Why the Apparatchiki of Finance Didn’t See It Coming

    I know a great joke. Unfortunately, I’ve learned that some people don’t get it without a preface.

    So here’s the preface: In the 1950’s there was a school of psychology called “Behaviorism”. Behaviorists turned away from the “internal states” that had been the concern of psychology since its inception, regarding them as mental constructs whose explanation invoked unscientific mysticism. Behaviorists instead proposed a new “scientific” paradigm and mission: to describe “the organism” in terms of inputs to and outputs from a Black Box whose inner workings need not be explained. If you have seen 1950’s grainy black-and-white films of BF Skinner teaching pigeons to spin around and peck buttons, and chickens learning to perform simple tasks, you have seen Behaviorism in action.

    So here’s the joke: Two professors of behaviorist psychology have sex. When they’re finished they light up cigarettes. One says to the other, “So…. That was good for you. How was it for me?”

    It’s a great joke. For those who still missed it, the point is that the professors were so wrapped up in their theory (in this case, the denial of internal states), that they could not experience what was right in front of them. They had to filter their data through the theory to which they were committed before they could experience it.

    Sometimes such commitments bind their holders so strongly they forget that what they are committed to are just paradigms. For example, Richard Feynman told a story about how, in 1895, the chairman of the Harvard Physics Department discouraged new graduate students from starting PhD’s on the grounds that all the questions of physics had been answered, with the exception of two problems. Those two problems were the photoelectric effect and the problem of black-body radiation. Their subsequent investigation spawned quantum mechanics, shattering the classical Newtonian paradigm to which the Harvard department chair had been committed.

    Modern finance theory is dominated by two pillars: the “Capital Asset Pricing Model” (or “CAPM”) and “Efficient Market Theory” (or “EMT”). CAPM is a model that says, Market participants will bid the price of a financial asset up and down until its return and its volatility satisfy a certain equilibrium equation. Efficient Market Theory evolves alongside of CAPM to say, Prices have already been so bid to reflect all publicly available information.

    An implication of Efficient Market Theory is that, since securities are already priced to reflect all publicly available information, it is impossible to beat the market without having inside information. While for some years the leading edge of finance theory has been nibbling away at EMT, it is no exaggeration to say that it is still the dominant paradigm of modern finance, and that every MBA program in American universities teaches EMT as the core of finance theory.

    By happy accident I was exposed to EMT by its greatest counterexample, Warren Buffett. I was 14 when he impressed upon me the ridiculousness of EMT. He loved the fact that it was taught in business schools, he said, for it made his job “like playing bridge with people who have been told it doesn’t help to look at the cards.” Later, I was fortunate also to know Dr. Kenneth Arrow (one of the founders of general equilibrium theory, and the originator of Arrow’s Impossibility Theorem, a tidy social choice proof he did over a weekend when he was 26 for which he later won the Nobel Prize). Dr. Arrow also ridiculed Efficient Market Theory, saying, “Believing in EMT is like believing you can’t find a $20 bill in the street because if it were there someone else would have picked it up already.”

    Mr. Buffett and Dr. Arrow warned me about the intense dogmatic belief in Efficient Market Theory among finance professors. Mr. Buffett compared their profession to a Mayan priesthood whose practitioners had invested years in learning the arcane language of their priest craft (or as he put it with regard to finance professors, “had gotten their Ph.D.’s learning how to talk to each other in Greek letters”). He pointed out how natural it was for priests to defend the hard-won skills which set them apart from ordinary mortals.

    Mr. Buffett has beat the market so handily, for so many years, that his success is an affront to Efficient Market Theory. Naive EMT proponents at first discounted Buffett’s success: give enough chimpanzees coins to flip, and one of them is going to get 10 heads in a row, they said. This led to Buffett’s famed response, “The Superinvestors of Graham-and-Doddsville“, first delivered in a talk at Columbia University, and then reprinted as an Appendix to The Intelligent Investor.

    Buffett’s partner, Charles Munger, has had this to say on the subject:

    “Now let’s talk about efficient market theory, a wonderful economic doctrine that had a long vogue in spite of the experience of Berkshire Hathaway. In fact one of the economists who won — he shared a Nobel Prize — and as he looked at Berkshire Hathaway year after year, which people would throw in his face as saying maybe the market isn’t quite as efficient as you think, he said, ‘Well, it’s a two-sigma event.’ And then he said we were a three-sigma event. And then he said we were a four-sigma event. And he finally got up to six sigmas — better to add a sigma than change a theory, just because the evidence comes in differently. [Laughter] ….

    “…what made these economists love the efficient market theory is the math was so elegant. And after all, math was what they’d learned to do. To the man with a hammer, every problem tends to look pretty much like a nail…”

    Finance professors and economists have missed the boat on stock manipulation schemes such as naked short selling because they are confined by the straight-jacket of their theory to the point that they cannot experience what is right in front of them. When confronted with data showing the existence of naked short selling, they answer that any manipulative effects are impossible. Their addiction to EMT locks them into a worldview that maintains, There is an ocean of capital out there ready to pour in and correct any mispricing, so mispricing cannot exist. This worldview prevents them from understanding the effects of stock manipulation schemes such as naked short selling.

    I will give some recent examples of this (because I do not care to embarrass any individuals I will not identify anyone by name):

    • Not long ago a sitting commissioner of the SEC made precisely this argument in private: CAPM tells us it should not matter how many shares are trading in the market, phantom or otherwise, as long as the market knows how many have been issued;

    • Along the same lines, the current internal party line of the SEC’s Office of Economic Analysis is that anyone objecting to naked short selling must also object to short selling, because within legal short selling shares could theoretically be sold-lent-sold-lent, thus creating an infinite number of shares. This objection misses the boat on two counts: the practical constraints of the settlement system would prevent such an infinite chain from developing (and if it did, we might in fact have to reconsider our commitment to the benefits of short selling); besides which, the short seller pays for his position, and by paying that price he injects valuable information into the marketplace, whereas the naked short selling skips paying that price and hence the information he injects into the marketplace is value-less;

    • As recently as last June, a high official within the SEC’s OEA was arguing internally that there is no difference between naked shorting and writing a futures contract. He was correct in that a naked short position is akin to a derivative called a “Contract For Difference”. He was wrong in that a naked short position creates a futures contract that is in some sense involuntary, cheats the buyer of rights he thinks he is acquiring (such as the right to vote shares), and has the unusual feature of being able to affect the underlying value of which its value is putatively derivative (a producer of orange juice may write derivative contracts on how much the sun will shine in Florida all he wants, and it will not affect the underlying event, but if I sop up all demand for a thinly-traded small cap company by diverting it into what are in effect CFD’s, the underlying event, that is, the stock price, will be affected).

    My point is not to descend too far into the arcana of such debates. Instead, it is to suggest that modern finance theoreticians have become misguided because they reason from a foundation of Efficient Market Theory.

    A couple of years ago I visited a United States Senator who walked me through arguments the hedge fund’s lobbyists had recently rehearsed to him, arguments holding that, in effect, everything I claimed was going on in the market was theoretically impossible. I said to him, “Sir, they can line up finance professors from here to MIT who say this is impossible. I can line up tough Italian guys from here to Staten Island that say they do it every day.”

    Like Newtonian physics, which gives good results on much scale of interest to humans, EMT is useful. It may even be directionally correct, expressing a powerful marketplace dynamic. However, there are corner cases it gets hopelessly wrong. Sadly, over time those corner cases have become a non-negligible corner of the market. And as this has happened the finance professoriate, unable to see what was right in front of its eyes, has stayed busily asking itself, “That was good for you, how was it for me?”

    If this essay concerns you, and you wish to help, then:

    1) email it to a dozen friends;

    2) go here for additional suggestions: “So You Say You Want a Revolution?

    This post was written by:

    - who has written 166 posts on Deep Capture.

    I am a concerned citizen who has been focused on systemic instability since 2004.

    Contact the author

    136 Responses to “Why the Apparatchiki of Finance Didn’t See It Coming”

    1. davidn says:

      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.

    2. davidn says:

      ****************** DTC ******************

      http://www.bis.org/publ/cpss20r3.pdf

      DTC is a limited-purpose trust company organized under the New York

      Banking Law, a “banking organization” within the meaning of the New York

      Banking Law, and a member of the Federal Reserve System. DTC is also a

      “clearing corporation” within the meaning of Article 8 of the New York

      Uniform Commercial Code. DTC is registered as a clearing agency with the

      U.S. Securities and Exchange Commission (“SEC”) pursuant to the provisions

      of Sections 17A and 19(a) of the Securities Exchange Act of 1934, as

      amended (the “Exchange Act”).

      DTC and its activities are regulated by the SEC, the Board of Governors

      of the Federal Reserve System (the “Fed”), and the New York State Banking

      Department.

    3. davidn says:

      ****************** NSCC ******************

      http://www.bis.org/publ/cpss20_usnscc.pdf

      NSCC is organized under the New York Business Corporation Law as a for profit organization.

      NSCC is subject to regulation and examination by the SEC.

    4. davidn says:

      ****************** DTCC ******************

      http://www.co2-handel.de/article58_10058.html

      LCH.Clearnet is regulated or overseen by the national securities regulator and/or central bank in each jurisdiction from which it operates.

      It doesn’t mention DTCC, so Patrick appears to be right.

    5. Hi. I believe that the subject of who regulates these fellows is now not so up-in-the-air as it was a few years ago. That is because the DTCC has taken steps to tell the public, Yes, yes we are regulated!

      However, all my experience with people within the system suggests that this regulation is more for show than anything.

      Patrick

      PS Yes, I do clump DTC, NSCC, and DTCC all into one buckeet, in a faint attempt to keep the interest of the general reader.

    6. davidn says:

      Patrick, I majored in math and sciences when I was in university and when I took economics, I was stunned how unscientific and how unmathematical it was.

      Professors would do graphs and not label the axes with units and they would spew crap about inflation being caused by workers wanting more money (obviously inflation is caused by a sudden increase in the money supply).

      It is a pseudoscience, with less science than astrology.

      I wanted to understand where money came from as it just didn’t make sense to me that all the world’s governments were in debt. Who did they owe all this money to?

      I had a friend who worked in the old library archives and he started pulling out books on economics from the 1800’s and it became really clear, really quickly, that what is taught in the schools is disinformation and economic history is censored in the schools.

      Q. If we didn’t pay income tax before the Fed. was set up, then how did the government pay their bills?

      Q. What was the role of colonial script in 1776 and why was the privately owned Bank of England so pizzed when the colonists issued it?

      In the 1800’s, they got it. The Wizard of Oz was an allegory about the banksters versus the people.

      http://www.prosperityuk.com/prosperity/articles/wizzoz.html

      I’ve realized that the system is the way it is because the people that run things want it this way and they don’t want the population to understand their secret sauce, which lets them print wealth out of thin air (counterfeiting shares, counterfeiting bonds and gold, fiat currency) and lend it to the government at interest.

      They keep us rats busy chasing our cheese in our rat race as they operate a system that operates according to different rules than what they tell us.

      I spent a few hours last year with a senior executive at Rothschilds and went through my thoughts and he nodded instead of disagreeing with me, explaining that the sheep need a shepherd. I think he’s wrong.

      Your post couldn’t be more on the money. If you still have any relationship with Warren, who has relationships with the banksters (lots of photos with him and the Rothschilds), I implore you to explain to them that their system doesn’t work in the age of the internet where we all have near perfect access to information and it is in the banksters interest to distribute their power and allow their casino to run fair.

      Would you rather be a 40 year old king, years from death in the year 1400 or a middle class person in 2008? Things are better when you let society function and innovate and you don’t hold back the cure to cancer or the next Microsoft. Progress requires a fair casino.

      In a poker game, the chips eventually all go to one player and either the game ends or there is a buy in. If the game ends, it also hurts the big player.

      It’s in all our interest to have an economic system that doesn’t come to a grinding halt every time one player gets all the chips because he cheated.

      Failure to deliver is a symptom of a system where there are two levels of law, one for the people that control our politicians and regulators and another for the rest of us.

    7. davidn says:

      Patrick, I agree with your thesis that the whole bucket is unregulated.

      My point in spilling the BIS stuff is to force them to be regulated. For example, we should complain to the NY State Banking Department that they need to go into the DTC and audit them and show the DTC BIS filing as proof they have the authority to do it.

      You are causing huge waves of change and I commend you on your bravery and determination. You are exactly what society needs right now.

      Thank you!

    8. lenofus says:

      Funny how comments come back to haunt us.

      http://jeffmatthewsisnotmakingthisup.blogspot.com/2008/09/naked-nothing.html

      “If anyone wants to naked short Berkshire, they can do it until the cows come home. In fact, we’ll hold a special meeting for them,” he says, to laughter.

      I wonder who’s laughing now?

      http://stockcharts.com/h-sc/ui?s=brka

      It’s ok, Mr. Buffett. You can admit you’re wrong, save yourself, and maybe some other folks at the same time. Three hours on CNBC? Tell the world. Get this over with while we have a bank left. I can’t do it. Or I’d do it for you. Patrick can’t do it. But YOU can do it. And it is your civic responsibility. If 19 year olds can get shot trying to become citizens, you sure as hell can admit to the world naked shorting has to be stopped yesterday.

    9. Dale B. Ritter, B.A. says:

      Quantum mechanics points at more possibilities for the future, new dimensions of perception and understanding. New developments there include the
      RQT (Relative Quantum Topological) physics scene, where imaging of picoyoctotechnical scales is achieved by solution of the Schrodinger equation for the atom. This system blends the quantum functions for frequency and wavelength with the relativistic transforms for time, mass, and energy to build 3D animated, interactive images for all particles, fields,and waves. The heat capacity energy cloud is projected as a spectrum of exact particles which intersect the primary physical constants: h, h-bar, delta, nuclear magneton, beta magneton. The mathematical image of the h-bar magnetic energy particle is available online, along with grand unified discussions, graphics, essays, commercial infotools for building pymtechnical imaging Softicon software, plus the book The Crystalon Door, the grand unified theory of matter and energy.

      (C) 2009, Symmecon Mktg. Inc.

    10. Lara Braveheart says:

      Bravo Mr. Byrne:

      It’s a great joke. For those who still missed it, the point is that the professors were so wrapped up in their theory (in this case, the denial of internal states), that they could not experience what was right in front of them. They had to filter their data through the theory to which they were committed before they could experience it.

      Sometimes such commitments bind their holders so strongly they forget that what they are committed to are just paradigms.

      As Russian Devil Loveland (not a behaviourist, more an anti-psychiatrist) said:

      If who I am is my Ph.D; then who am I; if my Ph.D. is lost (wrong)?

      If who I am is my bank balance; then who am I; if my bankbalance is lost?

      A case of you can find intellectual, emotional, psychological and political proles anywhere:

      “A prole is not actually happy when free; he is uncomfortable, a bit alarmed, and intolerably lonely; longs for warm, reassuring smell of the herd, and is willing to take the herdsman with it.”

