Congress prepares to bypass impotent SEC

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SB 605 is a bill on Capitol Hill
SB 605 is a bill on Capitol Hill

Something of great importance in our effort to finally end illegal naked short selling took place recently.

Senator Ted Kaufman of Delaware, together with three colleagues, distributed a letter to the remaining 96 members of the Senate formally requesting co-sponsors for SB 605: A bill to require the Securities and Exchange Commission to reinstate the uptick rule and effectively regulate abusive short selling activities.

You can find a copy of the letter and the bill itself here.

This is a very good sign that this most vital bill has momentum. However, this is always a very tenuous time for any bit of nascent legislation. That’s why I encourage all supporters of true market reform to contact their US senators (remember you each have two!), encouraging them to co-sponsor Senate Bill 605.

Every additional co-sponsor’s name added to the bill reduces the likelihood that backroom shenanigans — something at which our adversaries are experts — will kill our best opportunity for true reform yet, while still in its cradle.

Please reach out to your senators today. Click here to find his or her contact information.

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85 Replies to “Congress prepares to bypass impotent SEC”

  1. I guess I’m just too cynical to think that Congress will ever again do the right thing regarding any matter. Let’s hope so.

    1. I have been told I am cynical because I also believe as you do, but I don’t call it cynicism; more like a very good grasp of the obvious.

  2. Keep up the Pressure..I like this also:

    http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aaxktkA94ezQ

    Hoyer Proposes Regulating Short-Sellers of Shares (Update1)

    By James Rowley

    Oct. 20 (Bloomberg) — U.S. House Majority Leader Steny Hoyer proposed legislation to regulate short-selling of stocks by requiring shareholders to be given notice and payment when brokers lend their shares to short-sellers.

    Hoyer’s plan would require brokers to publish daily information about the identity of short-sellers and the companies whose shares they are selling short. Brokers would have to disclose any short-sellers who fail to deliver shares to the investor they were to be sold to, according to a summary of the proposal distributed by his office.

    The measure will “protect from the abuses of those who drive down” the share prices of “small, vulnerable enterprises” and “make it very difficult for them to operate,” Hoyer told reporters today in Washington.

    Short-sellers bet that the value of a company will decrease by borrowing shares from another investor, for a fee, and selling them to someone else.

    The short-sellers agree to return the borrowed stock by a certain date. If the share price drops, short-sellers profit from the difference between what they sold the shares for and the price they paid to repurchase them.

    Because brokers charge to lend shares to short-sellers, “the owner of that stock ought to have an interest in that process” and be compensated, Hoyer said.

    The measure would require brokers to alert investors that they may lose voting rights if their shares are loaned to short- sellers on the date of a corporate election, according to the summary.

    Hoyer said he hoped the measure would be included in financial-regulation overhaul legislation being drafted by the House Financial Services Committee.

    To contact the reporter on this story: James Rowley in Washington at jarowley@bloomberg.net

    Last Updated: October 20, 2009 13:35 EDT

    1. The system is not broken. Its the people who run the system who are broken. Those people are politicians, Bankers and their intermediary – lobbyists.

  3. I want to see a serial number attached to EVERY SHARE of stock trading in the American Market! And the serial numbers given to every person who buys stock in America – available online in their account. And public database of the serial numbers of stocks trading daily.

    No More Anonymous pooling by the DTCC
    Regulation of the DTCC, and regular public reports from DTCC, and the ability sue them for Counterfeiting.

    And those who want to make money loaing their shares to shorts must give up their voting rights and their ability to sell their shares until they are returned.

    1. This could be trivially implemented by registering the buyer as the beneficial owner at the DTC. Currently, they register the clearing brokerage as the beneficial owner.

      They need to get rid of the continuous net settlement system as something archaic from the days before computers. Why do we need to reduce settlement by 98% when computers can easily handle fifty times more volume and settle every transaction individually?

      If the DTCC isn’t capable, then they need competition.

      The whole immobolization thing was legislated by congress in 1976 and they should overturn that now.

  4. This is the time to pull out all the stops. Call every elected official. Call every journalist. INSIST that they support this legislation. Refer them to the Rolling Stone article. Refer them to Deepcapture. com. Anything less than a FULL COURT PRESS is UNACCEPTABLE.

    Take a 1/2 day off from your job, and save this country from itself.

  5. Tonight Frontline (PBS) Aired “The Warning” about the Brooksley Born fight for regulation of derivatives. To say that it is riviting is an understatement. You can watch it on PBS. Please do so and implore your representatives and congressmen to watch it too. Congress was wrong to not heed her warning then as they are wrong not to take action against NSS IMMEDIATELY.

    You will enjoy the pilloring of Greenspan,Reuben,Summers, Geithner et al.
    Maybe the media giant is now awake and sees the calamity that we are in for and realizes that it is not safe either.

    1. I really enjoyed the piece on Born. The mea culpa by Greenspan.. he can’t apologize his way out of this. He’s a witchdoctor. Why trust any of the experts who brought us here?

