternity brother making the sale to deliver that which he sold so that the headquarters can “execute” on the delivery obligations it just “assumed”? No, that’s part of the deal with a “forgiving fraternity”.

      The fraternity headquarters (the NSCC management) will with 100% certainty pretend to be “powerless” to buy-in that debt even though it has all of the power in the world as well as the “prompt settlement” of securities transactions congressional mandate to do so. That’s all part of the “package”. In fact what’s really exciting is that when a fraternity brother absolutely refuses to deliver that which it sold the ONLY “cure” available is a “buy-in” and the fraternity headquarters thus refuses to implement the ONLY solution available. That’s one of the services of a “forgiving fraternity”.

      Does the U.S. citizen that paid for the undelivered shares earn interest on his money during this period in time while he awaits the delivery of that which he paid for? No, it’s just the opposite. The fraternity brother he placed the buy order through gets to earn the interest off of his client’s funds while awaiting this NSCC-imposed “eventual” delivery.

      How do you keep the buyer of shares from raising a ruckus when he doesn’t get delivery of that which he purchased? That’s also part of the “package”. All you do is have the “fraternity brother” that services his account credit his account with a readily sellable “securities entitlement”. The investor will never know the difference because whether or not that which you purchased ever got delivered the purchaser is still going to get a “securities held long” notation on his monthly brokerage statement “implying” that what he purchased did indeed get delivered. If the investor doesn’t know UCC Article-8 inside and out and know what a “securities entitlement” is or what the legal concept of “novation” entails then that’s his problem.

      But what about the SEC, aren’t they going to address all of these thefts going on? The only thing you have to worry about with the SEC is to remember to tip-toe when you walk by the SEC building; otherwise you risk waking up somebody.

      Another thing that is really helpful is that the “fraternity headquarters” is actually an SRO or “Self-Regulatory Organization” that is mandated to act as “the first line of defense against abusive naked short selling frauds” LIKE THE ONE THAT IT SPONSORS! Now how cool is that? The fraternity headquarters doubles as the police headquarters!

      Wait, it gets even better. The “birth certificate” of the DTCC and its NSCC subdivision is Section 17 A of the ’3

    3. ron doc says:

      Our system is utterly corrupt and polluted.

      God has spit us out.

      Sorry to be so negitive but before you can have a change you must admit where you are.

      Before you can fight a war with any hope of winning you must be willing to admit who the enemy is.

      That takes leaders with power, both political and financial to have the guts to enter the fight. We don’t have those leaders because from both the political and finacial side are too gutless to risk their postion or wealth.

      This Country was founded by real Statesmen with weathy people alongside who were willing to give up their weath, farms,posion and then lifes for a free honest land with a chance for all even the small man to make it. Now we have leaders, politcal and finacial who are nothing but cowardly greedy weasles who care only about keeping their postion while the Country is ruined. Shame on them and shame on all of us for allowing this to continue.

      I truly believe a country can, the same as a person, go too far for any chance of blessing from God, without change and fear of God we are there.

    4. barry dingle says:

      Naked short selling was last years game. Have you checked out buyins.net lately? While naked short selling is likely still used for short term stock manipulation, it has gained too much scrutiny and is no longer an essential tool in the wall street criminals’ bag. the scam du jour is now traditional shorting followed by manipulation of credit default swaps. Have you been watching GE lately?

    5. Patchie says:

      Captured? did you say CAPTURED. Who better to play that role than the new Deputy Director of the SEC’s Division of Trading and Markets.

      JAMES BRIGAGLIANO NAMED DEPUTY DIRECTOR IN SEC DIVISION OF TRADING AND MARKETS

      Washington, D.C., March 4, 2009 – The Securities and Exchange Commission today announced that James Brigagliano has been named a Deputy Director in the agency’s Division of Trading and Markets.

      Mr. Brigagliano has been serving as Associate Director for the Office of Trading Practices and Processing and has more than 20 years of experience at the SEC. He replaces Robert Colby, who left the agency for the private sector at the end of February.

      “I am pleased to have Jamie play an expanded role in the Division’s management,” said Erik Sirri, Director of the SEC’s Division of Trading and Markets. “The Division will continue to benefit from Jamie’s management in a wider variety of areas. His insights, energy, and pragmatism will be especially valuable as we confront today’s challenging market environment.”

      Mr. Brigagliano said, “I look forward to continuing to work with my colleagues to pursue the Commission’s statutory mandate to promote fair and efficient markets.”