      Jonathan Livingston Seagulls, whose conduct is as a result of their reasoning, and willingness to confront reality, AS IT IS; as opposed to the required political correct ‘reality’ of their ideology, or ideological class, are few and far between.

      Keep going Mr. Jonathan Earp!! :-)

      Lara

    11. yesquire says:

      EMT blissfully ignores that the world has a goodly number of crooks. Market theory is useless to predict the financial decisions of crooks. No…wait. Maybe it is, in a backwards sort of way.

      Let’s assume there is a crook. Let’s define “crime” as an interpersonal transaction in which one party dictates the price, and the other party is powerless to negotiate.

      When a crook commits a crime, he walks away from the transaction with a theoretical maximum possible profit, his profit being limited only to the value of the object he steals.

      If market theory is correct, and if you assume more than one crook, or, better yet, lots of people who maybe weren’t crooks to begin with, but could be drawn that way with the right incentive, the success of our first crook would draw other crooks into the same market for that sort of transaction.

      This assumes of course, that there is a mass of willing people waiting to be victimized, or, better yet, not yet realizing they have been victimized.

      As more crooks flood into the market for this particular crime, the total volume of theft will accelerate over time, at least for awhile.

      It will end only when the victims no longer possess anything of value to steal, at which time the theft will cease. Theft requires some amount of effort and carries some amount of risk.

      Now, class, discuss this efficient market theory in the context of strategic fails to deliver and the current direction of our major stock indices.

      See, standard market theory really is helpful to develop an understanding of the world around us.

    12. yesquire says:

      I’ve been giving this a little think.

      Standard economic theory would also tell us that a crook would seek to minimize the risks involved in his endeavors.

      With regards to crime, the primary risks are detection and enforcement. Detection limits your options for a getaway. Enforcement is to be avoided at all costs.

      A well-organized group of thieves would take steps to minimize the risk of detection of their crimes, such as hiding them within some place where nobody can see what’s happening, or better yet, by hiding them someplace where the owner of the premises conceals what goes on there and actively fights any attmept by an outsider to see what’s going on within.

      A well-organized and thoughtful group of thieves would quite naturally seek to castrate any governmental enforcement agency, and to control any other segment of society, like news media, that might investigate and reveal the scope of the crimes being committed.

      It maybe isn’t a part of economic theory, but my own personal, anecdotal experience is that crooks very quickly learn never to admit their crime to anybody. Such admissions by their very nature act as instant detection of the crime, and vastly increase the risk of enforcement.

      Unless you are Jim Cramer.

    13. huckstercrusher says:

      The current rash of failures to deliver in Berkshire was totally predictable, as is the attack on Mr. Buffet’s holdings, such as GE. Our friends view Mr. Buffet as an “enemy” because he has demonstrated that their pet dogma is flawed. So all efforts must be made to distroy him. This is the true guiding mandate of our friends. To protect themselves from all the percieved enemies they have amassed.. You do not have to hold a phd in psychology to be able to label our friends. We are dealing with totally paranoid individuals.

    14. Peter says:

      I think you could restate your idea more elegantly by using the old saying “The map is not the terrain.”

      That simple sentence possesses as much or power as any statement I have ever encountered in gaining an understanding of how we have arrived at where we are. From my personal investigations over the course of a couple decades (and I am not an academic or an expert) I have come to believe that the arbitrary disciplines of academia and the more rigorous field business have been overwhelmed by the fundamental failure to recognize this simple truth.

      Clearly, in the western world, the principle map makers are the central bankers and their accolytes. They have created an extremely self serving map which they insist you accept or you will be declined credit. (And to be fair it has produced some incredible benefits, but if you talk to any coke-head or junky they will have similar observations about their initial experiences with their drug of choice.)

      If you review the history of what happens to individuals in any discipline who insist that observed results (not predictive theory) are the sine qua non of progress you can’t help but become a cynic about consensual reality. In other words those who see what “is” as opposed to what is predicted are universally black balled

      Academics fail to get tenure (or have it revoked) entrepeneurs are denied capital. Should they be lucky enough to get white knight private capital, or self finance they are attacked by state-controled agencies which are all run by folks who by definition believe their map IS the terrain.(And you have to confess their map is working for them.)

      If you are able to draft a map that shows all roads to wealth, progress and freedom lead to your self serving cartographic reality, I’d say you’ve “got it made in the shade”.

      When the map makers are able to use statistics and realize that one standard deviation from either side of the mean is all that need to be suckered in a “democracy” to get their way and the “outliers”, those troublesome idealists who insist the terrain is everythng, are irrelevant. Does this “feel” familiar Patrick?

    15. carlk says:

      This finance professoriate you describe must not have any of their hard earned shekels in the stock market, for if they did, they would certainly know how it feels to get a hard stick poked in their eye! It will blind a man, I tell you.

    16. mhelburn says:

      yesquire,

      You have forgotten the major portion of the fleecing. Make the rules so that what would be immoral and illegal transactions are no longer illegal. By allowing credit default swaps to be sold that had no underlying asset to hedge, those with no insurable risk were allowed to manipulate and destroy the value of the real underlying assets in the quest for getting the insurance that they conveniently called “credit default swaps” so that they could not be regulated.

      How do you prosecute someone for something that is wrong, takes its toll on the entire world with devastating results when it is not illegal?

      The purchasers of these CDS were “too big to fail” and the underwriter was “too big to fail”, which resulted in the a transfer of asset value from the housing market to the holders of the CDS. They had nothing at risk and yet our government covered the bet for them. Million of people will suffer for this. As long as it is acceptable for these people to profit from what they have done, we will be in a depression. The insanity of how this was handled has its natural consequence. People don’t want to play in a game where the rules change to protect the dirty players who have an infinite number of chips via a government handout. The folks who were behind on their mortgages didn’t get a reprieve, but the banks and AIG got one.

    17. roger muldavin says:

      Thanks Internetors, maya the force of logic be with us and pass on to others.

      Some Strings Theories use the flat equal lateral triangles (felts), four of them, to form a a tetrahedron.

      John Von Neumann wrote a book (I have it somewhere in my cellar, basement library) so a quick Google located this recent (2006) thesis, but the idea is that a five sided hedron of felts cannot lie flat, it will form a 5-cap, a tetrahedron a 3-felt with a felt base.

      Von Neumann stated that an investor placing “money” on five paper investments, the five will converge to a monopoly.

      This thesis below shows some signs of this notion.

      Best, rm
      ***********

      http://gupea.ub.gu.se/dspace/bitstream/2077/278/1/Hedesstrom06.pdf

      DOCTORAL DISSERTATION AT GÖTEBORG UNIVERSITY, GOTHENBURG, SWEDEN, 2006
      ______________________________________________________________________

      Abstract

      Hedesström, T. M. (2006). The psychology of diversification: Novice investors’ ability to spread
      risks. Department of Psychology, Göteborg University, Sweden

      In order to reduce risk, portfolio theory prescribes holding a stock portfolio that is diversified
      across industries and countries. This thesis investigates novice investors’ ability to compile
      well-diversified portfolios and to what extent psychological factors may affect diversification.
      In Study I a sample of 10,999 randomly selected citizens’ choices of mutual funds in the
      Swedish public premium pension scheme (PPS) was analysed. Among those who did not
      choose the default fund it was typical to include as many funds as were allowed (five) in a
      portfolio and to use a 1/n heuristic, allocating investments evenly across the selected funds.
      While thus superficially well-diversified, portfolios were often home biased (overrepresentation
      of Swedish funds) and possibly influenced by extremeness aversion (overrepresentation of
      medium-risk funds). Study II replicated these findings in an Internet-survey where 392
      university employees made a fictitious choice of PPS funds. Highly involved individuals
      included a larger number of funds in their portfolio but were not less home biased. Suggesting
      that investment experience does not improve diversification, individuals who own stock
      (outside the PPS) were not less home biased. In Study III undergraduates made hypothetical
      investments, choosing between stock funds that were stripped of all characteristics except for
      their past (Experiment 1) or expected (Experiments 1 and 2) returns. In Experiment 1 (N = 40)
      participants paid more attention to the volatility of individual funds than to the volatility of
      aggregated portfolios. In Experiment 2 (N = 46) a majority diversified even when this increased
      risk due to covariation between individual funds’ returns. In Experiment 3 (N = 48) nearly half
      of those who seemingly attempted to minimize risk diversified even when this increased risk.
      These results suggest that novice investors neglect covariation when diversifying across
      investment alternatives. Study IV replicated and modified Experiment 2 in Study III.
      Undergraduates (N = 160) were randomly assigned to one of five conditions with varying
      instructions. Being instructed to minimize risk, many diversified even when this increased risk.
      Choices were not markedly improved by informing participants of how covariation affects
      portfolio risk. Only when being instructed to systematically calculate the returns of diversified
      portfolios, was covariation neglect reduced. In sum, the results of Studies I-IV suggest that
      novice investors have an insufficient understanding of what portfolio diversification is
      essentially about: combining assets which returns are not likely to covary. The results hint at a
      deep-rooted inability to grasp the concept of covariation, possibly hampering acquisition of
      adequate knowledge. It is hypothesized that naïve heuristic diversification may be a residual of
      a default cognitive strategy to seek variety for the sake of learning about the environment.

      Keywords: Covariation neglect, Novice investors, Portfolio diversification, Diversification
      heuristic, Behavioural economics

    18. yesquire says:

      mhelburn,

      Thanks for your additional info.

      Insurance law contains the concept of “insurable interest”, as I am sure you know. Gary Weiss should not be allowed to take out an insurance policy on Judd Bagley’s life, for example. He lacks an insurable interest. You cannot take out a fire policy on your neighbors house, either. You lack an insurable interest.

      At one time we had a legal wall between insurance companies and brokerages. I was never sure why. Now I think I know. Removing the wall made it too easy for stockbrokers to create securities which are nothing more than insurance policies in disquise, under the theory that it is good for debt markets to have such insurance available to supposedly reduce risk. But there if those securities are treated as securities in a securities market, they will, almost by definition, end up being held by people with no “insurable interest” in the risk being insured against.

      Also, they do not reduce systemic risk. They might reduce risk for an individual by pushing it into the overall system. That only allows individuals to take on more risk again, buy insurance, and then repeat until system collapses.

      As noted somewhat belatedly by Alan Greenspan, you have to take into account human nature. Being what it is, those holding securities which pay off only in the event of a default will greatly encourage their holders to try and create massive defaults.

    19. tommytoyz says:

      Great insight for those of us like me, who were not aware that the MBA education of our “leaders” has gotten so far off the path from reality. No wonder they can’t see what’s really happenig as they cling to beliefs rather than facts. Only the critical thinkers can see out through the falsehoods. And apparently, those are in very short supply or are criminals.

      Isn’t this akin to superstition?

    20. roger muldavin says:

      Poetry: 4by5by6,
      numbers count

      Patience pleases progress plenty,
      risk raises returns remotely,
      Postscript presents problems, pow!
      doctoral dissertation deserts decay,
      software socks savings sadly.

      Poetry plays placing proportion
      sight saves somewhat sorting,
      five favorites find favor-of-colors
      vertex verifies veracity-of vision,
      Higgs helps hinge-all holistic.

      All things are connected,
      equality-of string begins&ends,
      between becomes two-way motions,
      tangentially and longitudinal equals,
      electron-magnetic and gravity helicals.

      Backbone base? calcium embrace,
      5+10+5 felts, 5cap+10ring+5cap,
      smallest cross-section of nuclii,
      brain? five centers-of consciousness,
      Something is really happening.

      Sun’s Summary Symmetry Simmers,
      Solar-Winds Van Allen Explains,
      Earths Magnetic Poles Change,
      Directs Protons to South Poles,
      Electrons to water North Poles.

      Ice-Ages&Continents cycle times change
      Roughly 100Kyrs, 100MegaYrs, Approx.
      What is the base?
      Planet Earth’s a starter;
      We must (therefore) get smarter!

      best, rm

    21. tommytoyz says:

      I, for one, do not see any utility or benefit in short selling of any kind. For one letter to the SEC I sis some reseaarch to see what the studies/data was that showed what the benefit of short selling could possibly be that escaped me.

      I found only one reference to a professor who was talking about how short selling made deriviaties hedging cheaper and thus helped the derivatives market.

      Neither the SEC nor anyone else quoted any data or studies to the often repeated mantra in all the letters and speaches, that short selling equities is benficial for equity securities markets and investors.

      I can’t see any benefit and in my personal opinion, short selling of all kinds should be banned. It has no benefit to investors or the issuer, markets, economy, etc….

      If somepne wants to hedge, they need to do so in a manner that does not affect the underlying asset. If this limits or makes hedging impossible – so be it.

    22. Stunned says:

      DAVIDDN, on your inflation comment way above.

      Greenspan was touting that inflation would rise sharply as labor markets tightened up. What followed was the collapse of the internet bubble due to Greenspan raising rates and continuosly maiking comments about the markets and investors being irrational.

      What Greenspan failed to address in his ‘attack’ was that the US enjoys 2 very large labor pools to the North and South of its borders. There would never be a labor shortage which would cause inflation to spike.

      As to his attacks on investors, i’ll leave that to others to define why he stuck his nose in when its the last place he should be concerned with.

      Remember, its your money, . You can do what you like with it. If you wanted to buy CMGI for 200,. then , that was your choice. Greenspan had no business making comments.

      Fortunately, the world now knows Greenspan is a farce and is pointing to him as the single biggest dunce to have led this Free market to ruin.

    23. Dr. Jim DeCosta says:

      tommytoyz,

      In a perfect world the SEC would not have allowed the trading of any derivatives if the trading done therein could be detrimental to the prognosis for the success of the underlying “financial asset”.

      With derivatives a Pandora’s box of “self-fulfilling prophecies” can be accessed. In the credit default swap (CDS) arena all a crook needs to do is to establish a naked short position in the underlying security and then manipulate the price of the CDS upwards with your hedge fund cronies managing more money than they know what to do with. As the CDS price goes up the share price of the underlying asset tanks and you’re making money from both bets via the setting up of a “positive feedback loop”. Soon the rating agencies take notice and undercut the rating of the security to throw some gas onto the fire. In an industry based on confidence like the banking industry the confidence levels of humans can be manipulated just like the share prices of the assets. This throws more gas onto the fire.

      The banking industry just so happened to present the perfect storm. Recall that the “securities entitlements” resulting from failures to deliver are another form of a “derivative”. They’re not “shares” of a corporation. This set up a “positive feedback loop on steroids”. Now you’re attacking the banking sector with 2 separate derivatives and the 2 self-fulfilling prophecies that are easily accessed can work in synergy with each other.

      What we’re missing in the securities markets is the analogue of a “covenant not to compete” wherein the SEC promises not to allow the trading of any new forms of securities (like CDS’s or “securities entitlements) that might undermine your prognosis for success. You as a corporation were here first and we (the SEC) promise to protect your “sovereignty”.