  6. AMEN.

    Let’s hope it passes before the next major collusive short attack on our market.

    Meantime, let’s investigate and prosecute Chanos, Cohen, Soros, Einhorn and the rest of the cabal.

  7. The PBS Frontline was very revealing to me.

    http://www.pbs.org/wgbh/pages/frontline/warning/

    The first revealing point was:

    “The new Fed chairman, Alan Greenspan, is a believer in Ayn Rand’s philosophy — free-market capitalism means no regulations, no government intervention.”

    The second revealing point that stands out in my mind is the meeting that Brooksley Born attended with the three powerful men that opposed her desire to regulate derivatives. Specifically, the statement made by Fed chairman, Alan Greenspan – something to the effect that > fraud does NOT have to be regulated.

    Fraud Does NOT have to be Regulated?

    Now I understand WHY on Wall Street Fraud is NOT called Fraud. For 40 years Alan Greespan and other leading Financial Guru insiders have been guided by the principal that:

    In the Financial Industry, Fraud Does NOT have to be Regulated!!

    Greenspan and other Financial Gurus would state publicly that “Fraud Does NOT have to be Regulated” because they know that this statement would create a firestorm of opposition to them.

    So what do they do instead?
    They talk about “Market Efficiency” and “Market Liquidity.”

    The translation of these two phrases are “Fraud Does NOT have to be Regulated” in the financial industry, because we, members of the financial industry, have the RIGHT to use fraud to become as wealthy as possible as long as no one knows we are committing fraud.

    And this explains WHY there are some many “black boxes” in the financial industry – so we the non-financial industry people can NOT know that FRAUD is being used against us.

    Fraud Does NOT have to be Regulated?
    …says Alan Greenspan?

  8. The Third revealing point was that Congress was completely duped by Alan Greenspan and the other people that opposed Brooksley Born.

    As a result, Congress passed a law the prevents the CFTC from regulating derivatives! And this law is still in place – derviatives are STILL UNREGUALTED because Congress has done NOTHING to change the law in spite of the global meltdown in the last year.

    The fourth revealing point for me is that the BLACK BOXES in the financial industry are HURTING the recovery of the global economy because banks cannot trust other banks – one bank does not know what another bank is HIDING in its BLACK BOXES, and therefore cannot trust another bank.

    One Correction – Add the word “NOT”

    “Greenspan and other Financial Gurus would “NOT” state publicly that “Fraud Does NOT have to be Regulated” because they know that this statement would create a firestorm of opposition to them.”

    1. The fourth revealing point in the PBS Frontline report was the blatant sexism shown by the various Wall Street and Washington officials who were interviewed. Not once did any of these powerful men refer to her as “{Miss, Ms., Mrs. as appropriate} Born” or “Commissioner Born” or even just “Born.” Every mention was “Brooksley.” Contrast with the consistent use of the mens’ last names – even when strung together with her in a sentence listing attendees of a meeting. The attitude thus displayed was “heck, she’s just a GIRL, she doesn’t know anything.” This dismissive disrespectful mode of address is a subtle form of _ad hominem_ attack, in my opinion; a tool that was used to undermine her authority and credibility.

  9. Thank You

    1. Stock Shock ” the Short Selling of the American Dream ” movie

    2. Senator Ted Kaufman for seeing movie and creating this Bill 605

    3. Rolling Stone’s Matt Taibbi and his article Naked Swindle which featured Wall Street expert Susanne Trimbath who is also the expert in the movie Stock Shock.

    4. Vanity Fair for a great article.

    5. All the Bloggers out there telling the real truth to We the People.

    6. http://www.twitter.com/stockshockmovie twitter, facebook, bloggers.

    7. Sandra Mohr, director of the movie Stock Shock

    8. Capita;lism A Love Story by Michael Moore

    9. William Galvin of Boston Secretary

    10. President Obama for Financial reform to come on Wall Street.

    Thank you very much to all listed above and the many others involved.

    WHO NOT TO THANK. Who brought financial disaster to this Country.

    1. Christopher Cox previous head of the SEC. He abolished the Up-tick rule, which caused Wall Street gone wild. July 2007

    2. Goldman Sachs and their secret software to manipulate stock prices.

    3. CNBC, Fox business news and Bloomberg news. They ignored the story of naked short selling.

    4. Jim Cramer and the Najarian brothers who are the bouncers for Goldman Sachs and are paid off to promote Goldman Sachs

    5. General Electric. They have no business being involved in business news, with the GE executives forces the workers at CNBC to promote Goldman Sachs and GE thru reading thru teleprompts on what these GE executives want them to say, instead of reporting business news.

    6. Mary Shapiro, the current SEC head who has done nothing but drag her feet and delay the re- instatement of the up-tick rule, not to mention have Goldman Sachs sitting in on the round table discussions on Sept 22nd, 2009. Are you kidding me, they are the ones stealing investors money via their decimal place scandal and their use of secret software.