      As an Associate Director, Mr. Brigagliano has been overseeing the Division’s regulatory program in trading practices, including Regulation SHO and other rules related to short selling and market manipulation. He also oversees the clearance and settlement program within the Division, as well as the enforcement liaison function. In his new role as Deputy Director, Mr. Brigagliano’s responsibilities will be expanded to include oversight of the Division’s Office of Market Supervision, which has responsibility for matters related to oversight of stock and option exchanges, and the Division’s Office of Market Operations.

      Mr. Brigagliano, 51, joined the Division in 1998. He was previously Assistant General Counsel for Litigation and Administrative Practice in the SEC’s Office of the General Counsel, representing the Commission in a wide range of matters in federal district and appellate courts. Mr. Brigagliano has received a number of awards for his work at the SEC, including the Capital Markets Award, the Jay Manning Award, and the Supervisory Excellence Award. He came to the SEC in 1986 after three years in private practice. Mr. Brigagliano received his law degree from Georgetown University and undergraduate degree from Amherst College.

      This is the same Brigagliano that lied to a member of Congress and has been paramount in delaying positive short sale reforms. So much for making good decisions Mary Schapiro.

    6. kd says:

      “American media still does not have a clue.”

      Sorry, but American media has something that trumps a clue. They have an interest.

      Naked shortings sets up reports and news agencies in a position to be a player. With naked shorting, a paper can run a crusade against a firm and bring it to its knees.

      Without naked shorting many firms that fell during a self righteous media attack would be able to weather the storm and still be employing workers today.

      A direct self interest will always trump a clue.

    7. Anonymous says:

      James Brigagliano wrote the letter to Madoff authorizing the Madoff exception on Feb. 2, 2001.

      This is an outrage.

      Goto pg. 4

      http://www.sifma.org/regulatory/exemption_archives/Requestfrom10a-1.pdf

      See Letter to Bernard L. Madoff Investment Securities LLC (February 9, 2001) (In granting prior
      exemptive relief from the tick test to allow market makers in exchange-listed securities to sell
      short to facilitate customer buy orders at the national best offer, the Commission had noted the
      assertion made in the exemptive request that such sales “do not have the potential for the types of
      abuses that Rule 10a-1 is designed to address, because a market maker would only be providing
      liquidity in response to a customer buy order.” The Commission also noted the assertion that
      “granting a limited exemption would help a market maker’s ability to provide best execution to
      customer orders in a decimals environment.”)

      http://www.sec.gov/rules/proposed/2006/34-54891.pdf

      pg. 16

      44 See letter from James A. Brigagliano, Assistant Director, Division of Market Regulation to Bernard L.
      Madoff, Chairman, Bernard L. Madoff Investment Securities LLC (February 9, 2001). This relief is strictly
      limited to the facilitation of customer market and marketable limit orders and is not available as a means of
      soliciting customer orders.

    8. ginger says:

      Jim, the link to your comment letter…

      http://www.sec.gov/comments/s7-30-08/s73008-78.pdf

      clarifies immensely, for me, your explanation of how the NSCC stock borrow program (SBP) creates multiple counterfeit shares that channel countless victims’ investments into the pockets of the financial fraternity operating the den of thieves.

      Thank you for helping me better understand.

    9. Dr. Jim DeCosta says:

      ANONYMOUS,

      Bernie Madoff was a genius, period. He presented the Madoff exemption from following the uptick rule to the SEC as a means to “inject liquidity” and to better serve his clients buying shares. He used to refer to it as “price protection” and “print protection”. If a stocks bid/ask is $8.95 to $9 he wanted permission to naked short sell at perhaps $8.90 “as a service” to his trusted clients. This sucked in the buy orders of clients from all over the world.

      As the readily sellable “securities entitlements” resulting from all of his FTDs piled up in the share structure of these corporations the share price had to tank. Since he did the naked short sale he in essence got “first dibs” on the lessened collateralization requirements needed as the share price predictably tanked. Sure he gave a perhaps 1% discount up front to attract the buy order flow from competitors but that1% discount allowed him “first dibs” on half of the investor’s cash as the share price tanked 50%.

      This is brilliant. It falls into the category of “if something sounds too good to be true then it probably isn’t true”. “I’m doing this to provide liquidity and to provide a service to my clients”. The “new Madoffs” of the world suck in your buy orders via charging you $7 per trade and then do the exact same thing. I did a paper on this and posted it on deepcapture.com. I think it’s called “The CVP rooms at the NSCC”.

    10. Anonymous says:

      Dr. Decosta:

      The SEC discloses fails to deliver data at the NSCC, but it is netted across all NSCC participants.

      http://sec.gov/foia/docs/failsdata.htm

      For example, it shows the Overstock NSCC fail in December is only 11,846 shares.