    24. Dr. Jim DeCosta says:

      tommytoyz,

      One of the more heinous aspects of abusive naked short selling (ANSS) is that the crooks selling these nonexistent shares have “no skin in the game”. Sure they have to “collateralize” the monetary amount of the failed delivery obligation but 99% of that collateral consists of the unknowing investor funds. After he cut the check the investor’s funds go into a legal limbo wherein neither the investor nor the seller of bogus shares have a right to touch it. The brokerage firm is given the interest earnings of the investor’s money which is unconscionable in and of itself and the seller of bogus shares gets to use that pile of cash to collateralize the failed delivery obligation which is equally unconscionable. The abusive naked short seller has “no skin in the game”.

      As the readily sellable “securities entitlements” resulting from the FTDs accumulate in the share structure of the corporation under attack the share price has to tank by definition. As the PPS tanks the investor’s funds flow to the seller of bogus shares despite the fact that he still refuses to deliver that which he sold. As the investor’s funds flow to the crook he can then afford to establish and maintain an even larger naked short position which makes the share price really fall off of a cliff. There’s your “positive feedback loop”. We all remember the days of the options market maker exemption. There’s yet another “positive feedback loop” to throw into the mix. And all along the crooks have hardly any of their own money on the line.

      When you have deep-pocketed hedge funds working in concert to drive up the price of the credit default swaps then there’s no way a bank can fight back. So what do you do? You go in front of Congress and complain that these hedge funds and other “banksters” stole a page from our play book and are naked short selling us to death.

    25. Dr. Jim DeCosta says:

      Have you ever wondered why the crime du jour being committed by the “banksters” and the unregulated hedge funds is abusive naked short selling (ANSS) wherein share prices are manipulated downwards and not “pump and dumps” wherein the share price is manipulated upwards? If you think about it you’d think it was the exact opposite because in any form of short selling your winnings are limited to 100% (bankruptcy) versus no limit to the earnings when share prices are manipulated upwards.

      There’s 2 reasons. The first is that in ANSS you’re not using your own money like you need to do in a pump and dump i.e. “no skin in the game”. Secondly, in ANSS you can rely with 100% certainty on the fact that the DTCC and its NSCC subdivision will pretend to be “powerless” to provide the ONLY cure available when the seller of securities absolutely refuses to deliver that which it sold i.e. buy-in the failure to deliver.

      They’ll even plead to be “powerless” to execute buy-ins when they have 15 of the 16 sources of power to execute buy-ins. Do you see what can happen when you gain a “monopoly” on the power to provide the ONLY cure available when crooks refuse to deliver that which they sell?

    26. Anonymous says:

      Who got AIG’s bailout billions?

      By Toni Reinhold Toni Reinhold – Sun Mar 8, 8:30 am ET

      http://news.yahoo.com/s/nm/20090308/bs_nm/us_aig;_ylt=AktyXant22IZ2NcEB3eXQ6J34T0D

    27. Jim Hall says:

      Patrick, the outline of an idea (take it for what it’s worth)…I have no email address directly to you so here it is…hoping you will see this.

      ***************************************************

      RAIL – Real American Investors League

      I propose a not-for-profit organization/movement called RAILS. (aside: Couldn’t ANY group for investors be considered ‘non-profit’ these days?)

      This organization would serve as spearhead and aegis for concerns of INVESTORS, not TRADERS. We need positive PR to counteract the Chanos/Einhorns of the world.

      Who are RAIL investors?
      pensioners, etc.

      What we are not…
      Hedgefunds
      Daytraders

      Ways and Means, Tools at our disposal:

      A Platform:

      Build A platform (what we demand in no particular order):

      – immediate and complete short ban

      – uptick rule – modified to take into account percentage increase over a time period – not geared to a penny as many

      disingenuous folks have suggested is the only way to accomplish this.

      – Shorting (naked) and otherwise immediately public

      – Puts must be married. If you have no long share, you may have no put.

      – SKF must be terminated

      – CDS must be invalidated if no ‘investable interest’

      – DTCC reconciliation of FTD within 30 days

      – News rumors CNBC – nationalization etc squelched. No yelling ‘Fire’ in a crowded theater, or in Yahoo message Boards for

      that matter…

      – FUD regarding accounting of companies to stop

      – Legislators to reveal ALL investment holdings right now, short, long and otherwise.

      – Analysis of the origin of the shorting, naked and otherwise – who, what countries, when

      – CRIMINAL Charges and sentencing in cases like Madoff. ALL ASSETS confiscated. Complete investigation into his family, and

      the Family (mob) at the heart of this.

      METHODS:

      – Need a ‘Million Investor’ march on Washington – NYC?

      – News coverage

      Lawsuits against senators, NYSE, SEC, etc.

      This is merely a germ of an idea. What do you think?

      ************************************

    28. Anonymous says:

      Jon Stewart’s Rant Caused a Stir
      65% Agreed With His Attack on CNBC

      http://www.dailyfinance.com/2009/03/05/jon-stewart-gives-scathing-cnbc-critique

    29. jack says:

      Patrick,
      It looks like WEB is about to take a walk through the same metaphorical alley that you did back in 2005.
      No shares available to short at any broker I could find, CDS’s on Berkshire being bid waaay up… Eerily familiar. Expecting a rash of innuendo and negative articles by some financial non-journalists( where theres smoke theres fire type stuff, spinning the annual report.. etc), followed by a ratings downgrade that I’m sure a few ulterior motivated and compensated analysts at the ratings agencies (im guessing S&P) are lobbying for.
      I guess on the plus side I know a few brk shareholders who will be amazed at my ability to predict what will happen to their portfolio over the next few weeks… I’ll be sure to point them here.

    30. Lara Braveheart says:

      Excerpt of Letter to Jhb Stock Exchange Brd. of Directors, Nelson Mandela, Arbishop Tutu, Bank of New York, et al; dated July 29, 2008:

      If the economic theory engineers who design these economic ships, with holes like swiss cheese, driven by Captains blind to icebergs, were held as accountable as Captain Bligh’s crew, an economic system may be capable of being devised with the same commitment to accountability, as the engineers responsible for the dykes of the Netherlands.

      Correct me if I am wrong, but it appears that the financial engineers responsible for the world’s swiss cheese financial system — from it’s Central Banks fractional banking and fiat currencies, to Enron and Worldcomm like fictional helium based accounting systems, on various stock exchanges; — do not appear, to live below the sea-level of their financial systems.

      If stock exchange regulations do not allow for companies traded on the relevant stock exchange to enter fictional helium based assets and liabilities, how is it that there appear to be no consequences for their accounting bluffing game? If a poker player goes all in on a bluff, and loses, he is out of the tournament, immediately. Yet companies invested in stock exchanges appear to enter ever greater and ever higher helium-like fictional accounting bluffs, and yet – even though this is strictly against regulations – the bankers interest in enforcing the regulations appear half-hearted, to the naïve, and intentionally criminal, to the astute.

      Title: “Is an Ethical Emotional, Financial, Political or Military Reputation, based on Honour?”

      http://crimeninuria.blogspot.com/2009/01/08-07-22-jse-tutu-langa-mandela-et-al.html

      Lara Johnstone
      State v. Johnstone: Crimen Inuria
      http://crimeninuria.blogspot.com

    31. ron doc says:

      The plan is bigger.

      The ones employed in it’s advancement are not in many cases even aware of the end game, but only know they will be well compensated for their work plan that they follow.

      The Puppetmaster pulls the strings of the largest of the large, without a question from them. They know without asking that to continue to do well they must not disagree. This is I beleive why some of us stare in awe that some of the big players don’t buck even as their house gets attacted, they know their quite acceptance will pay off in the new set up.

      Patrick has uncoverered a portion of the over all plan but it is only a part of the whole for a master purpose.

      Take away everything, from most people for a while, let them see what living in a Mad Max world will feel like and national sovereignty, freedom of choice of the person, as well as what you want to believe in all fall down to the desire to see your childeren have food and a place to sleep safely. Control of your person and freedom then is more easily handed over in favor of survival.

      http://www.wnd.com/index.php?fa=PAGE.printable&pageId=91100

      Go read the Book of the Revelation 13:7.

      I think we are seeing a portion of the following of the blueprint to bring world government and a gold backed electronic currentcy controlling all money and transactions.

      Consider this from several yeas ago and wonder how he seems to have had the playbook well before the game came out into public view.

      http://gold-eagle.com/research/nightwatchmanndx.html

      God is in control, no matter what the pupeteers think!

    32. Davidn says:

      Stunned,

      The “need” for money is tied to the velocity of money (how quickly transactions occur) and the value of those transactions (goods and services).

      For example, if the population goes up 10% and the unemployment rate doesn’t change, then you “need” 10% more money.

      Inflation is money printed in excess of the “need” and deflation is a shortage of money below the “need”.

      If you print money when there is a shortage and the result is you lower the unemployment rate, then you get a free lunch. The extra currency is offset by extra “need” (more people working) and there is no inflation.

      To get the free lunch, you have to print it and spend it into the economy. If you just give it to the banksters to pay off their foreign debts, then it doesn’t work.

    33. Davidn says:

      Tommytoyz, the theory of shorting is that it helps transactions occur, but I’m not sure of the utility either. They banned it in the 30’s without much impact on liquidity.

      The idea is supposed to be that you allow a maximum amount of shorting which becomes pent up buying. It only works if there is also forced covering (buy ins) when those shares are needed.

      If it works properly, then the idea is it should reduce volatility by getting rid of the lows and highs (shorts cover when it is low and sell when it is high).

      We are so far from it working properly that I tend to agree with you.

    34. Davey says:

      This is interesting. I think this is probably a common occurrence across many disciplines. I’ve seen it often in English, where people are so addicted to a particular form of analysis, that they don’t really pay attention to a novel beyond what you see from a feminist/marxist/whateverist interpretation.

      It does seem to me as though this is largely an issue because it is easier to have a narrow view.

    35. iStandUp says:

      Here is an article about “Stock Market Propaganda = 911 Financial Terrorism”

      By Michael Levy

      Everybody now knows that $147 a barrel oil was a speculative bubble fed by expert propaganda. There was never a shortage of oil yet lies that turned into propaganda and then spouted as expert opinion sent oil into unrealistic
      levels.

      Today we have the same type of intellectual propaganda feeding into short selling derivatives like index fund ETF’s that are leveraged to take a basket of stocks down in double quick time.

      If terrorists wanted to destroy the world investment system what better than to get experts to state how dire things will become and use fear based propaganda, rumors and lies that allow short selling speculation to send stocks into a tailspin.
      Good stocks will do well in bad economies and bad stocks will do bad in good economies, however ETF short derivatives take the majority of good stocks down with the few bad ones.

      GE is a good stock that reflects the heart of America and yet it has been taken down by negative propaganda that focuses on one segment of the company. Its value is worth far more than the stock price and there are a multitude of other stocks trading at values that are lower than their book value.
      The only way to regulate an over-leveraged system is to halt all short selling for a while. Bring back the up-tick rule when short selling returns and check who is buying short index ETF’s in large quantities. The time for government action is now
      ( http://newsblaze.com/story/20090304165851zzzz.nb/topstory.html )

    36. Fintas says:

      Mr Buffet who is unquestionably one talented man made an ooops that cost his investors alot of money that will TAKE YEARS to recover. And that is and was a disservice to them. For that he should feel bad. Does he. Don’t know. Don’t know the man. I do KNOW he KNOWS. I also know that at one point as he did his usual talking down certain areas MBIC etc and while doing so was implementing his normal strategy of if you can buy a 50 dollar steak for 19 then do so. it’s great value. UNFORTUNATELY as bright as he is he neglected to ACCEPT that they can turn those guns via click cliickl on him and have done so via the use of ANSS and CDS. NO not against BRKA but against the holdings. And it’s happened faster than he or others could respond. So he does the wise thing to say…SEPT was near failure but we will get out of this. I’d only say to that..but Warren SEPT was AVOIDABLE. And from where I sit pro active is far better than crisis management. Yes you may have wanted to buy things on the cheap for you knew there was a bubble. BUT does that mean you do so at the RISK of the system collapsing? NOT in my world. How low could BRKA go. IF the thugs have ther way..it could revist 53/38k a share. Hopefully someone has a END GAME and that means using the appropriate TACTIC to force buyins.. As while doing so..maybe some might spill their gutts so we can get rid of SOME of the targetted compicit. We know we can’t get them all for the dots overlap. Yet it would be nice if a WARREN could sit down on a cnbc and say. MY FELLOW AMERICANS..you were XXXX. It’s an OLD game. I was part of it but I’m now here to educate and inform. HMM I won’t hold my breath but there is SOME out there that are GOING to act and others are going to spill their gutts…

    37. tommytoyz says:

      Thanks Jim and David for your insights.

      What Patrick wrote, struck a cord with me as I’ve had a hunch there is something amiss in MBA schools in this country and Harvard in particular, where many of the crooks in suits seem to come from.

      Though the explanation Patrick laid out, I think misses one aspect, or at least should be highlighted. It’s not that regulators are blindly following EMT or CAPM , it’s that many seem to know how the markets do work, because they argue to limit information to the markets regarding short sales, FTDs and FTRs while at the same time espousing belief in EMT. That does not compute – so they must not believe in EMT either.

      These SEC people seem to know (and should) that delivery failures (FTDs) are only the mere appearance of trades and settlement, and not the real thing and that FTRs are only the mere appearance of holding securities, not the real thing.

      Yet this misinformation is happily passed to the market on purpose, because the EMT and CAPM touting SEC regulators and Wall Street types have been fighting the disclosure of FTD and FTR data.

      My point is, that at least some of these regulators seem to know more than they let on and are using these theories as a cover to throw stardust into everyone’s eyes – confuse. Ditto for many hedge fund managers and securities industry types that cite these theories as “proof” – as Patrick pointed out they’re doing.

      Since many MBA types believe in EMT and CAPM religiously, which includes many politicians, I now see how it has been easy to deflect from the harm done in selling fake shares. For that many thanks Patrick.

      And I can understand Wall Street types covering their tracks like this, but for regulators to do this is unforgivable. It’s deliberate mind manipulation that they’ve been getting away with for too long already.

      It’s also nice to see this mind manipulation working less and less each day and critical thinking setting in more on the part of Congressmen and Senators as they start asking key questions and demand asnwers.

      Let’s hope all legislators wake up and effect change. There’s always hope…..

    38. iStandUp says:

      Dr. Jim DeCosta

      Now that other pressing matters of life have been put to rest, it is time I started putting pencil to paper by attempting to write a generic letter to the American People and to all our elected officials.

      To do this, I will need your help and the help of others so together we can come up with something that every common man and woman will easily understand.

      You many explanations and letters to the SEC have greatly aided my understanding… Thank you so very much!

      In thinking about the FTDs and the total number of outstanding shares of a publicly traded company, it seems that there are in fact THREE categories of books listing the total number of outstanding shares:

      1 – The total number approved by the board of directors and stockholders.