    7. The WSJ, Barron’s and the rest of the main stream media for not covering the arrest of a Goldman Sachs employee who was trying to steal the secret software Goldman Sachs is using to gain the advantage and steal investors money. How could this arrest not be all over the TV stations. It was on for 1 minute during the holiday week-end and then they buried the Story.

    8. The combination of the arrest and the secret software used was how Goldman Sachs made over $100 million dollars a day and RELATED to the Goldman Sachs $ billion dollars bonuses in 2008 and the current 2009 bonuses. They made this money illegally and now they want to pay Huge bonuses with this stolen money.

    9. Hank Paulson secrets and ties to Goldman Sachs

    10. Rupert Murdoch and his 132 newspapers and 25 magazines and his TV station Fox. All these people and they could not put the scandal and puzzle together. Shame on all of them. We have to finally get the truth from the movie Stock Shock along with Matt Taibbi and his Rolling Stone’s article ” Naked Swindle. Sure now here comes all the books and finally the coverage, much much too late. Cover the arrest of the Russian with Goldman Sachs secret softwre. The World needs to hear this story. It is time for the COVER UP by the main stream media to end and tell the truth to the the American people.

    Richard Keane
    October 21st, 2009

  10. We need to overturn this legislation from 1975 which stops the shares from being registered as yours.

    With fiber optics and high speed computers, this is an anachronism from a day before the internet. It would be trivially easy to eliminate the continuous net settlement system entirely and require shares to be registered in the true beneficial shareholders name.

    Currently, the DTC considers the clearing brokerage as the true beneficial owner and they can hypothecate the shares as they see fit, subject to their own local laws.

    http://publikationen.ub.uni-frankfurt.de/volltexte/2007/4885/pdf/ILF_WP_068.pdf

    “Congress, in the 1975 Securities Acts Amendments, took the extremely unusual step of legally imposing a single technique for settlement on the markets. The effect on securities settlement was somewhat comparable the effects of a law that would require all computers plugged into the internet to run on DOS. As amended, § 17A Exchange Act requires the SEC to “use its authority . . . to end the physical movement of securities certificates in connection with the settlement among brokers and dealers of transactions in securities . . .”, i.e., to impose the immobilization of securities certificates in a depository. In this way, what was considered an “interim step” on the way to the “certificateless society” became the permanent basis of U.S. securities settlement. Given the SEC’s role as an independent regulatory agency expert in the technicalities of the securities market, the choice of Congress to regulate down into the details and impose a system that was generally considered a short-term, second-best solution is curious.”

  11. To understand the problem, think of this imaginary scenario. Zimbabwe decides that they will allow anyone in the world to buy or sell Nasdaq shares through their market at no commission, but they actually don’t buy or sell anything. Like the bucket shops of the 1920’s, the buyers would be betting on the direction of the stock, but not actually buying anything.

    Our lawmakers would have no say in this as this would be under Zimbabwe jurisdiction.

    What if they allowed Americans to trade on the Zimbabwe market (if you buy on that market, you have to sell on that market).

    Again, our lawmakers would have no say.

    Now, what if you could buy on the Zimbabwe market and sell on the US market and there was no settlement between countries to encourage arbitrage and liquidity?

    Now you would end up with regulatory arbitrage. Buy IOU’s in Zimbabwe and sell them here.

    That’s the current situation, but substitute Zimbabwe with Clearstream in Europe or CDS in Canada.

    No law here will ever fix the problem unless settlement is demanded between countries. The solution is to disable access to our market for any country that doesn’t settle fails.

  12. davidn,

    That David Donald treatise is one of the better ones on the uses of central counterparties (CCPs) and securities intermediaries. A simpler way to understand DTCC abuses goes like this: In about 1970 there was a “paperwork crisis” associated with increased trading volumes combined with the cumbersome nature of dealing with paper certificated shares. Congress told Wall Street to “dematerialize” all difficult to counterfeit paper-certificated shares into easy to counterfeit electronic book entry shares on a 1-for-1 basis.

    Pre-1970 a short seller would track down a shareholder, grab his cert and pay him some rent. The readily sellable “float” of securities stayed constant as one party lost the right to resell those shares i.e. the lender. Post-1970 a short seller approaches an “anonymous pooling” of impossible to identify the owner of electronic book entry shares. Since the “donor” of the rented shares can’t be identified or contacted nor does he even know his shares were rented out his margin a/c gets credited with a readily sellable share price depressing “security entitlement”. Since nobody loses the right to sell their shares and one party (the buyer of the “rented” shares that were short sold)gains the ability to sell shares as their new owner then what amounts to a “counterfeiting/replicating” phenomenon occurs which increases the “supply” of that which must be treated as being readily sellable which in turn decreases the share price one notch.