      Huh? What’s going on here?

      The SHO list shows only 40 companies have any problem with naked shorting.

      http://www.nasdaqtrader.com/trader.aspx?id=regshothreshold

      Out of all the scam penny pink and OTC companies, the SHO list shows the market makers and hedge funds are only naked short in 12 of them.

      Why is there such a mismatch between SEC and NASD data and the claims of abuse?

    11. Dr. Jim DeCosta says:

      ANONYMOUS,

      There’s a couple of reasons. Firstly, Reg SHO and its “threshold list” of securities only addresses FTDs held at “registered clearing agencies” like the NSCC subdivision of the DTCC. When Reg SHO became effective on 1/7/05 there was a mass exodus of FTDs into “ex-clearing” arrangements and elsewhere.

      Despite UCC Article 8’s mandate that the number of “securities entitlements” granted by the NSCC and its “participants” plus the # of “outstanding” shares in an issuer may never attain a state of “overissuance” i.e. their sum exceeds the # of shares “authorized” as per the corporation’s “articles of incorporation” the SEC and the DTCC absolutely refuse to tally these securities entitlements. They can’t because it would be tantamount to pleading guilty to the facilitation and cover-up of the biggest “fraud on the market” ever.

      Therefore you and I don’t have a clue as to how damaged the corporation is that we are buying or contemplating buying shares in. We have been relegated to be buying a “pig in a poke” in order to protect the “banksters” and hedge funds guilty of these thefts.

      There are many, many hiding places for FTDs outside of any “registered clearing agency”. Have you ever noticed how many corporations just coming off the Reg SHO “threshold list” actually fall in share price instead of gap upwards? The “threshold lists” are a total joke meant only to provide the façade that the DTCC is cleaning up its act. In many ways the SEC is a total joke only meant to provide the facade that our markets are regulated.

      There is a gigantic cycle of corruption out there. The “banksters” and the hedge funds are the largest donors to the politicians. The politicians over see the SEC. The SEC oversees the “banksters” and the hedge funds who they also seek employment opportunities from when its their turn to exit through the “revolving door” leading to much better paying jobs on Wall Street. SEC staff and commissioners that try to “rock the boat” and disrupt the corrupt status quo will not get invited to exit through that door.

    12. Dr. Jim DeCosta says:

      ANONYMOUS,

      I forgot to address your question re: why there are so few pink sheet companies being protected by the threshold lists. First of all, Congress provided a 12-g exemption to tiny companies from having to file with the SEC due to the associated expenses. They are allowed to be “nonreporting”. The SEC doesn’t like this rule at all. Their default assumption is that 100% of all nonreporting companies are scams until proven otherwise. They don’t report because they’re hiding something and it has nothing to do with the expense of reporting. Note also that the SEC does not make any income from nonreporters. Keep in mind that since Sarbanes-Oxley (and Rule 404) things can get pretty expensive for a tiny corporation to become fully reporting nowadays.

      This mindset has permeated the SEC since day 1. One group on Wall Street likes the 12-g exemption because they want scam corporations to trade publicly so that they can kick the——out of them via abusive naked short selling. They thus steal the funds of the investors in these companies in order to “teach them a lesson”. They’ll even proffer that they act as “shareholder advocates” by killing corporations so that new investors will not get taken in by their acts of deceit. That’s an interesting concept: stealing from investors to save investors. If it helps them sleep at night then more power to them I guess. Many are of the opinion that they are overdue to get a rude awakening one of these nights.

    13. Anonymous says:

      davidn,
      There is not competition there.

      Nasdaq will only clear the trades, but will not settle them.

      “We can offer lower costs to our customers,” says Brian Hyndman, senior vice president of transaction services for Nasdaq. He adds that Nasdaq will only do clearing. It will not settle trades.”

      Thats the whole issue, the settlement is NOT getting done (T+3)as per the securities law written to protect the very thing they are doing.

      NEXT !!!

    14. lenofus says:

      Mark, I think I’ll pick a fight with you about the media “not having a clue”. I think they have every clue. I think they know the game better than we do; they’re playing it.