      2 – The total number of FTDs (Counterfeit Shares) created by the Wall Street Counterfeit Machine and know to DTCC.

      3 – The total number of FTDs NOT reported to the DTCC know to the individual ?? Clearing Houses??. And is this called Ex-Clearing?

    39. Fintas says:

      Ok for those who are skilled at what they do.

      A: Joe Noceir’s sp? hit piece on GE and who wants to expose this thug for what he is?

      B: Gasparino on cnbc attempting to defend Jimmy Cayne of BSC. Now there MUST ba a journalist out there that can stop that crap. OL BSC could have sold long before it collapsed from 120 to 80.. Heck Cramer was out there strongly suggesting BSC was a TAKEUNDER at 80. LONG before it collapsed from 60 to 20 to the over weekend of 2. AND GASPARION has the xxxxs to suggest Cayne was a victim. Hello Charlie it was because of that INCOMPETANCE that BSC became a target and that began the collpase which drug many with them. TIME SOMEONE who is a WELL RESPECTED VOICE pull the pants down on both of these jerks.

    40. Dr. Jim DeCosta says:

      istandup,

      It gets confusing I know. 1) The # of “authorized” shares is the # of shares that a corporation’s charter or articles of incorporation OK’d the BOD to “issue”. 2) The # “issued” is the # of shares that historically have been OK’d to trade by the BOD. 3) The # “outstanding” equals the # “issued” plus the # held in the treasury. 4) The # “issued and outstanding” equals the # issued plus the # in the treasury. 5) The # of FTDs held at the NSCC equals the amount of “long positions” held in their “C” sub accounts. These are associated with their totally corrupt “stock borrow program”. A “long position” in a “C” sub account resulting from SBP activity gives rise to a “securities entitlement” seen on a monthly brokerage statement.

      Most FTDs are held on the books of NSCC participating clearing firms as “securities entitlements” OUTSIDE OF THE NSCC. They have to be hidden outside of the NSCC because corporations have the right to order out a “securities position listing” (SPL) from the DTCC. When a suspicious management team orders out an SPL they will be INTENTIONALLY MISREPRESENTED with the façade that all is OK with their shares being held in “street name” and that you must have been imagining things.

      An SPL won’t show the # of “long positions” held in “C” sub accounts. Nor will an SPL show the # of FTDs held on the books of individual NSCC participating clearing firms whether from ex-clearing “arrangements”, those sitting on trading desks that have been “desked”, those held offshore, those held in international clearing systems allowed to interface with the NSCC, etc.

      If the DTC holds 100 million paper-certificated shares in its vaults as the “legal custodian” then the SPL will list out the shareholdings or “record positions” of all NSCC participants and it will indeed add up to exactly 100 million shares. The problem is that an NSCC participating clearing firm may have 10 million in its “share account” at the NSCC which will show up on an SPL but the sum total of “securities held long” referenced on the monthly brokerage statements they send out might add up to 18 million “shares and/or mere “securities entitlements” resulting from FTDs they’re sitting on.

      Some market intermediary or several of them collectively owe this b/d 8 million shares but he doesn’t want them to be delivered because NSCC policies allow him to earn interest off of his own client’s money UNTIL delivery occurs. He’s been “bribed” never to forcibly buy-in those 8 million yet to be delivered shares. The NSCC subdivision of the DTCC does not know this 18 million # nor do they want to. They only know that this b/d has 10 million shares in its participants “share account”. They put their participating clearing firms on the “honor system” despite the fact that they operate as an “SRO” (self-regulatory organization) mandated to create and enforce regulations monitoring the “business conduct” of its participants. The NSCC with this self-imposed blindfold is supposed to be acting as an SRO acting as “the first line of defense against abusive naked short selling frauds”. On the birth certificate of the DTC (Section 17 A of the ’34 Exchange Act) it says that the DTCC and its various subdivisions are to “act in the public interest, serve to provide investor protection and to promptly settle all securities transactions. Putting on a self-imposed blindfold so that it can’t see the “business conduct” of those that it is supposed to be regulating is not exactly the quintessential example of “acting in the public interest,….”

      If called on the carpet the NSCC will say our books match up perfect except for those “long positions” in our “C” sub accounts which they will say do not reflect “ownership” positions but only “yet to be met delivery obligations associated with SBP activity”. An SPL only shows “ownership” and not the key information concerning FTDs which management was looking for-the smoking guns. The NSCC says that the # of FTDs held in “C” sub accounts is “of a proprietary nature” and might reveal the “proprietary trading methodologies” of our participants who deserve privacy so we’re not going to reveal that. Sounds a bit like UBS over there in Switzerland doesn’t it.

      All DTCC and NSCC participating market intermediaries are put on a “need to know” basis and none of them including the NSCC have all of the information to put together the total FTD position. Nobody gets to see the composite picture; everybody is handed a blindfold hiding certain puzzle pieces. Everybody thus has “plausible deniability” and can say that they had no idea that the NSCC as a whole or one of the individual NSCC participating clearing firms was misbehaving so badly. I’ll bet that “muddified” matters more than it clarified them. The net-net is that ANSS is the most meticulously-designed “fraud on the market” conceivable. The cops are doing a great job of running interference for the bad guys but you might expect that when the “cops” (the NSCC management) are employees of the “banksters” doing the misbehaving. Gee and “self-regulation” seemed like such a good idea in a system riddled with conflicts of interest and with quadrillions of investor dollars up for grabs with the self-regulator being owned by those that have already showed zero ethics and an insatiable level of greed. Whooda thunk?

    41. davidn says:

      Istandup, it is doubly confusing as there might be no failure to deliver or naked shorting and still there is a problem.

      Claims on shares are owned in long daisy chains of trust relationships.

      For example, Cede & Co. owns shares on behalf of the DTC who owes shares to the foreign depository who owes shares to the clearing brokerage who owes shares to the introducing brokerage who owes shares to the client.

      At any one of these levels, they might notice that people rarely ask for a cert., so they can own less shares than they are supposed to own.

      “Failing to deliver” implies an action, but this is more like “failure to own”. Imagine a clearing brokerage that has 100% backing of his IOU’s. He could turn around and sell off 50% of those shares as long sales and now only back half his obligations.

      There is no failure to deliver and no naked shorting. It was a long sale.

      In my mind, this is where the system is vulnerable. They should do random audits at the state level to compare obligations on statements to actual ownership. If there is a mismatch, it is fraud (taking someone’s money to store their asset, then lying to them that you sold it).

    42. Dr. Jim DeCosta says:

      One source of “plausible deniability” that I forgot to mention above with the brokerage firm having 10 million shares in its NSCC participants “share account” but “implying” to its clients that it was “holding long” 18 million “securities” (a real share or an IOU as both are technically “securities”) is that even if the NSCC management learned of this gigantic disparity they could always proffer that “they assumed that this brokerage firm had 8 million paper-certificated shares in its own vault system”. There’s no law that states that you can’t provide “custody” services for your own clients outside of the DTCC. ALL DTCC participating market intermediaries have excuses pre-engineered into the system should they get called on the carpet to explain their actions.

      A totally different issue is that IF those misbehaving try to justify the existence of all of these unaddressed FTDs that manipulate share prices lower are somehow justifiable THEN WHY CAN’T YOU WARN THE INVESTING PUBLIC AND THE MANAGEMENT OF THE CORPORATION ABOUT THEIR EXISTENCE? Doesn’t a prospective investor have the right to know that the company he is contemplating an investment in may have already been preordained to die an early deathbecause of the presence of a gazillion readily sellable IOUs poisoning its share structure? Doesn’t a managemen team have the right to know how many readily sellable “shares” and or readily sellable “securities entitlements” are floating around in their share structure?

      What’s the typical answers of the NSCC to these queries? Sorry, we can’t tell you the total # of FTDs because that might reveal the “proprietary trading methodologies” of our participants. The information of a proprietary nature is WHO authored all of those FTDs; management or a prospective investor doesn’t particularly care WHO poisoned the share structure. The question was how many incredibly damaging readily sellable “securities entitlements” resulting from FTDs are out there.

      When the foundation for a clearance and settlement system is corrupt the entire structure has to be corrupt. For instance, when the SEC mandates that the owner of 5% of a corporation must file his Form 13 does this refer to 5% of the legitimate “shares outstanding” or to 5% of the total amount of legitimate “shares” plus readily sellable “securities entitlements”? How do we do the math if it’s the latter?

    43. davidn says:

      Dr. DeCosta, further to your 5% example, companies are supposed to declare the number of shareholders they have in their annual filings, but if they try and pull data, the company can’t get the number of foreign shareholders or the number of objecting beneficial owners.

      The system hides that information as if it were known, it would show the level of corruption.

      Most companies just use the number of actual shareholders on their company transfer list, which gives weird numbers, such as a few thousand owners of a fortune 50 company.

      The other thing about the current structure is it makes a joke of anti trust legislation as anyone can own 4.9% of the shares in many OBO accounts.

      The purpose of anti trust was to ensure no entity ever became too big to fail, so the taxpayer wouldn’t have to bail them out.

    44. RMR says:

      To The Editor
      The New York Times:

      Credit Default Swap Comment Misleads Public

      When Gretchen Morgenson wrote in “A.I.G., Where Taxpayers’ Dollars Go To Die” (3/6/09), that credit default swaps “are like insurance policies; bondholders buy them to protect themselves from default on various forms of debt” — she unaccountably omits the most important fact about credit default swaps– that an estimated 80%* of them are owned not by bondholders, but by speculators who own no bonds, and have no “skin” whatsoever in the underlying debt other than to do all they can through the force of their highly leveraged bets in the CDS, equity and options markets (and via other more subtle means), to help bring about the failure of such debt and the companies who issue it.

      Sincerely.
      Richard M. Rosenthal

    45. Kevin says:

      This has never been about saving main street. It’s about saving Wallstreet’s selling of everything from stock IOU’s to mortgage IOU’s backed by nothing. (The same mortgages were used in more than one bond.)

      The bailout money is a substantial fraction of the real economy.

      “Try as we might to salvage the residential real estate market, it’s at best worth $23 trillion in the U.S. We’re struggling to save the stock market, but that’s valued at less than $15 trillion. And we hope to keep the entire U.S. economy from collapsing, yet gross domestic product stands at $14.2 trillion.”

      http://www.marketwatch.com/news/story/The-700-trillion-elephant-room/story.aspx?guid={024DB809-8506-4AA9-83BB-B053FD4E1C11}

    46. RMR says:

      re credit default swap Letter to the NYTimes— the 80%* cite is:

      *http://www.lifeandhealthinsurancenews.com/News/2009/2/Pages/State-Lawmakers-Seek-Swap-Oversight.aspx

      and was included in original to NYT

    47. Anonymous says:

      If this does not say ” Hey all you tax payers, we are untouchable, and we will do what we want with your money because we are the chits and “No ONE CAN STOP US, so in your face!” I don’t know what is.

      House Committee Critical of Banks’ Spending of TARP Funds
      By Avi Klein on March 9, 2009 1:59 PM | No Comments | No TrackBacks
      Major banks have made a number of “very large, questionable transactions” since receiving bailout money, a House subcommittee said today.

      The House Oversight and Government Reform’s domestic policy subcommittee, in a memorandum released ahead of an oversight hearing on Wednesday, also charged that the Treasury Department has failed to sufficiently oversee the Capital Purchase Program, the part of the Troubled Asset Relief Program (TARP) dedicated to shoring up the nation’s banks.

      According to the committee, none of the questionable transactions were illegal. However, “members of Congress might not consider them the kind of transactions they believed TARP would subsidize,” the memorandum said.

      The transactions included a $2 billion repurchase by Goldman Sachs Group, Inc. of its own company stock. Goldman Sachs Group received $10 billion in TARP funds on October 26, 2008.

      The subcommittee said it identified the questionable transactions through testimony from Dow Jones & Co., the business information firm.

      Also singled out for scrutiny were an $8 billion loan from Citigroup Inc. to public sector entities in Dubai; a $1 billion investment by J.P. Morgan Chase & Co. in the development of cash management and trade finance solutions in India; and a $7 billion investment by Bank of America Corp. in a Chinese bank.

      The committee also identified a number of oversight failures by the Treasury Department’s Office of Financial Stability (OFS), which administers the TARP program.

      OFS’s efforts to track the use of bailout funds is limited by the fact that only the 20 largest recipients are required to file monthly reports on their activities. So far, more than 450 banks have received TARP money.

      Moreover, the committee noted that the monthly reports “do not provide details about any individual transaction, no matter how significant,” and they only address bank lending activities, not other investments or expenditures.

      The committee said that, although Treasury has the right under the TARP program to inspect the books of participating banks, it has largely failed to do so, “nor has Treasury questioned any TARP recipient about its use of TARP funds.”

      The committee will hear testimony on the use and oversight of TARP funds on Wednesday. Witnesses will include Acting Interim Assistant Secretary for Financial Stabilization Neel Kashkari and Neil M. Barofsky, special inspector general for the TARP program.

    48. Anonymous says:

      WHERE ARE THE INDICTMENTS ALREADY?

      Hedge fund hotel yields up secrets

      • Wheeler-dealing in UK led to US insurer’s record loss
      • ‘Acts of Satan’ ripped black hole in financial system

      * Andrew Clark
      * The Guardian, Saturday 7 March 2009

      http://www.guardian.co.uk/business/2009/mar/07/aig-insurance-us-economy

    49. ron doc says:

      Patrick, what did you do to the Canadian site stockwatch and LilGarys buddy Lee M Webb?
      http://www.stockwatch.com/default.aspx?ReturnUrl=%2fDefault.aspx

      They not only are running this third hit piece against you, but have tonight run a e-blast email of the same hit piece of todays garbage report on you.

      You must have rolled over a dirty rock, right next to the one some Canadia short trash is hiding under.

    50. Anonymous says:

      I was watching a Doctor on the news who was offering a charge of $79/mth to patients who didn’t have health insurance (less that 10% of his practice), This one doctor in younameit USA’s practice is being threatened by the Government to close his practice because they are saying he is getting into the insurance business by doing this. Ok, lets see, the government let financial miscreants create a toxic (INSURANCE) called Credit Default Swaps…leaving out the word insurance, which is bringing these companies to there knee’s, and we the people have to use our Tax Dollars to save these Greedy Bastards through bailout money(OUR TAX MONEY) and not a word from the government…no Perp walks, yet this doctor who offers a service of healthcare payment plan…Lets Call it HEALTH CARE SWAP and the GOVERNMENT wants to close his private office down ?
      Now there’s an idea…Lets Call all our services we as American’s can offer SWAPS…and lets challenge the government in the supreme court over why WallStreet can create CDS’s, yet we can not have Swaps as private individuals…..What a friggin’ corrupt and evil government we have become. I now understand why other countries hate us as we sit here with our heads buried in the sand while they were on the outside looking in and saw our government for what it truly was.