    The authors of both UCC Article 8 and Rule 15c 3-3 of the ’34 Exchange Act noticed this damaging dilutional phenomenon and both mandate that clearing firms “obtain and maintain physical possession OR control” of failed to be delivered shares or shares loaned for more than a day or 2. “Control” was satisfied by merely keeping your shares at a “qualified control location” and there are 12 of these but the DTCC accounts for 99% of the action. Since the DTCC only mandates that those that fail to deliver shares “collateralize” the monetary value of the failed delivery obligation abusive short sellers use the DTCC as their “qualified control location” to gain compliance with these 2 critical laws. Physical possession is much tougher. Not so mysteriously the owners of the DTCC that hire the DTCC management that introduces these illegal policies also happen to be the financial beneficiaries of these thefts. The other name for 15c3-3 is “the customer protection rule”; so much for the provision of “customer protection”. Once again, the rules are OK but the enforcement is nonexistent. The “spirit” of the congressionally mandated “dematerialization” was that paper certificated shares would be substituted FOR AN EQUAL AMOUNT of electronic book entry shares. The reason behind “anonymous pooling” was to streamline the clearance and settlement system. The “assumption” behind “dematerialization” was that the SEC and the SROs would enforce the laws already on the books. OOPS!

    1. It makes you wonder why a temporary rule from 1975 is causing failures to deliver in 1999 and yet it remains the status quo.

      The “problem” is that this solution to the paperwork crisis has created a giant vacuum cleaner that sucks money from mainstreet’s wallets into wallstreet’s. It’s almost like wallstreet doesn’t mind this $$$problem$$$.

      That article is definitely a keeper and a good one to send to politicians.

  13. The goal of any reform in our currently corrupt beyond recognition clearance and settlement system would obviously be to maintain the efficiencies associated with dealing with computerized electronic book entry “shares” but to reinstate the difficulty in “counterfeiting/replicating” abuses associated with the old paper-certificated abuses. An obvious possibility would be to use computerized electronic mail boxes that all investors can access at the DTCC to check on the delivery status of their purchases and the current location of their shares. All costs would be borne by investors and the corporations they have invested in. Response by Wall Street that is quite happy with the status quo: too expensive, too slow, the technology is not there yet, diminished market efficiency, diminished liquidity, diminished pricing efficiency, diminished price discovery, etc.

    As far as the ultimate deterrent measure to the perpetration of these frauds one becomes obvious. Allow any corporation that believes it has fallen victim to an abusive naked short selling attack to voluntarily and at their own expense (which would be significant)pull out of the DTCC 30 days after having served notice and move on to a “self custody” basis for transferring the ownership of their shares. This would amount to “rematerialization” wherein electronic book entry shares would no longer be legal tender but only the much less efficient paper-certificated shares or a readily identifiable analogue thereof. What would happen? All shareholders would run to their broker to demand delivery of their paper-certificated shares in order to gain liquidity. This would subject ABUSIVE NAKED SHORT SELLERS AND ONLY ABUSIVE NAKED SHORT SELLERS (due to the 30-day advanced notice) TO POTENTIAL SHORT SQUEEZES. The SEC Enforcement Division would never have to lift a finger again (not that they ever did)in regards to abusive naked short selling crimes. That’s referred to as the provision of MEANINGFUL DETERRENCE.

  14. Dr.Jim DeCosta, I only hope that you are getting the ear of some of our ‘public servants’ with the excellent analyses you provide here on this site.

    Has the ever-pitiful SEC ever contacted you as a resource?

    Are you talking with Kaufman?

    You are clearly an expert with great ideas.

  15. Let’s talk “uptick rule” and the unconscionable current lack thereof. A short seller in his infinite wisdom deems that “Acme” is trading at too high of a level and he wants to place a bet on its going down in price. He borrows shares and in the case of Acme being a “hard to borrow” security he pays a handsome rental rate. The short seller needs to sell these borrowed shares at a high enough level to cover the expensive rental fees and still be able to cover the short position at a low enough level to make a profit.

    Why would a legal short seller want the right to knock out bid after underlying bid in a no uptick rule type of environment? It makes no sense unless he knows that he can induce an avalanche of selling that makes the share price come crashing down. Wall Street insiders and their hedge fund “guests” that do almost all of the short selling have visibility of “stop loss orders”. They know that if they can “trip” these by knocking out bid after underlying bid a large sell order can be triggered. This results in another cascade of selling into which the abusive short seller can cover his short position. This in turn will induce panic selling by those current shareholders unable to risk a catastrophic loss. Oftentimes this is the elderly on a fixed income.

    Does Acme’s share price really have to be at an inordinately high level to make money in this scheme? No. For every hedge fund manager that determines that Acme’s share price is too high there might be 20,000 current shareholders not selling their shares because they think that Acme is undervalued. An “uptick rule” in any form provides “avalanche” protection from abusive short sellers but it doesn’t affect legitimate short sellers. Our country’s lack of having an “uptick rule” right now is scary beyond belief and that’s why the politicians are going to extraordinary lengths with Senate Bill 605. The current lack of an “Uptick rule” effected to kowtow to ABUSIVE SHORT SELLERS ONLY with the recent near collapse of our entire financial system vis-a-vis Bear Stearns and Lehman Brothers is nothing short of criminal. Yeah I know, it has nothing to do with the fact that corporations like sand castles are much easier to kill than build it’s all about the “injecting of liquidity” into our markets.