      In the headlines today, UBS was grilled like toasted cheese by Levin and the boys. Now, Levin has known about naked short selling since at least 2001. He’s no nube. I’ll take “better late than never”. But UBS is going to great lengths to protect ‘clients ‘ who are no longer clients, and never will be again. Why?

      http://www.breitbart.com/article.php?id=CNG.4199329ae065ca82087e536f5767c411.cc1&show_article=1

      My bet is, the 52000 names, plus Lichtenstein, the Caymans, Curacao, will yield some everyday slugs we are all very, very familiar with. Know what? I may be wrong. But I’ve walked this earth for a few years now, and I’ve never seen anyone carry this much water for rich people for free before. It’s just common sense money changed hands, and if it’s illicit: You know they didn’t want to pay taxes on it. How hard would it be for the bad guys to salt an account and pass out an ATM card?

      I would suggest interested readers google Howell Woltz, and Sam Currin. They’ll lead you on to better stuff than you’d find in any “Who Done It.” And if you ‘d like to talk to them, they’re cooling their heels in Charlotte, N,C. I hear there is a prison there. It’s the new growth industry since the banks there went out. It’ll only get bigger.

    15. sean says:

      Dr. DeCosta , your thoughts please

      Brokers caught by small OTCBB Company doing hanky panky
      I don’t know anything about this company, but it their claims are true, it is another exposure. They are trying to issue a share dividend wth additional voting rights attached:
      PR release from March 04 2009

      My Email to them:

      As president of the National Investor Protection Coalition, I read your PR piece with great interest. I think you also should have mentioned that the brokers are seemingly violating REG T. That is because REG T requires OTC securities to be treated as fully paid for cash securities, regardless of what securities they are held in, like margin accounts.

      Securities can only be lent from investor accounts if there is an express lending agreement for those particular securities. A blanket margin account agreement permitting brokers in general to borrow or hypothecate shares is not sufficient to meet REG T’s written permission requirement because margin account agreements only cover marginable eligible securities and not fully paid cash securities or excess margin securities.

      In other words, since no OTC securities are margin eligible per REG T, they are considered the same as fully paid securities. Therefore, they can not borrow nor hypothecate these OTC securities and under Exchange Act Rule 15c3-3, brokers must maintain physical possession and control of all fully paid securities.

      Furthermore, you have possibly discovered that brokers are violating the Uniform Commercial Code of all states. The UCC does not allow investor accounts nor securities to be misrepresented after settlement date. If brokers are crediting more securities than they actually have in their possession or control after settlement date as defined on the federal level by SEC rule 15c6-1, they are in violation of the states’ UCC.

      Furthermore, if the brokers or other market participants are frustrating the voting rights of investors, they are in violation of the UCC and/or other state corporate governance laws. Voting rights are the exclusive jurisdiction of the states and no federal authority or agency can infringe upon those state laws and investor rights. This legal battle has already been fought and won by the states, reaching the US Supreme Court when the SEC tried to regulate voting rights.
      Tom Vallarino
      NIPC President

      report abuse

    16. Uncle Fester says:

      Genesis Of The Financial Meltdown]

      The stupidity of the press, especially The Wall Street Journal, never ceases to amaze me.

      It has been pointed out that Goldman Sachs had purchased approximately $20 billion of credit default swaps and other exotic instruments from AIG, the troubled insurance behemoth. It has also been stated that this outstanding $20 billion was a central reason for the federal government, especially Henry Paulson, former Chairman of Goldman Sachs and at the time of the bailout Secretary of the Treasury, saving AIG from descending into bankruptcy.

      The federal government of course denies this. But most extraordinarily Goldman Sachs has denied it. Goldman Sachs has stated that it had done off-setting transactions against its AIG obligations. But what is never stated is that Goldman would have had to make good for the $20 billion.

      Point to note: Paulson, Goldman’s former chief becoming Treasury Secretary was beyond merely a “perception” of conflict of interest.

      Now, I shall illustrate Goldman’s lie with one brief example that involves the purchase and sale of stock.

      Let’s assume that Goldman Sachs purchased 100 shares of XYZ for $100 per share from AIG. Goldman Sachs then sold these 100 shares of XYZ to Morgan Stanley for $102 per share. This is an example of an offsetting transaction. Ten days later there is a takeover bid for XYZ for $120 per share. But in this time AIG has been declared insolvent. Furthermore, AIG never owned the stock but sold the stock short and never borrowed the short share. AIG expected the price of XYZ to decline. As a result of AIG’s bankruptcy the stock was never delivered.

      What has happened? Well, Goldman sold the stock that it had purchased, or believed that it had purchased, to Morgan Stanley. Now Goldman must deliver the stock to Morgan. But Goldman does not have the stock. AIG is bankrupt and cannot deliver the stock.