    51. Anonymous says:

      Link to the doctor above…Write this doctor about the CDS’s and let him challenge these communist idiots.

      http://www.vosizneias.com/28392/2009/03/04/new-york-ny-doctor-trying-to-help-uninsured-patients-with-annual-low-fee-is-being-fought-by-state-bureaucrats/

    52. ron doc says:

      If you think your freedom is being taken and want to do something about it read this.

      http://wnd.com/index.php?fa=PAGE.view&pageId=91191

    53. mmfiore says:

      There is a new Theory of Everything Breakthrough. It exposes the flaws in both Quantum Theory and String Theory. Please see: Theory of Super Relativity at Super Relativity Einstein was right!

    54. iStandUp says:

      Comment 58 about “Theory of Super Relativity ” appears to be SPAM….

    55. Anonymous says:

      Gotta Love our Government of Transparency and Change! Ben Bernanke can Tell Congress NO when questioned about 2.2 Trillion $’s and the FOIA can simply ignore request for Government Transparency.

      Four months, no answer
      By Chris Carey on March 10, 2009 8:18 AM | No Comments | No TrackBacks

      http://bailoutsleuth.com/

      Four months have passed since BailoutSleuth filed Freedom of Information Act requests for unredacted copies of the Treasury Department’s contracts with six companies hired to provide financial and legal services to its Troubled Asset Relief Program.

      To date, we have received no decision from the government.

      As BailoutSleuth previously reported, the Treasury Department blacked out or deleted compensation figures and other information from the public versions of the contracts it posted on its web site.

      The Treasury Department’s contract with Bank of New York Mellon, the master custodian for all TARP assets, blacked out the sections of the contract that outlined how much the firm would be paid for its services and how its fees would be determined.

      A report on TARP transparency last month by the Government Accountability Office put the estimated value of the deal at $20 million over three years.

      The Treasury Department’s contacts with two accounting firms, Pricewaterhouse Coopers LLP and Ernst & Young, also blacked out information about their deals. Pricewaterhouse Coopers was hired to provide internal controls for the $700 billion TARP fund, while Ernst & Young was hired for general accounting and consulting.

      The Treasury Department’s press release on the accounting contracts did include dollar amounts for the initial orders. But the GAO report showed that the contracts have since been modified or expanded, and that payments to those firms have far exceeded the original amounts.

      The Treasury Department also blacked out or deleted sections of its agreements with three law firms – Simpson Thacher & Bartlett LLP, Hughes Hubbard and Reed LLP and Squire Sanders Dempsey LLP.

      The Treasury Department said its deals with Hughes Hubbard and Squires Sanders would be worth around $5.5 million per firm, making them the second and third biggest TARP contacts.

      BailoutSleuth will keep pushing for full disclosure of the contract details and report back on what we find.

    56. John says:

      I never thought I’d applaud Barney Frank, but his announcement of a potential uptick rule restoration and mark-to-mark changes helped spur a good rally…I just hope it lasts until the close. Of course, Frank is just the messenger, but I hope he keeps giving these kind of messages instead of “TARP Part 363: How We’ll Waste Another Umpteen Trillion.”

    57. iStandUp says:

      Dr. Jim DeCosta and Davidn,

      Thank you for your answers…. I need to digest this information to find a way to phrase it in simpler words…

      Self-Regulation has become – you can do anything you want to since you regulate yourself!

      How do the Wall Street Counterfeiters handle votes cast at for example annual meetings?

      If they have doubled the total shares available to vote, does not the corporation discover yearly that they are receiving more votes than they should?

      Or do they allow us to vote and delete them so the corporation never sees an excessive vote number?

    58. Anonymous says:

      iStandUp,

      http://www.gamingthemarket.com/2008/06/how-manipulators-game-the-market.html

      “The following story was reported by Bloomberg. In 2005 the Securities Transfer Assoc. audited 341 NYSE listed companies that had corporate contests. It was looking to see how naked short selling, which creates counterfeit shares called failures to deliver, influence fair voting practices for shareholders. In all 341 cases they found more votes cast than shares registered. Those ballots were stuffed full of FTDs, and the outcome of the votes were manipulated by firms holding fake shares – in all 341 cases!”

    59. Anonymous says:

      “During this time the SEC said FTDs did not exist on a large scale. They stated people who complain about naked shorting are paranoid investors who simply lost money. When Reg Sho became law the existing FTDs floating in the system were grandfathered. This was due to the SEC’s concern about “creating volatility where there were large pre-existing open positions.” The effect was to shield the illegal behavior of the firms creating FTDs. The Columbia Journalism Review discovered this and worked for six months to publish an expose. They were immediately placed under extreme pressure by Wall Street firms. Eventually one night, while in a bookstore, the author was approached and told his 4-year-old would be killed if the story ran. That was the end of their investigation and the story was killed.”

    60. Dr. Jim DeCosta says:

      istandup,

      In regards to a corporation’s voting rights, the NSCC is set up such that its participants with shares of a given corporation’s stock being held in their NSCC participants “shares account” own what is referred to as a “proportionate interest” in the shares collectively held by the DTC subdivision of the DTCC in its vault system.

      The voting rights of any corporation are tied to the legal “ownership” of shares WHICH HAS NOTHING TO DO WITH OUTSTANDING FAILED DELIVERY OBLIGATIONS ON THE BOOKS. At the NSCC “ownership” issues become obfuscated in that “Cede and Co.”, the nominee of the DTC, has been appointed as the surrogate legal/nominal/record “owner” of all shares held in street name. This is great news for securities fraudsters. When the NSCC predictably pleads to be “powerless” to buy-in the delivery failures of its abusive DTCC participants when they absolutely refuse to deliver that which they sold the “proportionate ownership” of the shares held in the DTC vaults falls below the levels needed to provide all purchasers of fully paid for securities the opportunity to vote their shares as provided for by state law. This results in the need to cancel voting privileges also on a “proportionate” basis behind the scenes in order to cover up the existence of this disparity.

      The result is that the founding concept of a corporation involving “one share, one vote” must be invisibly discarded to accommodate the refusal of those empowered to execute buy-ins to do so. First came the concept of a “corporation”. Only later came the desire to trade the unit of equity ownership of a corporation (a “share”) in a public format. What the DTCC has done is morphed the entire concept of a “corporation” in order to accommodate the financial interests of its abusive participants acting as market intermediaries in the trading process.

      What is done in the voting process behind the scenes has to be done to cover up the enormity of the disparity between “shares and mere “securities entitlements” purchased and the number of votes in existence. Since the “securities entitlements” resulting from FTDs have no “package of rights” attached to them like a legitimate “share” does then every time one of the rights contained within this “package” tries to get exercised a “cover up fraud” needs to be perpetrated by the NSCC and its participants. If the missing “right” is the voting right then the crooks need to invisibly cancel voting powers behind the scenes. In the case of a share dividend “right” the crooks merely credit the account of those that bought failed to be delivered shares with yet another “securities entitlement” even though the dividend being distributed was for real “shares” with a “package of rights” attached.

      If the crooks don’t commit cover up frauds to hide the original fraud of refusing to deliver that which one sells then the fraud would be revealed to all.

      The DTCC incorrectly argues that UCC Article 8 “forces” them to allow the purchaser of failed to be delivered shares to exercise ALL of the rights that comprise the security. That is not true. The purchaser of failed to be delivered shares is only allowed to exercise the right to resell that which it purchased an that’s all. Despite what the DTCC is forced to argue due to prior acts of fraud still on the books a “securities entitlement” has no rights attached except the resell right. These are not legitimate “shares” of a corporation. These were to be mere ultra short termed “accounting measures” to indicate the presence of a failed delivery obligation.

      The authors of UCC-8 allowed them to be readily sellable because the DTCC was supposed to buy-in any FTD over a couple of days in age past the previously agreed to “settlement date”. When the DTCC and NSCC decided to shirk this congressional mandate then the voting process has been total chaos ever since.

    61. Dr. Jim DeCosta says:

      What the above boils down to is that a mere “accounting measure” denoting a failed delivery obligation does not create a “property interest in a financial asset”.

    62. Davidn says:

      SEC may reinstate rule to restrict short selling

      WASHINGTON (AP) — Federal regulators next month may consider reinstating a Depression-era rule restricting certain trades betting against a stock that some lawmakers say is needed to help restore investor confidence in the battered markets.

      http://www.google.com/hostednews/ap/article/ALeqM5iVdMrxFN87RqxCgLaoTdO9dhiTUAD96RCQP80

    63. Davidn says:

      Istandup, the answer to your question about votes is surprisingly obvious.

      In most cases, most people don’t vote. Then, the people who vote get a full vote.

      If you get a case where too many people try to vote, then they get a fraction of a vote. If your brokerage has twice as many IOU’s as votes, then you get 1/2 a vote.

      Shareholders with certs. always get a full vote.

      If the vote is important, you could naked short a ton of shares to yourself in another account, then use the votes in the other account, even though on a net basis, you don’t own a single share.

    64. Davidn says:

      To clarify my last post, one share always equals one vote.

      If you have a certificate, you have one vote for each share you have.

      Most people don’t own an actual share. If your shares are in a brokerage account, you have a claim on a share that is owned by Cede & Co. and registered to Cede & Co. on the company shareholder list.

      You send voting proxy instructions to your brokerage and they use those instructions from their customers to send instructions to Cede & Co.

      In theory, Cede & Co. votes the way instructed, but there is no audit and no actual requirement for them, as the ACTUAL shareholder to vote the way the BENEFICIAL shareholders instruct them to.

      Cede & Co. is a private partnership company, dating from at least 1971 and it appears at one time it was owned by the private (at that time) NYSE. No one seems to know who owns it now, but they literally control the voting in most public companies and determine who the directors and officers are.

      The DTC nominates them to own the shares (they are the nominee), but they are not part of the DTCC group. Otherwise they would be listed in the annual report.

      I tried calling the DTCC to ask them who owned Cede & Co., thinking I might get a simple answer (it’s non profit, a trust, etc.), but they got mad and refused to answer.

    65. davidn says:

      “On June 24, 1971, Senator Metcalf asked “Who Owns America?” and entered into the Congressional Record the “Secret Nominee List,” which gives the corporate code names used by American companies to hide there identity of stockholders from the public. He began his remarks ask follows:

      Aftco, Byeco, Cadco, Bebco, Ertco, Fivco, Forco, Gepco, Ninco, Octoco, Oneco, Quinco, Sevco, Sixco, Tenco, Treco, Twoco . . . may sound like a space age counting system. In reality, each is part of the corporate code. Each of these names is a nominee, a front name, used by the Prudential Insurance Company of America to hide some of its interests.

      Use of nominees, also known in the securities trade as “street names” or “straws” to hide beneficial ownership is a common corporate practice today.

      How does one find out that Aftco is really Prudential, that Kane & Company is really Chase Manhattan Bank, that Cede & Company is the Stock Clearing Corporation, which is a wholly owned subsidiary of the New York Stock Exchange?

      The answer is simple if you are a select insider. The answer is much more difficult or impossible to find out if you are an outsider, even a party to a case in which corporate ownership is an important issue.

      Many answers are found in the “nominee list.” The American Society of Corporate Secretaries, 9 Rockefeller Plaza, New York, N.Y. 10020 publishes it. The executive director of the society was John S. Black, Jr.

      The managing editor of a string of suburban newspapers, W.J. Elvin III, of Globe Newspapers, Vienna, Va. asked the society for a copy of the “Nominee List.” His request was denied. Mr. Elvin was told that distribution is limited to the membership.

      Mr. Melvin then asked for a copy of the society’s membership list. That request too was denied. Its distribution was also limited to the membership he was told.

      At the request of Senator Metcalf the American Society of Corporate Secretaries promptly furnished him with a copy of its February 1971, edition of the “Nominee List” The information in this publication, nowhere else available to the best of my knowledge, belongs in the public domain. The press, counsel for the public and, indeed Government regulators and administrators as well as the Congress and the public generally need to know who owns America.”

    66. davidn says:

      Remember this whole clearing system has always been privately controlled and no claim was ever made that the Stock Clearing Corporation or their nominee, Cede & Co. was anything but for profit.

      According to pg. 8, Cede & Co. was established in 1966 and is technically a nominee for a nominee.

      http://www.241mumbers.com/DISCLOSURE%20OF%20CORPORATE%20OWNERSHIP.pdf

      It didn’t become a nominee of the DTC until 1973.

      The DTCC didn’t form until 1999.

      Why all the smoke and mirrors secrecy around the ACTUAL owner of most stocks and bonds in America and the controlling shareholder when it comes time to vote?

    67. mhelburn says:

      Someone started a cause on facebook.

      http://apps.facebook.com/causes/242363/53485279?m=2c16bad3

      I see some familiar names there.

      I posted on the wall to get people to come here and read the stories.

    68. Anonymous says:

      Apparently, sending fake brokerage statements through the postal service is a crime.

      http://hosted.ap.org/dynamic/stories/M/MADOFF_SCANDAL?SITE=ALANN&SECTION=HOME&TEMPLATE=DEFAULT

      Madoff generated or had employees generate “tens of thousands of account statements and other documents through the U.S. Postal Service, operating a massive Ponzi scheme,” prosecutors said.

    69. iStandUp says:

      Patrick, Dr. Jim DeCosta, & Davidn.

      Patrick’s article above states:

      “As recently as last June, a high official within the SEC’s OEA was arguing internally that there is no difference between naked shorting and writing a futures contract.”

      QUESTIONS:

      If wanted to BUY a Futures Contract for the purchase of LONG shares in a company XYZ, and went to the Futures Contract Market (where ever that is?),…

      WOULD I have to pay 100% of the present value of the stock for the futures contract?

      OR WOULD I have to pay only a small percentage of the present value of the stock? and the remaining value AFTER the purchase was completed?

    70. iStandUp says:

      Anonymous,

      Great observation:

      “Apparently, sending fake brokerage statements through the postal service is a crime.”

      So why are long share holders allowed to receive FALSE Brokerage Statements?

      Is this why some brokerage companies will NOT allow you to see any online statements UNLESS you signup for Online Delivery – no US Mail?

    71. iStandUp says:

      Dr. Jim DeCosta,

      Do brokerage companies know specifically which of their clients have NOT YET Recived Delivery of their Long Stock Positions?

      OR is it just an anonymous pool of money with no specific account names attached they receive?

    72. iStandUp says:

      Dr. Jim DeCosta,

      Your Very Preliminary paper about the conflict of interests among all the different parties lends itself easy to an illustration, which I will create.

    73. Dr. Jim DeCosta says:

      istandup,

      DTCC policies make it very difficult for a brokerage firm to identify which particular investor never did get delivery of the shares it paid for. First of all the NSCC division of the DTCC utilizes “multi-lateral pre-netting” to “net out” share and cash transferences at the end of the day by about 97%. Lost in the “netting” process is the identity of the investors and the delivery status of the trade.