    A question:How do you tell the difference between a legitimate short seller that truly thinks that Acme is over priced and he wants to place a bet that Acme’s share price is about to correct and an abusive short seller that doesn’t particularly have an opinion as to the appropriateness of Acme’s share price but knows it can easily be bankrupted due to either its developmental stage or wounded nature. Answer: You can’t and that’s why you don’t rescind a 75-year old uptick rule that was functioning just fine especially right in the midst of a worldwide uproar over short selling abuses.

  16. Guys, guys, guys,….please….,

    This is just another bill and nothing but just another smokescreen.

    The pivotal point is this one: there are numerous guidelines, laws a.o. whereupon the SEC…COULD act!
    I’ll write it again: the SEC…COULD act…as there are already wayyyyy sufficient rules issued against a broad variety of malicious activities, deliberate acts, by all sorts of white-collar criminals.

    So please Americans wake-up…for G*D sake…for your own future!

    You should send your Congressmen e-mails with two simple questions of: 1, why isn’t the SEC sufficiently enforcing criminal activities and 2, why isn’t the SEC indicting more criminals? Hey!! That’s their duty, just as the DEA has to chase drug sellers…ist the SEC’s d*mn duty!

    And guess what…and I told it you already before: the SEC is controlled by Congress! So if the SEC isn’t functioning well…, let criminals Bankroll America…similar counts for Congress.

    So please guys…get the message: don’t endorse this [just another] bill! As just another bill doesn’t make any d*mn difference…and let me assure you this: those Congressmen will pound you all off…when you raise the REAL pivotal issues! They will say to you: ‘Quit moaning as we supported this bill.’

    Adress this to Congresmen: ‘Either you’re with us…the American public, the country that our ancestors have build and worked for…or you’re with the financial terrorists on Wall Street!’

    All the rest, honestly, is just plain BS and the purest kind of distraction.

    1. Eliot Spitzer:
      “The traditional critiques of the SEC have been that it was underfunded and didn’t have up-to-date laws needed to regulate sophisticated financial transactions in evolving markets. That’s not accurate. The SEC is a gargantuan bureaucracy of 3,500 employees and a budget of $900 million—vast compared with the offices that actually did ferret out fraud in the marketplace. And the general investigative powers of the SEC are so broad that it needs no additional statutory power to delve into virtually any market activity that it suspects is improper, fraudulent, or deceptive. After each business scandal (Enron, Wall Street analysts, Madoff …), the SEC claims a need for more money and statutory power, yet those don’t help. The SEC has all the money and people and laws it needs. For ideological reasons, it just didn’t want to do its job, and on the rare occasions when it did, it didn’t know how.”

      SEC stands for: Seriously Enabling Crime

      1. Thanks calltoaccount!

        Well…the words of Spitzer; hitting the nail on the head IMHO.

        And this is exactly what I meant when I stated that this blog has IMHO flaws. The people behind it are very much respected for their ongoing efforts — Patrick, Judd, Mark — and honesty but I am not that much convinced about their insights of how ‘the entire system’ on Wall Street works.

        Accordingly, in general terms: if a man doesn’t know what he’s talking about, he better stays silent.

        Lastly: the enemies of the honest American public are to be found on Wall Street and in Congress. IMHO if Patrick, Judd and Mark want to go for a real change, they better come to senses and insights soon.

        IMHO a wise man doesn’t chat or maintain friendly contacts with his enemies, since they are his enemies. Thus Judd’s contacts with the SEC and Congress are a bet on the very very wrong horse. That’s for me just out of the question.

        All the best,

        Dirk.

  17. Now, now, Dr. DeCosta, if you stop the illegal manipulative selling, the red candle software will not work properly. It takes some hubris to decide that criminal activities ought to be curbed when the whole financial, and political system, is profiting so greatly from the current allowance of felonious policies. Next you will be demanding that our leaders display a cursory adherence to ethical behavior. Silly dreamer.

  18. Dirk, I thought you said you were leaving because of the nature of our “off-topic” posts. What happened?…. I thought so. This site is irresistable huh? LOL!!! The SEC is “Impotent” I say bypassing them is the right thing to do. Hear here.

    1. Hi Sean,

      Look, this site has its flaws.
      Major flaws IMHO.
      However…at least Patrick, Judd and Mark are running this website and are informing the American public.

      Though I think that they could and should be far more effective.
      IMHO this site, in its current state, is something like a online cafe.

      The crooks on Wall Street are laughing, because this site is IMHO nothing but a virtual bystander at a real robbery.
      Hey they rob the Bank, let someone call the cops!
      Than the cops arrive… and all you guys do is to start chatting with the cops…in the mean time the robbers are safe and will rob another bank.

      So I am not interest in a platform whre people post all sorts of links and scream: outrage!
      Been there, seen it…done it all myself…and this isn’t the way to change the corrupted system.
      Shouting what a corrupted mess it all is…Goldman Sachs this…Goldman Sachs that…, what does it bring?

