You don’t read about it in the American press, but major news organizations in just about every other nation on the planet are reporting that it is really bad that some hedge funds and brokers do not deliver the stock that they sell to unsuspecting investors.
In a story this week, for example, Euromoney, one of the Continent’s more prestigious publications, concludes that “fails to deliver in the U.S. equity market have exacerbated the sharp declines in share prices of financials.”
“Had those failures been averted through better regulation,” Euromoney asks, rhetorically, “would Bear Stearns have had a slower downfall, or even avoided outright collapse? And what of Lehman Brothers, Fannie Mae and Freddie Mac? Indeed, would all financial companies have enjoyed more resilient share prices, instead of seeing sudden, sharp price declines that were the final nudge to creditors and counterparties abandoning firms and driving them into bankruptcy?”
“On March 14, 128% of Bear Stearns stock outstanding was traded,” Euromoney reports. “These ‘phantom shares’ can be on-lent without delivery again and again, further diluting the stock.”
Translation: Criminal naked short sellers (hedge funds selling phantom stock to drive down stock prices) very nearly vaporized the American financial system.
Euromoney continues: “One former employee of regulator NASD says he knows of a hedge fund that was shorting Freddie Mac and Fannie Mae on a ‘massive scale’, with no intention of ever locating stock. ‘His prime broker let the trade go through regardless as he was a large client of theirs,’ he says.”
Translation: Euromoney knows the name of a hedge fund that committed a “massive” crime. A former regulator knows the name of a hedge fund that committed a “massive” crime. Everybody can guess which hedge fund it was. And yet, the manager of that hedge fund is not in jail.
Many other former regulators – not to mention Congressional investigators and an inspector general – say that officials at the Securities and Exchange Commission quashed investigations into naked short selling crimes, even as it became apparent that illegal naked short selling was doing serious damage to at least a hundred companies.
As a result, the U.S. government is now spending trillions of dollars – money that it will confiscate from honest citizens (criminal billionaires don’t pay taxes) – to bail out the investment banks that employed the criminal prime brokers who processed the phantom stock for their criminal hedge fund clients.
Once upon a time, American journalists would have called this a “scandal.”
Instead, some influential journalists participated in the cover-up. In May, Deep Capture published a story alleging that a small but influential clique of journalists, most of whom had ties to CNBC’s Jim Cramer, had covered up the naked short selling scandal in service to a small number of hedge fund managers, most of whom had ties to CNBC’s Jim Cramer.
The day after we published that story, Cramer, who had always denied that naked short selling was a problem, began a “crusade” against “diabolical” naked short sellers. His now-regular diatribes against the evils of naked short selling are spectacles of some anthropological interest.
In his latest live-on-television rant, Cramer said that naked short selling hedge fund “maniacs” are sowing “fear and destruction” in the markets. Therefore, said Cramer, the new president must appoint Cramer to be the chairman of the Securities and Exchange Commission.
To emphasize this point, Cramer held up a bright pink and florescent green sign that said “Cramer for SEC chairman.”
Cramer continued: “This isn’t my megalomania talking I don’t mean to brag but look I’m a lawyer by training — I sound like an ad, right? – I’m a stock jock and a former hedge fund manager and a guy who knows the tricks and has seen others do them and although to be very clear I never did anything illegal or even close to unethical because in the end I am a goody two-shoes and I actually have a new pair of goody two-shoes but I have seen other money managers do things and I know how to detect them and — Wow! — hey, he went to Harvard he must be really smart…and it takes a fox to guard the hen house.”
This guy is the only mainstream American journalist reporting on a crime that helped bring us to the brink of another Great Depression.
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Mark Mitchell email: [email protected]
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