      Why? Because the legitimate “shares” that a broker/dealer (b/d) has which do indeed have a paper-certificated “share” in a DTC vault are pooled with the mere “securities entitlements” resulting from failures to deliver that they carry on their books and reflect on the monthly brokerage statements they send to their clients as “securities held long”. They hold the purchases of clients in a “fungible bulk” or “anonymously pooled” format. This policy, however, leaves any victimized investor without any “cause of action” to sue the DTCC or his b/d for misbehaving via abusive naked short selling frauds. How do you prove that it was your particular parcel of shares that got “counterfeited’ many times over and are being simultaneously loaned out to a dozen different short sellers while “curing” a dozen different failures to deliver?

      “Multi-lateral pre-netting” is very efficient but easily abused. “Anonymous pooling” is also very efficient but easily abused. The NSCC’s “Automated Stock Borrow Program” (SBP) could have created efficiencies but it got corrupted beyond imagination. Any UNCONFLICTED party administering a clearance and settlement system utilizing these policies would obviously have checks and balances in place to identify and deter abuses. The DTCC absolutely refuses to implement the necessary checks and balances. Why? It’s because of the conflicts of interest present between investors and the “participants”/co-owners of the DTCC and NSCC. What does the conflict of interest center on? The money of the investor and the prognosis for the success of his investment. Those NSCC participants and their hedge fund “guests” that can easily establish massive naked short positions by merely refusing to deliver that which they sell want the share price of the invested in company to tumble. The investor assuming a “long” position naturally wants the share price to go up.

      When the crime being committed is as obvious as refusing to deliver that which you sell you need to hide these activities with as many policies as possible to reduce transparency.

      The key to the entire fraud is to concentrate the power to provide the only cure available when the seller of shares absolutely refuses to deliver that which it sold i.e. a buy-in, into the hands of the DTCC and NSCC management. After the DTCC policies have concentrated 15 of the 16 sources of empowerment to execute buy-ins into the hands of the DTCC and NSCC management these parties will still have the audacity to plead to be “powerless” to provide this only cure available. Why? Because that’s what the abusive “banksters”, their bosses, that co-own the DTCC and NSCC want them to do especially AFTER they have established massive naked short positions by simply refusing to deliver that which they sold knowing that their employees can be counted on NOT to provide the only cure available.

      The moral of the story is to beware of the administrators of clearance and settlement systems bearing new policies to theoretically “enhance efficiencies”.

    74. Davidn says:

      iStandup, it’s an anonymous pool. The brokerage has a block of shares for each company and it isn’t clear which shareholders they belong to. When a shareholder requests a cert., he can get it from the pool, as it is unlikely all the other shareholders will request a cert. at the same time.

      At each level in the daisy chain, custodians have learned they can fractionally back share ownership, then use the money for something else.

      This is bigger than naked shorting or failing to deliver as those imply an action. I coined “failure to own” where the custodian just doesn’t own enough.

      A couple scenarios:

      – You place an order to buy shares out of the market. Your brokerage “prints” the trade, but doesn’t actually buy anything, just keeping your money. There’s no naked shorting or failing to deliver, but they don’t own enough shares to back their obligation to you.

      – a clearing brokerage notice a penny stock seems to be nosediving. They sell their entire inventory, further pushing it down, knowing they can always buy it back at the lower price. There’s no naked shorting as this was a long sale.

    75. Anonymous says:

      When there is trouble with the Rich and Powerful, this man Adnan Khashoggi,always seems to be involved.

      Former bank exec to serve 20 more years
      Wed. March 11, 2009; Posted: 11:23 AM

      BANGKOK, Mar 11, 2009 (UPI via COMTEX) — BNGFF | Quote | Chart | News | PowerRating — A court in Thailand added 20 years to the prison sentence of a former Bangkok Bank of Commerce president Wednesday for an embezzlement conviction.
      Former bank President Krirkkiat Jalichandra was convicted in September on corruption charges, including a charge that he had lent money to a colleague to buy bank shares without asking for the bank board’s approval, The Bangkok Post reported.

      He was sentenced, then, to 20 years in prison.

      Wednesday’s court action also included 20-year prison sentences handed out to four other defendants, including the bank’s former senior executive Ekachai Athikomnantha and former financial management division chief Wanchai Thammanitiwat.

      The recent conviction involves a loan made in secret to a Saudi Arabian arms dealer, Adnan Khashoggi, in a deal that lost the bank $43 million, the Post reported.

      http://www.upi.com

    76. ginger says:

      There could be a bright spot in all this gloom and doom.

      Listen to this very intelligent Arab speaking. Is this a new beginning or just an anomaly from the Islamic world?

      Wouldn’t it be nice if we were to hear more of this kind of ethic?

      The translation shown in the subtitles is precise.

      http://switch5.castup.net/frames/20041020_MemriTV_Popup/video_480x360.asp?ai=214&ar=1363wmv&ak=null

    77. Anonymous says:

      ginger,
      It just goes to show you there is decency in all cultures and religions. Sadly, decency has now been stifled by criminality and corruption held by the minority who are the most powerful and who control the masses. I tend to believe all decency is lost along the way in the bid to become the most powerful and elite (wealthy) and the masses are mind controlled (by corrupt media controlled and governed) by those evils who threaten not to be challenged or the consequences will be your life as a result of defiance.

    78. Bill Wood says:

      Your message about Deep Capture is starting to reach the broader media. In case you missed it, here’s a piece from today’s Huff Po that should help to vindicate a portion of your labors to date:

      http://www.huffingtonpost.com/2009/03/11/jim-cramer-shorting-stock_n_173824.html

    79. Anonymous says:

      We will never be able to save America until we come to realize who the actual Puppet Master is. All the puppets from the presidents on down the political chain show their strings by their lack of being able to do what they say, and say what they mean.
      Find the PUPPET MASTER and you will find the EVIL that all religions refer to.

    80. Fintas says:

      The fight between Jon Stewart and Jim Cramer is gaining momentum. I’m certain Mr Stewart would love to get ahold of some of the clips re Jim and also factual documents that give a clearer view of Jim and coeterie.

      Additionally a clip of Senator Shelby doing his denial re Naked short selling should also be sent to Stewart and others.

      If we can’t fight the media we can get them to help us.

      On a side note I found Oreilly’s segmant with Stuart Varney humorous as Oreilly was attempting to do the Kansas City Shuffle with Varney as Varney goes off on some he will do a political statement. HMM what’s a matter BILL. Ya catching some heat for that front running you did against GE with Stuart on set and your negative statements didn’t seem to POLITICAL to me Stuart. Bottom line enough of those who use a pulpit to destort, distract, slander, spread false staements and the like. Cramer although a bright guy is just ONE of MANY who could have joined the cause with Patrick YEARS ago. Instead he had his agenda and that wasn’t ensuring the FED LAWS were enforced. Does he deserve the heat? Well he was out there saying Bear Stearns was a take under at 80 and at other levels LONG before BSC was taken down. Seems to me that many innocent were harmed. Maybe Jim shoud have been as concerned with explaining that what BSC/AIG/MER/GS/MS/LEH/CFC and others were up to either directly, indirectly or other re many equities that were attacked.

      So I say, to those who do have the data bases and the videos, documentation etc. SEND them out to Stewart and other. Then we can say NEXT!

    81. Shelby says:

      Shelby is the stereotypical scumbag.

      He was both democrat and republican, proving either party can be controlled by the puppeteer and he was charged with taking a bribe.

      Shelby is the main reason the whole naked short scam wasn’t fixed in time to save the taxpayer trillions.

      This guys is a total scumbag, yet the media brings him front and center any time they get a chance.

    82. Anonymous says:

      Here is something for Jon Stewart..

      http://www.youtube.com/watch?v=vfWSRuNm6do

    83. Fintas says:

      Mary Shapiro out there suggesting the SEC will make decisions re M 2 M and other changes. Ms Shapiro and her ilk need to comprehend and accept what Congressman Kandorski Sp? just said. NO more of the same ol same ol. This market doesn’t have MONTHS or WEEKS to do something. It doesn’t take a brain surgeon to simply do the RIGHT THING. Whether it be BANNING NAKED SHORT SELLING and then implementing FORCED BUY INS. Or the handing over of the Madoff types to the DOJ.

      We the PEOPLE and I’ll say that again. WE THE PEOPLE MUST do OUR PART and do the ALBERT FINNEY from the movie NETWORK. WE ARE MAD AS HELL and ARE NOT TAKING IT ANYMORE. So MARY get your act together or be GONE Ditto ANYONE else who WE THE PEOPLE ELECT or those who WORK FOR US. It really is THAT SIMPLE. I’m doing my part and many here are doing your part. BUT there are STILL too many out there attempting to distract/decieve. Expose them and if it means using a STEWART then do so. If it means finding OUR CHAMPIONS in MEDIA/CONGRESS/SENATE then do so. OUR failure to be heard allowed this crap to occur. And it’s time we STOP the INSANITY and say to ourself. WE ARE THE STRENGTH and not some meely mouths who stand in front of cameras, or micrphones and spew garbage. SHELBY is but one of the jerks. Gasparino another Faver another. Cramer, Oreilly, Cavuto and on and on. Lets find the good guys. And hopefully they too will not be corrupted by power and money.

    84. Allen Papapetrou says:

      I’ve read a lot of words here which illustrate the complexity of “oh what a tangled web we weave…”.

      So let me make this simple. Selling something you don’t own is a crime. If I borrow and attempt to sell your car I should be arrested.

      Short selling is the same. If the law makers and regulators sanction, actively or inactively, criminal activity they are also criminals.

      Precedent: “Thou shalt not steal.”

      1. Only sell what you own – simple.

      2. Jail anyone who attempts to sell what they do not own – simple.

      Simple!

    85. Anonymous says:

      Madoff plead guilty…

      His Bail was revoked…

      Madoff goes to jail today..

      Sentencing in June…

      NEXTTTTTTTTTTTTTTTTTT..

    86. iStandUp says:

      The “Principle of Greed” is driving Wall Street, the SEC, the Congressional Committees overseeing Wall Street, the Congressional Leadership in Washington, and it seems most of our Elected Officials in Washington.

      The “Principle of Greed” on Wall Street and in Washington says that …because I am RICH and POWERFUL I can do anything I want, to make more money.

      This “Principle of Greed” has caused “Self-Regulation” on Wall Street to evolve into “I can do anything I want to because I regulate myself.” Just ask Bernie Madoff.

      Congress fully embraced this “Principle of Greed” when it over time de-regulated Wall Street (made it “self”-regulated) and the Financial Markets, and the Banks by removing the regulations created after the 1929 Crash to prevent another financial crisis, which we now have just re-experienced in 2008 – and continue to experience.

      The SEC has demonstrated over and over again that it is driven by this “Principle of Greed”. For example, when it continually hides the FTDs (counterfeited shares of stock) from the American people by refusing to release the daily FTDs until over 5 months have passed to protect the “Wall Street Counterfeiting Machine.” And the SEC has the audacity to OPENLY LIE to the American People by saying that it is protecting the “proprietary” trading practices of the Hedge Fund Industry. These are “CRIMINAL” trading practices, and the SEC openly seeks to HIDE these CRIMINAL ACTIVITIES from the American People to protect “Wall Street Counterfeiting Machine.” And we must not forget that the SEC happily named the “Madoff Exemption” after one of Wall Street’s Master Criminal Minds, Bernie Madoff… who “self”-regulated his 65 Billion Dollar Ponzi scheme for decades?

      So we the American People want to know WHY OUR Elected Officials in Washington think “GREED” can be allowed to Regulate It”Self”, …when there is NOTHING in history to indicate this works. In fact, the history of the last year reflects what history has shown mankind over and over again, “GREED” cannot be allowed to Regulate Itself.
      The 1929 Crash clearly demonstrates the simple fact that GREED cannot be allowed to regulate itself, yet you our elected officials ignored all these simple historical facts and gave in to the allure of the “Principle of Greed” …because I am RICH and POWERFUL I can do anything I want, to make more money.

      Elected Officials in Washington, YOUR JOB TODAY is to quickly re-introduce the regulation of “GREED” on Wall Street and the Banking Industry, OR OUR job will be to un-elect you.

    87. Anonymous says:

      Another high-ranking officer who should be reprimanded is the new SEC chairman, Mary Schapiro. Why hasn’t she assertively sought the reimposition of the uptick rule concerning short-selling? And why hasn’t she vigorously enforced the prohibition of naked short-selling?

      http://www.forbes.com/forbes/2009/0330/023-incapable-commanders.html

    88. Fintas says:

      Those who forget history and actually believe that because they are rich they are powerful are a foolish lot indeed. This debacle has harmed not the avg BUT some very powerful and rich. And it not wise to piss off either. They HAVE done so and because of such many in those positions best be listening and changing their behavior. IF not then they will be subject to a HISTORY lesson.

      There’s an OLD SALADA TEA BAG saying. So much time and energy is use to defend a wrong doing then just doing the right thing. As I listen to the mouth pieces of Kudlow, Seigman, Pitt, Geithner and ilk. Get a clue folks. THERE IS NO DEBATE. ENFORCE the LAWS and FIX IT.

    89. Fintas says:

      anonymous: Because she foolishly thinks it is still a game of same ol same ol. Too often most who have been part of something never see the change. Whether it be a scene from Good Fellows/or The GodFather/ or Casino or some athlete denying use of Steroids. When the Sea changes and it has, those who are locked into the same ol thought process do not understand that there are those who have said ENOUG!!!!. She WILL change or she WILL be short lived in this position. Those who think the new admin do not have the authority and LEVERAGE do not comprehend the saying being thrown to the lions.

    90. Anonymous says:

      Mary Schapiro should be fired. They need to hire a cop and start arresting people.

    91. Anonymous says:

      The FBI Needs to do a sweep of many DC offices….scary stuff…

      FBI searches DC government office, arrests 2

      By DEVLIN BARRETT, Associated Press Writer Devlin Barrett, Associated Press Writer – 21 mins ago

      http://news.yahoo.com/s/ap/20090312/ap_on_go_ot/dc_office_fbi

    92. Rich Hartmann (Miss America) says:

      Hello Patrick,

      I am a writer for Nouriel Roubini’s RGE Monitor. I have been shaking the same tree as you for some time now, to see what comes falling down. The disdain I feel towards our financial world is matched only by the schadenfreude I feel when the criminals are caught, and the knowledgeable onlookers are trapped in the wake!

      A while back I read that you felt no ill will towards the wrongdoers of this (the largest financial crime HUMANITY has ever known) situation. I go back and forth on this. Some days I want them flogged… Other days, I realize, this crime is so systemic, that it became “the system”, and the people that operated within it were only doing what has become the new norm (sorta like J-walking, driving over the speed limit or cheating on taxes)

      To me there are 3 sets of criminals, “the Orchestrators”, “the enablers”, and “everyone else”. For the orchestrators… they deserve everything they have coming! The Enablers, are an extremely grey area… Too many of these people knew what was going on, and rode the wave, but most were unwillingly/unknowingly part of it. The impossibility of determining who was who here is what leaves me undecided on how to feel about them. As for everyone else… (myself included) we either:

      Stood by for too long, knowing something was wrong and not doing anything about it.
      Or
      We failed to properly educate ourselves to knowing. (or were too indifferent)
      Or
      We failed to coordinate ourselves to make a difference.