      You can count me in as soon as Patrick, Judd and Mark have really woke-up and start the real deal. Chatting with Congressmen, endorsing just another BS bill, going for a chat at the SEC…please!

      Been there…done that.
      And that’s why I have to quit this site.
      Its at this stage just as effective against naked shorting as TheStreet.Com is. Effect: nill, nada, niente.

      To say it this way: I am not in for a chat or a exchange of opinions. I am not interested in opinions. I am in for the action!

      JMHO.

  19. http://www.sec.gov/comments/4-590/4590-84.pdf

    I think a more pragmatic approach is to pretty much write off the SEC and educate the Congress. Congress is obviously being lobbied by Wall Streeters claiming that short selling and even naked short selling provides all of this wonderful “liquidity”, “pricing efficiency”, enhanced “price discovery”, etc. Congress will sit there and nod their heads in approval because they’ve heard it so many times from the SEC et. al. Congress needs to be educated as to what a crock these arguments really are. They need to ask the question of Wall Street all of these things are beneficial but to whom? The “legs” supporting this platform that is a total crock from a “long” investor’s point of view need to sawed off at the knee caps. (Dirk-please don’t take that literally!) Even theoretically “legal” short selling involving a pre-borrow is incredibly damaging to U.S. corporations because of the massive inherent “counterfeiting/replicating” phenomenon associated with how the DTCC is “wired”.

  20. I’ve emailed my Senators about voting on 605… but I emailed congress back in Spring about the uptick rule as well…
    The dark pools of “uber-dollars” that crushed Main Street’s back could do it again at any moment ; let’s hope someone manages to stand up against the Wall Street lobbyists… odds against.

  21. Cox in the HOT SEAT !!! “Accidentally” Transfered ? “$72.5 BILLION !”

    “Deutsche Bank (represented by Bingham) sued Lehman to reclaim $72.5 billion it accidentally transferred to Lehman more than a week after Lehman’s bankruptcy filing.”

    Lehman Examiner Wants To Interview Ex-SEC Chief

    October 23, 2009 2:18 PM
    Posted by Zach Lowe
    http://amlawdaily.typepad.com/amlawdaily/2009/10/lehman-examiner-wants.html

    The examiner investigating the collapse of Lehman Brothers has requested an informal interview with Christopher Cox, the former head of the Securities and Exchange Commission who left the agency and joined Bingham McCutchen as a partner in July.

    The SEC has not yet made Cox available for an interview with the examiner, Jenner & Block’s Anton Valukas, according to an update Bingham filed in Lehman’s Chapter 11 case on Thursday.

    Bingham has made several filings announcing their representation of Lehman on tax issues since the firm’s acquisition in July of McKee Nelson, which had been serving as Lehman’s special tax counsel throughout the bankruptcy. The main McKee lawyers involved in the Lehman matter moved to Bingham and still are handling the case.

    The SEC “is determining whether other current or former agency personnel should respond to this request for information in lieu of [Cox],” the filing states.

    Valukas, a former federal prosecutor, has subpoena power in his investigation of the events leading up to the firm’s collapse, including several large cash transactions between Lehman entities in the days before the company filed for bankruptcy on Sept. 15 of last year. Valukas declined to comment. A Bingham spokeswoman did not immediately return a call seeking comment.

    In its filing, Bingham says “the firm will have no role in connection with any potential interview [of Cox], and will implement an ethical wall to avoid even the appearance of impropriety.”

    Ironically, some of Bingham’s clients took the most aggressive stances against Lehman in the early days of the company’s bankruptcy filing last fall. One Bingham client, investment fund Harbinger Capital Partners, filed the most contentious motion–a request to open Lehman’s books so creditors could investigate allegedly suspicious bank transfers made shortly before Lehman’s bankruptcy filing.

    And in mid-November 2008, two months after Lehman’s Chapter 11 filing, Deutsche Bank (represented by Bingham) sued Lehman to reclaim $72.5 billion it accidentally transferred to Lehman more than a week after Lehman’s bankruptcy filing.

  22. Jim, notice how they replace the Incompetent SEC’s name with the “Government”. Galleon has beenn doing this since 2001 and they just arrest Raj in 2009. Sounds like the Madoff/ Stanford’s time frame huh?

    “Galleon Tip-Seeking on Intel Known to Prosecutors Since 2001
    Share | Email | Print | A A A

    By Karen Gullo, Joel Rosenblatt and David Scheer

    Oct. 24 (Bloomberg) — Galleon Group LLC, the hedge fund firm at the center of a $20 million insider trading prosecution, came to the attention of prosecutors by 2001 for allegedly soliciting internal data on Silicon Valley companies.

    That year the government charged tipster Roomy Khan, a former Intel Corp. employee, with passing nonpublic information about the chipmaker’s backlog and billing reports, product pricing and sales to the Manhattan-based fund in 1998, according to a criminal complaint filed in federal court in San Jose, California in February 2001.