      Goldman owes the stock to Morgan Stanley and must purchase the stock on the open market. But the price is $125 per share. Goldman has lost 100 shares of stock multiplied by a price of $125 per share. So, Goldman has lost a total of $12,500 rather than earning a profit of $200. The is central to the reason that AIG was bailed out and the Treasury is making good on all AIG’s sales- especially to Goldman Sachs.

      Goldman Sachs purchased $20 billion in credit default swaps from AIG. Goldman then turned around and sold these credit default swaps for a small profit. But if AIG did not deliver on the $20 billion in credit default swaps and financial instruments, Goldman would have owed $20 billion to the firms that had purchased these credit defaults swaps and financial instruments.
      So, when Goldman Sachs stated that it had made offsetting transactions- yes that is true.

      But the entire truth is that if the Treasury had not made good on AIG’s sales of credit default swaps to Goldman, Goldman would have lost $20 billion.

      Meanwhile, in a remarkable development, Federal Reserve Chairman Ben Bernanke yesterday told the Senate Budget Committee: “AIG exploited a huge gap in the regulatory system. There was no oversight of the financial-products division. This was a hedge fund, basically, that was attached to a large and stable insurance company, made huge numbers of irresponsible bets, took huge losses. There was no regulatory oversight because there was a gap in the system.”

    17. Mb says:

      Mob on Wallstreet.

      http://www.sec.gov/news/testimony/ts142000.htm

      Fails to deliver were allowed as a remedy against microcap fraud where the mob gained tight control of the supply of a stock.

    18. iStandUp says:

      I noticed something strange yesterday about the NPR.org Morning Edition…

      As I was getting breakfast yesterday, I heard a person talking about HOW our Financial Market Regulatory System is Captured by the very people it is suppose to regulate…..

      I was not paying close attention as I was busy preparing breakfast. So I thought to myself that I would simple go to their website and REPLAY the story….

      NOTE: That immediately after this story by a man who I think had written a book (although I may be confused by the story that followed it), there was a Story about David Swensen, Yale’s chief investment officer, which can be found in the NPR website archives:

      http://www.npr.org/templates/story/story.php?storyId=101400310.

      THE STRANGE PART OF THIS STORY:
      Yesterday when I went to the NPR.ORG website to replay the story (interview) that mentioned how the financial regulatory system is captured, I COULD NOT FIND THE INTERVIEW LISTED….

      Here is a link to yesterday’s NPR Morning Edition stories – maybe I missed it:

      http://www.npr.org/templates/rundowns/rundown.php?prgId=3&prgDate=03-04-2009&view=storyview

    19. iStandUp says:

      OK… I just figured out where the story about the Captured Market is:

      http://www.publicradio.org/columns/marketplace/scratchpad/2009/03/wow_somebody_doesnt_like_geith.html

      MarketPlace.org has a segment on the Morning Edition and this is the segment that spoke about our Captured Regulators ( News and views from online host Scott Jagow )….

      AND a NEW BOOK Coming OUT >>>> “House of Cards”

      Scott Jagow says in his Blog today:

      “Yesterday, I mentioned a book coming out next week called “House of Cards.” It’s about the collapse of Bear Stearns. Another excerpt was published today, and holy mackerel is it nasty. It’s a brutal attack on our current Treasury Secretary Tim Geithner by Bear Stearns CEO Jimmy Cayne. A friend of mine who used to work on Wall Street says it captures the old-school Street mentality perfectly: “It’s a knife-fight.””

    20. amomymus says:

      What would be wrong with strict enforcement of delivery say on T+2 at the latest or else we slap you (as a DTCC member) with the (1) value of what was not delivered + (2) the value of by the DTCC bought securities that were delivered instead + (3) a penalty of the same amount as (1+2), all due on T+3. Pay up or else you are temporary shut down from the system meaning shut out of any exchange that we clear… For FTDs – no borrowing can ever be used (illegal). Buy-in (+ penalties) only.

      I know that these rules now not exist in US but if they would?

      As for the wonderful world of CDSs – they belong to a whole other story of fiat insurance, backed by kicked in FBNY (by a certain counterparty) as custody agent for the taxpayer and the upcoming outright monetisation of the budget deficit financing shortfall, that itself is in great need of a determined cramp down as well.

    21. Peter says:

      This comment is directed to the DTCC story which appears above this post but comments seem disabled.

      See if you can get a copy of “Dispersing the Fog” by Canadian author/journalist Paul Palango. While the book is mostly about “problems” within and around the RCMP and extrodinary renditions etc. his thesis is that the problems are really the desired effect of the power elite in Canada. Similarily, the “lack” of concern about the DTCC is the purpose of the act which created it. That is the problem is hidden in plain sight so to speak. It seems unlikely to me that no one has done a masters or Phd thesis on the subject and seems beyond belief that for 75 years the lack of oversite was unnoticed. It was always the purpose to give the appearance of oversite while stealing just enough not to get noticed.