      For the “everyone else” our guilt is being repaid with the inheritance of the current and future world. Like it or not, we will live with this sentence, and hopefully learn from it!

      So now I ask you, as a fellow drum beater… Do you really feel no “ill will” towards the wrongdoers? Naysayers?

      Do you feel vindicated?

      I am a big fan of your work, and would love the opportunity to collaborate with you in some way in the future. If you ever wanted to reach me to do so, I can be reached @ 718-614-1527

      All the best,
      Rich Hartmann (a.k.a. Miss America)

    93. Dr. Jim DeCosta says:

      Here’s a link to a paper I filed with the SEC yesterday. Note the brilliant design of this fraud and how every little detail seems to be pre-addressed.

      http://www.sec.gov/comments/s7-30-08/s73008-92.pdf

    94. Fintas says:

      Rich. I can’t speak for Dr Jim DeCosta. But those who committed or allowed these crimes has destroyed the LIVES of mom and pops and affected a geneartion of young people. The repsonsibilty is just as serious for the one who performed the crime as the one how allowed it. The POLICE officer aka regulator/inspector is just as responsible as the one who pushed the button for in truth if one could STOP one from pushing a button and avoiding a nuclear collapse is that any different that those who pushed buttons or stood buy and allowed the FINACIAL COLLPASE. Bring them in. Bring those who try to defelct the seriousnes and put them in jail and FILL their positions with the many ethcial people who do their jobs every day while adhering to the law. The voices were LOUD and clear for YEARS. Therefore do as they would in other parts of the world. Stone them, chop their hands off. Stealing is Stealing and FINANCIAL TERROISM is TERRORISM.

    95. Rich Hartmann (Miss America) says:

      @ Fintas… I’m very with you. Trust me. There should be so many heads rolling… but it just won’t happen.

      …but I think a great deal of what escalated the severity of where we are now had to do with a large percentage of the industry just following the trend. (unknowing the extent)

      For example, a bright kid lands a wall st job after his ivy leugue boot camp. He then learns his companies trading strategy and is on a desk given a certain allocation. Much like a foot soldier being led by your chief, you follow those rules, and try to be the best at it. More often then not though… that foot soldier doesn’t know what the chief knows. That foot soldier is just following orders.

      At most of the financial companies that have been willingly or unwillingly part of this, .01% to 5% of the people that work there are chiefs.

      The 95-99.9% are just foot soldiers that were either just following orders or oblivious.

      It’s the 95-99.9% that I don’t know how to feel about.

      Rich H / Miss America

    96. Anonymous says:

      Rich Hartmann,
      I know how I feel about the other 95-99.9%. These people are not stupid. Those ivy league educations afford them some form of education and common sense the rest. If you look away at wrong doings for the sake of a job you are just as guilty as the cheifs in my opinion. Our country is going to hell in a hand basket because of the 95-99.9% who looked the other way. Where is responsibility, morals and ethics in all of this? Since when did a Wall Street job trump morals and ethics which should be why you were there in the first place at that job. I say jail them all. Then, maybe then that light bulb will come on a decency will come back into those lives who for a buck lost it.

    97. Dr. Jim DeCosta says:

      Rich Hartmann,

      I agree 100% with your assertion that 95-99.9% of the foot soldiers are just following orders. That’s true both amongst the abusive market makers pulling the trigger on ANSS trades and the SEC staff.

      I’ve interviewed many retired market makers from the bigger market making firms. They don’t know exactly why but they readily admit that for some reason or another they never have to deliver that which they sell. They all admit to making a truckload of money and that it’s better to just follow orders,never “rock the boat” and don’t ask too many questions.

      A lot of the SEC staff have the same mantra i.e. just don’t rock the boat or mess with the status quo. They’re not typically making the big bucks yet but they know that if they don’t rock the boat they’ll have their chance to go through that “revolving door” at the SEC to a job on Wall Street that pays 10 times as well.

      Their main asset that they carry through that “revolving door” is not their brain as they’d like to think but their connections that remain at the SEC that can be called upon should their new boss get into a regulatory bind.

    98. Anonymous says:

      Lets apply the same 95-99.9% foot soldiers to another job. Lets say a medical job. A man practices as a surgeon/ physician but has never had formal training or was a legitimate licensee. He is taking care of you or your family and to some degree, he seems legit. No red flags to laymen on the street.
      Lets say the nurses/hospital staff pick up on something just ain’t right about this doctor. Maybe his knowledge does not seem up to par for someone who attended medical school. They do some checking and find something just did not add up in his credentials. They decide though to not rock the boat for the sake of a job because they are paid well and their suspicions are not confirmed.
      This surgeon (faked degree) takes your family member to an elected outpatient surgery only to come out and tell you they died in surgery.
      Although this seems impossible, this very thing has happened as this is not a hypothetical situation.
      Do the nurses/hospital staff (footsoldiers) hold no responsibility here since they decided to not get involved and try to find answers to their suspicions? Does a person’s health care bear more responsibility on those suspicions than a WS guy who suspects his boss is ripping off people’s money? As in the Madoff case, people who lost it all have committed suicide. So loss of money can lead to cause harm to health just as a fake doctor can.
      To me there is no difference. One is just a guilty as the other.

    99. Fintas says:

      Well I maybe getting my own feelings into this. NAH..but I’ve been fighting the battle all my adult life and THAT is a long time. I was taught right from wrong. I acceped what is right and wrong. Those who are in this business or any other know WHAT IS RIGHT. And they KNOW what is wrong. Whethr a nurse who re uses a needle. A police officer who doesn’t enforce, a helper who is told to put something in incorrectly. A design engineer who knows the design is flawed. The statement of can’t see it from my back yard doesn’t cut it. Or the I’m only doing what I was told to do doesn’t cut it.Or I don’t want to rock the boat doesn’t cut it. The truth is..OH OH..TRUTH and then they say whose version of the truth? We have laws. We don’t need to get into the INTERPRETATION of the law. YOU buy it. You deliver it. YOU do NOT gang up ILLEGALLY. YOU DO NOT spread false rumors for your own gang whether it be re a stock or position or to crucify someone. One does the RIGHT thing and here and now if someone KNOWS who a crook is one spills their gutts or one day asnwer why they didn’t. Now I’ve walked this and KNOW the consequences first hand. We need CHAMPIONS and CRUSADERS.. It’s nice to have the dialogue but most here KNOW. We don’t need to be told. Most in the business KNOW. They don’t need to be told. What we do need are those who will just do it and steam roll over those who will NOT!

    100. Anonymous says:

      I am with you Fintas. I do not think people need to be victims to come to the conclusion people need to do the right thing. It affects us all in some way. People who steal affect us in the prices of goods we buy. L

      You think this is a person who didn’t know? Look at what connections get you.

      CA Congresswoman Tied to Bank That Received Bailout Funds
      By Avi Klein on March 12, 2009 1:58 PM | No Comments | No TrackBacks
      U.S. Rep. Maxine Waters has long-standing ties to a Boston-based bank that received millions of dollars in bailout funding, The Wall Street Journal reported today.

      According to the report, the California congresswoman and her husband, Sydney Williams, were investors in two California banks that merged in 2002 to become OneUnited Bank.

      OneUnited received $12 million from the Treasury Department’s Troubled Asset Relief Program (TARP) in December.

      Waters sold her shares in 2004. But according to her most recent financial-disclosure form, dated May 2008, Williams still owned shares whose value was somewhere between $250,000 to $500,000. Williams also served on the bank’s board of directors until last year, and got “interest payments from a separate holding at the bank, also worth between $250,000 and $500,000,” the Journal reported.

      Waters’ connection to the bank is important because she is a member of the House Financial Services Committee and has spoken out repeatedly in defense of OneUnited and its executives.

      At the height of the banking crisis in September, she made calls to the Treasury Department on OneUnited’s behalf to express her displeasure at the department’s decision to put Freddie Mac and Fannie Mae under federal receivership. OneUnited had significant investments in the two companies, and their collapsed share prices wiped out much of the bank’s capital, leaving it below the level typically needed to qualify for TARP aid.

      In addition, The New York Times reported today that Waters also arranged a meeting between OneUnited executives and federal regulators. During the meeting, the company’s CEO “seized the opportunity to plead for special assistance for his bank.”

      “Here you had a tiny community bank that comes in and they are not proposing a broader policy — they were asking for help for themselves,” said Steve Lineberry, a former Treasury aide who attended the meeting. “I don’t remember that ever happening before.”

      According to Treasury officials at the meeting, Waters did not tell them about her ties to the bank beforehand.

      Soon afterward, House Financial Services Committee Chairman Barney Frank inserted language into a TARP bill that was specifically worded to permit bailout funding of OneUnited.

      OneUnited has a mixed regulatory history. The Journal reported that the bank received an “outstanding” Community Reinvestment Act rating for its lending efforts in Los Angeles, but “has weak ratings in Massachusetts and failed to meet minimum standards in Florida.”

      In October, federal regulators told OneUnited to raise fresh capital, name an independent board, and cease paying for such executives perks as a $6.4 million Southern California beachside house used by its chairman.

    101. Anonymous says:

      We were all given a conscience at birth. Some embrace it, while others suppress it and lose it.
      This is good vs. evil. If you have knowledge of wrong doing and choose to look the other way without any conscience, you are no different than the Ted Bundy’s, Jeff Skillings, Adolf Hitlers of the world in my opinion. I had a conversation with a detective which struck a nerve. He said, people will give us information regarding a crime but, then say “but I don’t want to be involved. Leave me out of it. I will not testify.” Then he goes on to say, when this person has been victimized, they scream do something, help me. How ironic. If it is all about you, you want the Calvary to be called in, but when it comes to you helping others, you choose to limit your involvement. I hope our Military does not decide to look the other way one day if another country decides to invade us, or terrorize us with WMD, dirty Bombs or nuke us.

    102. Rich Hartmann (Miss America) says:

      Believe me, I want justice…. But I know people in the industry. Too many people. …and most are OBLIVIOUS!

      The Ivy leaguers are the BEST at following orders. They’re far less free thinking then the high school drop out that’s worked his way through! I’ve had plenty work with and for me.

      What you have to realize about the 95-99.9%ers is that so much of what they do becomes so compartmentalized within their particular orginization, that they never were able to put the dots together.

      If it weren’t for the internet / blogs… they would’ve never known! …bvecause the media wasn’t planning on doing their diligent work, or were schills! It’s people like Mr Byrnes that forced their hands.

      I say congrats to him and the like. BEAT THE DRUMS!!!

      but the 95-99.9ers… I don’t know how I feel. They have wound up victims too. (they just didn’t know their part)

      Rich H / Miss America

    103. Anonymous says:

      When in doubt….become a snitch for the SEC…right, and get the Gary Aguirre Treatment…

      Feds might offer bounties for market miscreants

      David R. Sands (Contact)
      http://washingtontimes.com/news/2009/mar/12/sec-considers-cash-bounties-to-whistleblowers/

      The nation’s top market cop is looking for a few good snitches. Securities and Exchange Commission Chairman Mary L. Schapiro told a congressional panel Wednesday that her agency is considering offering cash bounties for the first time to private-sector whistleblowers who help expose financial wrongdoing.

      The plan was revealed as disgraced financier Bernard Madoff was preparing to plead guilty to 11 felony counts in a New York courtroom Thursday in connection with a massive Ponzi scheme that went undetected by the SEC and other regulators for more than a decade. Prosecutors this week raised their estimate of the size of the fraud to more than $64 billion.

      Mrs. Schapiro told a House Appropriations subcommittee that she is considering asking for the power to offer rewards to whistleblowers in securities fraud cases similar to the bounties given to those who reveal insider-trading violations.

      “Right now, the main reward for being a whistleblower is the good feeling you get of having done something important, because we don’t have the authority to pay,” she said, noting that the Internal Revenue Service and other federal agencies already have well-defined reward programs.

      “Whistleblowers tend to do a lot of the work for you, hand you something that’s pretty fully baked,” Mrs. Schapiro said. “It would enable us to run with that kind of information and pursue cases in a much more aggressive way.”

      Noting that the SEC has about 400 investigators to monitor more than 11,000 investment advisers like Mr. Madoff, she said, “We have to leverage third parties to do our job.”

      Mrs. Schapiro, who was confirmed in January, agreed with lawmakers that the SEC’s reputation had taken a major hit because of the Madoff case. Congressional anger boiled over last month when it was revealed that Boston investor Harry Markopolos had supplied SEC officials with a detailed analysis of Mr. Madoff’s fraudulent empire in 2005 but the agency failed to act.

      The agency’s top enforcement officer resigned in the wake of those revelations, and the SEC inspector general began an internal investigation into how the Madoff fraud went undetected for so long. Mrs. Schapiro also confirmed reports that the SEC is weighing changes to two rules that critics say have accelerated the global stock market decline and exacerbated losses and capital problems at the nation’s banks.

      She said she hopes the agency will put out for public comment within a month a plan to reinstate the so-called “uptick rule,” which forces short-sellers in the market to wait until a stock moves up in price before selling it. Many say concentrated moves by short-sellers – who profit when share prices fall – have pushed down equity market values around the world.

      Mrs. Schapiro also said she was in favor of “more judgment in the application” of accounting rules requiring banks to mark their assets to their true market values. House Financial Services Committee Chairman Barney Frank, Massachusetts Democrat, and others say the rigid use of “mark-to-market” rules have forced banks to write off entirely or sell at fire-sale prices troubled assets that they had planned to hold for the long term.

      But the SEC chief said she would oppose eliminating the rule altogether.

      “Investors have told us that fair value is important to them because it gives them transparency and a real insight into the financial statements. And that’s information they need to make decisions about how to allocate capital,” she said.

      Democrats and Republicans on the House panel sparred at times over whether budget and personnel cuts in the later years of the Bush administration had weakened the SEC’s enforcement powers.

      “I have to say that the last administration at the SEC was the only agency I ever ran into that we would sit here and say, ‘How much do you need?’ and they’d say, ‘We have enough,’ ” said subcommittee Chairman Jose E. Serrano, New York Democrat.

      Mrs. Schapiro said the agency lost 10 percent of its staff between 2005 and 2007 and that it “inevitably affected all of the SEC’s major programs.”

      She told lawmakers that she would seek authority to tap a $17 million fund not used by the agency to bolster current operations, and President Obama’s fiscal 2010 budget calls for a 9 percent increase in the agency’s budget to $1.03 billion.

      But Mrs. Schapiro agreed with Republicans on the panel that the agency did not need new rules to police the market as much as it needed more personnel to administer the existing rules.

      “What I think we really need are boots on the ground,” she said. She also expressed opposition to any plan to fold the SEC into a new “super-regulator” that the Obama administration, the Federal Reserve and lawmakers are now considering to deal with firms that pose a “systemic risk” to the U.S. financial marketplace.