    An unidentified representative of Galleon Management Inc. sought the information from Khan, according to the document. In March 1998, Khan faxed documents from Intel’s Santa Clara, California, offices to a machine at Galleon, prosecutors said in the complaint. Khan pleaded guilty to wire fraud in 2001.

    Raj Rajaratnam, Galleon Group’s co-founder, was charged with insider trading on Oct. 16, 2009.

    “It’s surprising that the government would only go after one side of the case” in 2001, Peter J. Henning, a professor at Wayne State University Law School, said in an interview. He said that, given Khan’s conviction, the government would have been expected “to pay a lot more attention to Galleon since 2001 — and on the flip side you’d expect Galleon to be much more careful.”

    When a tipster is charged, the government normally moves quickly to go after the recipient of the inside information, Henning said.”

    http://www.bloomberg.com/apps/news?pid=20601087&sid=al7FRUWRmvCU

  23. Anon, you don’t think that he’s really dead do you? Think Ken Lay and ask yourself.. Was this a death of convenience or a convenient death? Wonder what happes to the 7.2 billion now? LOL!! His wife gets to keep all assets now that hes gone. Just like Ken Lay’s wife did!!!

  24. Jim, I thought you and others should read this..This post was written by a poster on a message board last year. I removed the name of the poster and the boards identity. This could be very interesting. I wonder who these two companies are? HHHMMMNNNN!!!

    05 Aug 2008, 11:30 AM EDT

    Jump to msg. #
    Office of Inspector General-Semi-Annual Report to Congress

    62 Page Report
    Note : Page 41 reg NSS

    “The OIG has two ongoing inquiries related to the Commission’s actions concerning naked short selling, an issue about which the OIG has re-ceived a multitude of complaints.”

    “In the other inquiry, the OIG is reviewing allegations that a Commis-sion manager committed perjury in a letter to a Senator that discussed na-ked short selling in the context of a particular enforcement matter.” •

    “The OIG is continuing an inquiry into various allegations of misconduct on the part of Commission staff and a court-appointed receiver that were made by the subject of a Commission enforcement proceeding and his at-torney.”

    Read more here:
    http://sec.gov/about/oig/audit/2008/semiapr08.pdf

  25. A quickie note to any new followers of deepcapture.com in regards to the subject of this article by Judd Bagley on WHY the Senate had to “bypass the impotent SEC”. The reason ties in nicely with the concept of “regulatory capture” that gets totally out of control i.e. “deepcapture”.

    In an industry like Wall Street there is a constant inflow of new sometimes complex innovation. On Wall Street the new innovations appear and their creators basically push the SEC off to the side and say this is how it’s now going to be. The pitch is that the U.S. has to be at the cutting edge in order to remain the world’s financial center. This sets up a lag period in which the “securities cops” haven’t got a clue as to how to provide investor protection against the creators of the new innovations that choose to take advantage of this lag period with no well trained sheriff on duty to monitor for abuses. Does the term credit default swaps ring a bell?

    In the abusive naked short selling arena this lag period became very, very long. By the time the SEC caught on to these frauds there was already built up a tremendous amount of yet to be addressed “failures to deliver” (FTDs) in various hiding places around Wall Street. Upon realizing this in 2005 the SEC made an attempt to “grandfather-in” these preexisting “open positions” so that the new laws contained within Reg SHO would not apply to them. The words of the SEC spokesman back then pretty much gave it away, “we don’t want to have to rewrite history”. The problem is that the purchasers of all of those nonexistent shares they bought want what they paid for delivered.

    U.S. investors saw through this and raised an uproar and had the “grandfather clause” rescinded. Along came the already mortally wounded Bear Stearns and Lehman Brothers that presented as the perfect prey for an abusive naked short selling attack. They were within 100 yards of the edge of a cliff and the timing seemed just right. The naked short sellers absolutely teed off on them and the level of FTDs went through the roof as their share prices fell off of a cliff. The entire world took notice of the attack and the role of abusive naked short selling. Yet to this day the SEC, the DTCC and FINRA maintain the absolute absurdity that abusive naked short selling did not play a role in the demise of these two mortally wounded corporations.

    The question becomes WHY. The answer is that they had to no matter how inept it made them look. This is how “deeply captured” regulators and SROs react when the financial interests of those that have them “captured” don’t align with their congressional mandate to provide investor protection. An on the spot decision had to be made and they made it; we’ll side with those that have us “captured”. This is WHY Congress had to make their move; their constituents have had enough. The whole problem centers around what to do with all of those FTDs currently poisoning the share structures of many hundreds of U.S. corporations.