    22. Anonymous says:

      I agree with Peter’s thoughts that the system is unregulated because it is intended to be unregulated by the power elite.

      Europe was once a feudal system where royal families lived lives of luxuries for thousands of years at the expense of serfs who toiled in indentured servitude. The conspiracy by the wealthy was out in the open back then.

      The serfs rose up in wars of independence, even running guillotines in France and the thousand year dynasties realized they had to go underground and pretend that the class system no longer exists.

      Did you ever notice that newspapers always tell about crimes from below (muggings, break ins, etc.), but rarely talk about crimes from above (white collar, revolving door regulators, etc.).

      At a certain level, the people that control the trillions of dollars in foundations and who secretly own large blocks of most fortune 100 companies through nominees and who control the banking and brokerage system are not subject to our laws because their wealth is international and they see themselves as above the laws of any one country.

      They set up their own privately controlled systems from the BIS to the DCCC, totaling ignoring the pleas of the government leaders that report to them.

      They create an illusion of democracy with vote fraud, bought politicians and iron clad control over the media, but they live in an unregulated world above the law.

      Unfortunately for them, they didn’t see the internet coming and as we keep turning over the rocks to watch the cockroaches scurry out into the light of day, their crimes will be revealed to the population.

      Mort gage means “death contract”. When you sign one, you are guaranteeing to work for the next 25 years, handing over a large chunk of your wealth to the banksters. Are we really that far from the indentured serfs or is it all an illusion.

    23. kevin says:

      http://georgewashington2.blogspot.com/2009/03/fed-refuses-to-release-identity-of.html

      As you know, the Fed and Treasury are refusing to reveal to Congress, their overseers or the American people who is getting the bailout money.

      But did you know that the Fed is now refusing to disclose who the counterparties are to AIG’s billions of dollars of credit default swaps?
      Webmaster’s Commentary:

      That suggests that Wayne Madsen is correct that AIG is an intelligence front of some kind, used as a cutout to loot the nation.

    24. kevin says:

      http://georgewashington2.blogspot.com/2009/03/with-one-word-bernanke-reveals-who.html

      With his single word “no”, Bernanke revealed that Congress is impotent and out of the loop. In other words, Congress doesn’t really run the country in the core area of business, finance and the economy. The financial giants and their servants at the Fed and Treasury do.

    25. agua caliente says:

      “Paying for Policy in Washington”
      at http://www.counterpunch.org/weissman03052009.html

      Author Robert Weissman itemizes funds from financial industry to political parties.

    26. Anonymous says:

      Kevin, I don’t want to go off topic, so you can do your own research, but google “aig maurice 911″

      It’s all related. Fails to deliver is part of a bigger problem.

    27. Sammy says:

      I’ve noticed with some illiquid penny stocks, selling makes them go up and buying makes them go down.

      If you put up a small bid, say 5,000 shares, they will short it to get it out of the way to make the market look bad.

      If you put up a large offer, they will grab it because they are desperately short and want to cover.

      So, naked shorting flips supply and demand on its head where the more buying, the lower the stock goes and the more selling, the higher it goes.

    28. Davidn says:

      http://www.marketrap.com/article/view_article/9165/is-the-dtcc-which-clears-and-settles-us-securities-transactions-completely-unregulated

      The DTCC a holding company with a bunch of subsidiaries. The ones we care about are the NSCC which runs the continuous net settlement system and the DTC, which keeps track of which clearing brokerages Cede & Co., a private partnership of unknown ownership, who owns the shares as the DTC’s nominee owes shares to.

      It’s important to be precise as the DTCC, DTC and NSCC have different roles, corporate structures and regulators.

    29. Dr. Jim DeCosta says:

      I just filed this with the SEC

      http://www.sec.gov/comments/s7-30-08/s73008-84.pdf

    30. Dr. Jim DeCosta says:

      This was filed with the SEC several days ago. I tried to post it on deepcapture but only half got posted.

      http://www.sec.gov/comments/s7-30-08/s73008-82.pdf

    31. Dr. Jim DeCosta says:

      VOLUNTEERISM LEADING TO A MONOPOLY LEADING TO LEVERAGE LEADING TO A MASSIVE “FRAUD ON THE MARKET”

      Over the years I’ve noticed some rather peculiar patterns developing at the DTCC and its NSCC and DTC subdivisions. They keep volunteering to act in certain capacities ostensibly to increase the “efficiency” of our clearance and settlement system. In retrospect all of these noble acts of volunteerism have resulted in them attaining a monopoly on the power to provide the only known cure available when the seller of securities absolutely refuses to deliver that which it sold i.e. the power to “buy-in” the delivery failure so that the purchaser of those missing shares can receive that which he paid for.