      “My concern about a single monolithic regulator is that we need an entity with ultimate responsibility for the protection of the financial system,” she said. “A systemic regulator will always trump an investor protection regulator’s concerns, I fear, and I don’t think that would be good in our market.”

    104. Fintas says:

      Years ago. I leanred to find out what the POLICY was and then find out if they really meant it. Meaning is it just paper or does it matter. Then I would find that ANGEL that I could go to or count on. The rest was just fortitude. You see if you can get it to those who do care then others will help. Here and now there aren’t many who have not been affected. Except some are in damage control versus tell em the truth. THE TRUTH is we were let down by many. When one travels across a bridge they shouldn’t have to wonder is it safe. Did that inspector do his job. Now should we wonder if that enforcement agent did the verson of see no evil, hear no evil and speak no evil. Patrick appears on Cavuto awhile back and Neil does the superficial questioning. Oreilly does he’s for the working folk but does his version of Front running and let me show you how to go after a CEO for Political reasons. While doing so others pile on. And if this was ten years ago I’d say no one was watching. BUT here and NOW. CMON. JPM..and again CMON. SPX 500 and CMON. There is NO excuse. Whistle blowers..believe it or not they will soon be in. WHY? The masses are PISSED and infuriated. Make no misatake about such. Those who do will learn the hard way. History proves such and this time is not different. So here is what I continue to do. I send them the info. I DOCUMENT. I pass it along to all I know. I DOCUMENT and like one says those snowflakes do matter. ASK CRAMER about DOCUMENTATION. Here and now SHAPRIO is soon to learn the lesson. There are a few media types that do know how to go for the kill. IF any know feed them INFO. There are agents who are just. FEED them the info. There are CEO’s that are honest. FEED them the info. DITTO SENATORS, CONGRESSMAN. IT does require one thing. One does it. I did it long ago somewhere I will not mention. MY agent was another who had access to the stroke. And in a heartbeat I went from 2 YEARS of trying to get a GROUP to do the right thing to OVER NIGHT.. the HOW COULD YOU DO THIS. To which I responded. The question isn’t why I did what I did. The question is WHY DIDN’T YOU DO YOUR JOB. It really is simple. HANG IN THERE… WE ARE THE PEOPLE and THERE ARE MANY WHO DO CARE. JUST FIND THEM!

    105. Anonymous says:

      This book is a must read, often quoted at sanitycheck. It helps explain why the politicians don’t want to fix this settlement problem.

      http://www.camaradart.ro/biblioteca/carti/Carroll_Quigley__Tragedy_And_Hope.pdf

      “…[T]he powers of financial capitalism had another far-reaching aim, nothing less
      than to create a world system of financial control in private hands able to dominate the
      political system of each country and the economy of the world as a whole. this system
      was to be controlled in a feudalist fashion by the central banks of the world acting in
      concert by secret agreements arrived at in frequent private meetings and conferences. The
      apex of the system was to be the Bank for International Settlements in Basle,
      Switzerland, a private bank owned and controlled by the world’s central banks which
      were themselves private corporations….

    106. Anonymous says:

      If you understand the private control of the banking and clearance system and because of it, control of both political parties, then it becomes easier to understand why they are so quick to bailout banks, but so slow to crack down on their toxic excesses, including failure to deliver.

      http://www.camaradart.ro/biblioteca/carti/Carroll_Quigley__Tragedy_And_Hope.pdf

      Hundreds of years ago, bankers began to specialize, with the richer and more
      influential ones associated increasingly with foreign trade and foreign-exchange
      transactions. Since these were richer and more cosmopolitan and increasingly concerned
      with questions of political significance, such as stability and debasement of currencies,
      war and peace, dynastic marriages, and worldwide trading monopolies, they became the
      financiers and financial advisers of governments. Moreover, since their relationships with
      governments were always in monetary terms and not real terms, and since they were
      always obsessed with the stability of monetary exchanges between one country’s money
      and another, they used their power and influence to do two things: (1) to get all money
      and debts expressed in terms of a strictly limited commodity—ultimately gold; and (2) to
      get all monetary matters out of the control of governments and political authority, on the
      ground that they would be handled better by private banking interests in terms of such a
      stable value as gold.

    107. Anonymous says:

      Here’s an Idea……

      Get your tea bag ready to be mailed, on April 1, 2009 to the address shown below.

      Subject: Tea Party

      There’s a storm abrewin’. What happens when good, responsible people keep quiet? Washington has forgotten they work for us. We don’t work for them. Throwing good money after bad is NOT the answer. I am sick of the midnight, closed door sessions to come up with a plan. I am sick of Congress raking CEO’s over the coals while they, themselves, have defaulted on their taxes. I am sick of the bailed out companies having lavish vacations and retreats on my dollar.. I am sick of being told it is MY responsibility to rescue people that, knowingly, bought more house than they could afford. I am sick of being made to feel it is my patriotic duty to pay MORE taxes. I, like all of you, am a responsible citizen. I pay my taxes. I live on a budget and I don’t ask someone else to carry the burden for poor decisions I may make. I have emailed my congressmen and senators asking them to NOT vote for the stimulus package as it was written without reading it first. No one listened. They voted for it, pork and all.

      O.K. folks, here it is. You may think you are just one voice and what you think won’t make a difference. Well, yes it will and YES, WE CAN!! If you are disgusted and angry with the way Washington is handling our taxes. If you are fearful of the fallout from the reckless spending of BILLIONS to bailout and “stimulate” without accountability and responsibility then we need to become ONE, LOUD VOICE THAT CAN BE HEARD FROM EVERY CITY, TOWN, SUBURB AND HOME IN AMERICA. There is a growing protest to demand that Congress, the President and his cabinet LISTEN to us, the American Citizens. What is being done in Washington is NOT the way to handle the economic free fall.

      So, here’s the plan. On April 1, 2009, all Americans are asked to send a TEABAG to Washington , D.C. You do not have to enclose a note or any other information unless you so desire. Just a TEABAG. Many cities are organizing protests. If you simply search, “New American Tea Party”, several sites will come up. If you aren’t the ‘protester’ type, simply make your one voice heard with a TEABAG. Your one voice will become a roar when joined with millions of others that feel the same way. Yes, something needs to be done but the lack of confidence as shown by the steady decline in the stock market speaks volumes.

      This was not my idea. I visited the sites of the ‘New American Tea Party and an online survey showed over 90% of thousands said they would send the teabag on April 1. Why, April 1? We want them to reach Washington by April 15. do it? I will. Send it to; 1600 Pennsylvania Ave. Washington , D.C. 20500 .

      Forward this to everyone in your address book. Visit the website below for more information about the ‘New American Tea Party’. I would encourage everyone to go ahead and get the envelope ready to mail, then just drop it in the mail April 1. Can’t guarantee what the postage will be by then, it is going up as we speak, but have your envelope ready. What will this cost you? A little time and a 40 something cent stamp.

      What could you receive in benefits? Maybe, just maybe, our elected officials will start to listen to the people. Take out the Pork. Tell us how the money is being spent. We want TRANSPARENCY AND ACCOUNTABILITY. Remember, the money will be spent over the next 4-5 years. It is not too late.

    108. John says:

      This article barely scratched the surface, and didn’t deal with the real problem (NSS), but it’s a start for the mainstream press:

      http://news.yahoo.com/s/realclearpolitics/20090312/cm_rcp/profit_patriotism_and_bear_rai

    109. al says:

      I was quite pleased with the reaming that Jon Stewart gave to Jim Cramer this evening on the The Daily Show with Jon Stewart. It is laughable the spin that Cramer trys to apply to a video interview of himself [from which Jon repeatedly pulls clips to play, obviously embarrassing Cramer to the point of squirming] describing illegal activities that he routinely employed as a hedge fund manager, to illegally manipulate stock prices.

      The show will be re-broadcast several times tomorrow, and the interview is available online… watch it! you’ll be glad you did.

    110. sean says:

      Here is the link!

      http://www.thedailyshow.com/

      The actual interview was done on March 12th 2009 and is the most telling interview that I have ever seen that will expose the Financial Media for what is really is.. A FRAUD!!!

    111. Anonymous says:

      Cramer admits CEO’s lied to him, like he never did? I have a gut feeling Cramer is fearing the feds here. I’ll bet he has already turned snitch and is cooperating with authorities after striking a deal. Kinda like that Crazy Eddie guy did to his cousin….I wonder if Jim called up Sammy for some advice?

    112. Anonymous says:

      There’s a lot to read here, but at least read the overview comment by the guy that scanned the book in.

      http://www.camaradart.ro/biblioteca/carti/Carroll_Quigley__Tragedy_And_Hope.pdf

      When you read it, so much makes sense and falls into place. Written in 1966, it predicted much of what’s happened to our clearance system.

      This book should be standard reading in every high school.

    113. BWilliams says:

      To over complicate any system shows vast ignorance…….. and to attempt to cover for all future events and mistakes is futile when everyone is expecting everyone else to cover.. complete impossibility and stupidity for all layers. Finally, we must remind ourselves that fruad destroys any system — no matter how good or bad. Never expect others to work for you forever…

    114. dong feng says:

      I took a course in Rational expectations Economics 20 years ago. Well, they concluded that you cant make profit in stocks. Since Goldman, bear, merrill, leman, LTCM, CITI, AIG, etc etc are all bankrupt, they were right- you cant profit in stocks. The professor also told us you cant make profit in housing ownership; since then we have the greatest losses in mankind in real estate. I listened to the Professor and therefore have invested nothing into stock and real estate and avoided any losses. Did they not learn this at Harvard MBA school? or were they too drunk and high to learn the Professors teachings?

    115. dong feng says:

      In reality, you can make money in stocks and real esstate by commiting fraud and other crimes (mortgage fraud, stock manipulation,etc). Especially today with taxation at 50%, you can only make excessive returns with criminal activity. Ie circumventing “da Law”. Reminds me of Ali G: “what iz barely legal?”..”what iz dis ting called da laws?”

    116. Sinkultawongrit says:

      Be careful about the Quigley / NWO obsessive / “secret Illuminati” stuff. Most of that is Russian disinfo, meant to make you turn on Western institutions and destroy them. In fact, the Red Mafiya connections reveal the direction one ought to pursue:

      The Kremlin, and, with the advent of the SCO, The Forbidden City.

    117. pat says:

      I am no economics maven or financial genius but . . .
      The economic shenanigans and the travesty the securities markets have wrought, along with the other nonsense that the former administration (Bush) imposed on the country was well advertised, he campaigned on it from the get go, cloaked it in excellent cheer and la de da and the country bought it like kids lined up for candy. I recall an article in the Atlantic Monthly around the time Bush was first in power, which described how blithely and blatantly the deck had been stacked to favor thievery and an anything goes attitude on Wall Street and wherever else the security markets are extant. Bush placed an SEC commissioner as the head of the agency who was totally anti-regulation, had proven his favor for the corrupt, downright thieving transaction practices that have led to the current big sag in the economy. This economy has been f . . . ed. Deliberately and with greed and croneyism aforethought. Bush threw out a sensible regulator as head at the SEC in favor of a laissez faire at best and likely deliberately encouraging financial chicanery amounting to robbery head of the SEC. It was as blatant and obviously and patently wrong as the baiting and tormenting of Iraq and the trumped up invasion and demonizing of Saddam Hussein. But that is another issue, but too leads to the conclusion that the country doesn’t listen to issues but just goes along with someone who is in some way pretty or otherwise sounds convincing to the barnyard philosopher who is a sucker for easy answers and sophistry. Yes this is a rich rich country and the capitalist gang who took it over have benefited from it inordinately to where they actually get millions and millions and even billions of dollars, and say well because most people are doing ok with their puny share that the system works great. In fact any freaking system would have worked well given the rich resouces of this country. Communism Soviet style probably would have even looked pretty good here. We need to fundamentally revamp this system, put some teeth into rules against people manipulating the system beyond its intended reach or depth.
      I recently went to a graduation ceremony at Northwestern University in Evanston. About 40% of the grads had majored in “economics”. What the hell are they teaching our exalted college grads and “elite” business school people? I thought these people were supposed to be producing, creating grand things, putting us on the right track as trusted keepers of the complex economic veldt. Instead they give us a constant bombardment of vapid misleading advertisements for their products, constantly screaming give me your money until we buy some stupid shit just to shut them up. There is your exalted Wharton or whatever MBA at work. Give me a break. And the telemarketers – need I descry on that? Hey, write back to me and tell me what it is you know.
      yowza1@myway.com
      Pat

    118. behaviortank says:

      The joke is actually about Watson’s methodological behaviorism (which describes most modern experimental psychologists) NOT Skinner’s radical behaviorism which embraced internal states as behavior worthy of study, even though the technology mostly did not exist in his heyday for observing internal states and still is in its infancy.

    119. mhelburn says:

      Rich,

      http://www.marketoracle.co.uk/Article14326.html

      It isn’t just the insiders, the regulator had to be involved in this according to Mike Stathis. His story then gets into harassment of him for bringing this to the regulator.

    120. ubexx says:

      What everyone misses is that this disaster was SET UP years ago. Ask yourself : who made tons of money ??? The hedge funds and those behind them,led by the FED, as it has done at least three times in the last 110 years.

      Note that the FED is a private organization owned/controlled surrepitiously by the 300 most wealthy families in the US, who dont pay taxes (family trusts ).

      Note that three of the four main regulators were dead set against putting controls on hedge funds since 2000.

      Gee…why ?? They controlled HUGE moneys and ran the Market.

      Note,then,in 2007 the SEC (crooks ) got rid of the uptick rule in short selling !!!…which then made it easy to drive a stock down. With the rule you could only stop a stock from rising.

      Add naked short selling where you just sell stocks without having to borrow stock to do so and you have an unbeatable technique to drive the market down !!!

      Madoff, the former head of NASDAQ , even got the SEC to allow naked shorting (wink ) for him (even called it the Madoff Rule).gee,…what if the funds were short in various ways and then sent the stock market down drastically.

      What a way to make gigantic PROFITS without impunity

      Then there was the shill,Greenspan, who knew EXACTLY, what was going on,when he made that remark,the irrational exuberance of the market. He did what he was told to do !!!

      And the Democrats,Pelosi and Frank, telling us over and over that Fannie Mae and Freddie Mac ( who paid them handsomely in lobbhyinfg fees )were just fine,thank you,when they were actually bankrupt. And Paulsen in March of 08 that the economy was doing very well,thank you, when he KNEW the opposite was true.He is NOT that stupid .

      And note the incestuous relationships of Wall Street top money men gaining power in the White House. How convenient.

      The regulations were in place (except for hedge funds ) but the regulators and the politicians worked together and IGNORED the rules and let the crooks take charge to do their dirty work.

      Will we ever find out who really made a killing ??

      NO.

      Obama just keeps hiring them. The wolves are controlling the hen house!!!!!!!!!!!!

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