      What are some of these roles that have attached to them the power to execute buy-ins? Firstly, the NSCC volunteered to act as the “central counterparty” (CCP) to all securities transactions. This grants the NSCC management the unfathomable power to “discharge” the delivery obligations of its bosses in exchange for it “assuming” and “executing” on these delivery obligations. Can you imagine the corruption that would result should the NSCC management after “discharging” the delivery obligations of one of its bosses have the audacity to refuse to promptly “execute” on the delivery obligation that it just “assumed”?

      The DTC offered to act as the party with the congressional mandate to “immobilize” all paper-certificated shares into their vault system and then “dematerialize” the paper-certificated shares into AN EQUAL AMOUNT of electronic book entry “shares” that are much easier to deal with. Could you imagine the invitation for abuses if the NSCC management were to allow their “participants”/bosses to create enormous amounts of “fiat” electronic book entries above and beyond the number of shares held in a paper-certificated format?

      Coincident with this was the volunteering of the DTC subdivision of the DTCC to act as the “legal custodian” of all paper-certificated shares held in “street name”. Could you imagine the corruption resulting from this “legal custodian” in essence leaving the vault doors open so that crooks could “electronically” steal certificates and run to Kinko’s and make counterfeit copies?

      Later the DTC volunteered to have their nominee “Cede and Co.” act as the surrogate “legal/nominal/record” OWNER of all shares held in “street name”. Could you imagine the corruption associated with this surrogate “legal owner” commissioned to “safeguard” these securities it now legally “owns” if it were to oversee this counterfeiting process or this refusal to provide the only cure available if the seller of securities were to refuse to deliver that which it sold?

      Later yet they volunteered to act as a “qualified control location” so that their participants could gain compliance with the all-important “Customer Protection Act” or Rule 15c3-3 of the ’34 Exchange Act. Could you imagine the invitation for abuses should this “qualified control location” absolutely refuse to follow 15c3-3 and “take the physical possession of all fully paid for securities” AFTER granting compliance to one of its abusive NSCC participants?

      They’ve also volunteered to act as an SRO or “Self-Regulatory Organization” mandated to monitor the “business conduct” of its participants. Could you imagine the corruptness resulting from this “securities cop” mandated to provide “the first line of defense against abusive naked short selling frauds” if it were to corner the market on the power to execute buy-ins and then later refuse to deploy this only known cure when its owners refuse to deliver that which they sold?

      Later the NSCC volunteered to design and administer their own “Automated Stock Borrow Program” or “SBP” which has “accidentally” morphed into a well-oiled share counterfeiting machine which facilitates the lending out of any given parcel of shares in a dozen directions simultaneously while serving to “cure” a dozen different delivery failures. Could you imagine the corruption resulting if the designer and administrator of the SBP were after realizing how it is being abused by its abusive participants/bosses were to proffer that it has no “discretion” in addressing the loopholes being abused because the SBP is “automated”.

      Remember that all along the congressional mandate of the DTCC and its subdivisions was to “act in the public interest, to provide investor protection and to “promptly settle” all securities transactions. Could you imagine the corruption resulting should this provider of investor protection and insurer of the “prompt settlement” of all securities transactions were to LEVERAGE its monopoly power over the execution of buy-ins on behalf of the financial interests of its abusive co-owners by intentionally postponing the “prompt settlement” of securities transactions?

      Can you detect the pattern? All of these acts of volunteerism also have cornered the market on the power to provide the only cure available when the seller of securities refuses to deliver that which it sold. Can you see how this monopoly power has been converted into LEVERAGE? What’s rather peculiar is that due to how the DTCC, DTC and NSCC are structured the co-owners of these institutions now have the power to refuse to deliver that which they sell to unknowing U.S. investors and also the power to refuse to deploy the only cure available when this occurs. Well isn’t that special! It appears that it is a very lucrative proposition to do a lot of “volunteering”.

      In actuality, one could make the case that there are two other parties with the “power” to execute buy-ins. One is the brokerage firm of the client buying the securities that never got delivered. The problem is that it will not opt to execute buy-ins because NSCC policies unconscionably allow it to earn the interest off of its own client’s funds UNTIL delivery is accomplished. This “agent” of the investor that just got paid a commission has been financially incentivised to shirk its fiduciary duty of care owing to its client.

      The other party with this power is the investor himself. Two problems arise in this regard though. First of all, he doesn’t even know that his buy order resulted in a failure to deliver at the NSCC. Secondly, he receives a monthly brokerage statement “implying” that what he paid for did indeed get delivered and that his brokerage firm is “holding long” these securities.

      In the case of a failure to deliver involving the refusal to deliver that which was sold nothing could be further from the truth. His brokerage firm is holding an undated IOU and nothing more. When the seller of the missing securities absolutely refuses to deliver that which it sold and the parties with the power to cure this delivery failure refuse to provide the only known cure (a buy-in) then this IOU is 100% worthless as soon will be the share price of the corporation targeted for attack.

      I’d say the DTCC, DTC and NSCC have engineered themselves a pretty tight monopoly over the power to provide the only known cure available when the seller of securities absolutely refuses to deliver that which it sold. They’ve either cornered the market on this power, “bribed” its bosses not to use their power or misrepresented to investors that their shares arrived safe and sound. Coincidence?

      What’s the obvious solution begging to be deployed? The power to execute buy-ins needs to be granted by the SEC or other regulatory authority to an UNCONFLICTED party perhaps working out of the DTCC headquarters where it will have easy access to the failure to deliver data.

    32. Davidn says:

      I had problems posting, I have four in a row, hopefully the next few go through. The DTCC disclosed who the regulators are to the BIS.

      http://www.marketrap.com/article/view_article/9165/is-the-dtcc-which-clears-and-settles-us-securities-transactions-completely-unregulated

      The DTCC a holding company with a bunch of subsidiaries. The ones we care about are the NSCC which runs the continuous net settlement system and the DTC, which keeps track of which clearing brokerages Cede & Co., a private partnership of unknown ownership, who owns the shares as the DTC’s nominee owes shares to.

      It’s important to be precise as the DTCC, DTC and NSCC have different roles, corporate structures and regulators.

    33. Davidn says:

      It won’t let me post, I’ll try again later.

    34. ginger says:

      Is former US undersectary of commerce Mr. Robert Shapiro still an advisor to President Obama? If he is something must be preventing him from getting his concerns listened to:.

      Mr. Shapiro last year had this to say in reference to the NSCC stock borrow program:

      Naked short sales, in which a short seller sells shares he doesn’t own (as does every short seller), receives payment for those shares (as does any short seller), and then fails to borrow and deliver the shares (the crucial difference with legitimate short sellers), would not be a problem if at the end of the three-day period allowed to deliver the shares, they were not “cleared and settled” as if the shares had been borrowed and delivered. That’s precisely what the DTCC does through its stock borrow program, and that is also precisely what naked short sellers depend upon when they try to manipulate stock prices, as the SEC has effectively acknowledged…

    35. Davidn says:

      No go. It seems to let a one line post through, but I can’t send anything longer.

    36. Anonymous says:

      http://www.opednews.com/articles/Jim-Cramer-Uses-CNBC-to-Ma-by-the-web-090306-905.html

      This rabbit hole involves the thugs surrounding Jim Cramer and some of the top financial “journalists” from the New York Times, WSJ, Fortune magazine and BusinessWeek, top hedge funds, the Mafia, and the DTCC. It also includes “blackmail, smear campaigns, espionage, fraud, harassment, extortion, bribery, rumor-mongering, sabotage, off-shore money laundering, political cronyism, frivolous lawsuits, witness tampering, biased financial research, false identities, bogus credit ratings, bribery, libelous blogs, bad science, forgery, wiretapping, counterfeiting, collusion, lying, cheating, threats and theft.”

      And if that wasn’t fun enough, it may be the underlying story of what collapsed the entire, global banking system or at least served as the catalyst for the collapse.

      Unfortunately, this story is so rich and multi-dimensional that I cannot possibly hope to do it justice here. So I will primarily focus on the financial media angle and, specifically, Jim Cramer and his thug cronies.

    37. John Thomas Ellis says:

      I represent a $35 billion dollar a year un-taxed industry the government deems illegal and they sanction naked short selling! There isn’t a cannabis dealer in the world today who has that kind of malice towards anyone or anything.

      Since all the mega-merger mania of the past twenty-five years it seems these self-appointed ruler’s of the universe have decided they hold sovereignty over us all . . . It may just be time to use the courts to shut these clowns down. If not, we’re going to see poverty cause food shortages and we’ll watch hungry mobs beaten down on our streets.

      John Thomas Ellis
      The West Coast Leaf
      Columnist & Media Critic

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