    The Bear Stearns and Lehman Brothers debacles only revealed the tip of the iceberg. Those that attacked these two corporations did it right in front of the worldwide investment community and exposed all of us to systemic risks beyond comprehension. They knew that their sale of nonexistent shares would eventually be under a microscope. Yet they still attacked. What gave them the confidence that their crimes would be swept under a rug as they have been so far? They know that the SEC, the DTCC and FINRA are not in a big hurry to reveal to the world how far asleep at the wheel they have been during this innovative “lag period”. The crooks have the SEC, the DTCC, FINRA and by proxy all of us over a barrel because they don’t want to deal with the 99% of that iceberg whose surface was revealed during the Bear Stearns and Lehman attacks especially in reinstating some form of the “uptick rule” on an emergency basis if nothing else. It wouldn’t be in line with the “financial interests” of those that have them captured to once and for all finally deliver to U.S. investors that which they previously sold them. The good news is that the crooks do not have certain members of Congress over the same barrel.

    1. Yes, the 4 or so non-captured senators that I’m aware of constitute a moral minority that may or may not be heard.

      It will be most interesting to see what happens.

      Of course, the wheels have to come off the car before it gets fixed.

      Get ready for a bumpy ride.

  26. Jim, mainstream media is scared that they may be tarred and feathered so they are trying to sound concerned.. check out tthis article.

    Who’s telling on the secret stock market?Font size: A | A | A12:01 AM ET 10/27/09 | Marketwatch
    NEW YORK (MarketWatch) — Transparency and fairness.

    They are the two reasons Wall Street has always billed itself as having the greatest markets in the world. On the exchanges everyone puts their cards on the table and the winners win and the losers lose regardless of race, color, creed or connections.

    It’s simple and clean — at least in theory. In practice, Wall Street’s playing field has always been tilted toward a select few. The only things that change are the methods. Yesterday’s trades done “upstairs” have been replaced by dark pools, off-the-exchange exchanges where big investors and traders go to trade anonymously, away from the prying eyes of the mom and pops, the Joe Six Packs and the investors who might benefit from the information those markets keep hidden.

    More than one out of every 10 stock trades takes place in a market where you or I and possibly even our brokers can’t buy and can’t sell. Dark pools are Wall Street’s secret stock market, a place where big investors look to unload huge blocks of stocks without influencing the broader market or giving their identities away. In other words, exactly the opposite of one of the market’s two pillars: transparency.

    Surprisingly, the beleaguered Securities and Exchange Commission, which has failed to yield significant regulatory reform more than a year after Lehman Brothers’ collapse, is finally getting aggressive about dark pools. Last week the commission voted 5-0 to move forward with new rules that would require some trades made in dark pools to be disclosed.

    To be clear, the SEC is just proposing the rules, which means the industry will have ample time to water down the final rules or scuttle them altogether. And dashing the rules is far from a long shot. New rules aimed at curbing naked short selling of stocks — an almost universally despised trading practice — has actually stalled as Wall Street continues to amend and soften the final rules. See full story.

    Still, it’s encouraging that the SEC under its new chairman, Mary Schapiro, is even considering the issue given its lack of temerity in attacking high-frequency trading, flash trading, insider trading, capital levels at investment banks, fraud, asset quality, hedge fund regulation and Ponzi schemes in the recent past.

    The dark pool problem is one the SEC can’t ignore. Some dark pools have grown so big they are like private stock markets. The big three include Credit Suisse’s (CS) CrossFinder, Knight Capital Group Inc.’s (NITE) Knight Link and Goldman Sachs Group Inc.’s (GS) Sigma X. Together these “alternative trading systems,” capture about 55% of all dark pool volume, according to Tabb Group.

    Under one proposal, the SEC would lower the threshold for when dark pools must tell the public about the best prices their participants are offering to buy or sell shares. Under current rules, the disclosure requirement only kicks in when a dark pool accounts for 5% or more of the trading volume of a stock. The proposal would lower that to 0.25%. The requirement would apply if the dark pool is showing orders to more than one person.

    Another proposal, and a better one, is subjecting all indications of interest to the same disclosure rules found in other markets.

    It’s a simple and fair rule which means it’s under attack by a Wall Street afraid that it’s going to lose its edge on the kind of investors who play inside the lines. Critics of the new rule take a defeatist stance that this is the way Wall Street has always been, so why change?

    “There is essentially nothing wrong with matching or bettering the price of a public quote,” Miranda Mizen of the Tabb Group wrote in a July 19 report. “Upstairs traders have been doing it since the invention of fire, and most dark pools price relative to the national best bid and offer.”

    Proponents of dark pools also argue that trades sent to the public marketplace are subject to trade talk. Traders find out about big orders and can hurt an investor looking to buy or sell a big block of shares. They argue that orders in dark pools are less susceptible to the gossip mill.

    The problem, of course, is that bulky trades move markets. If I’m at Merrill Lynch and I need to unload 500,000 shares of XYZ, I can place the order in dribs and drabs — through the multiple public markets out there including the Nasdaq, EDGE and Arca. But that order still is going to pressure XYZ’s share price. Also, I’m going to be giving myself away.

    It also means that XYZ’s share price should be lower because there are more shares for sale than buyers. That’s how free markets are supposed to work, right?

    The bottom line is that if dark pools share information just like exchanges, then their order flow info needs to be made public, just like the New York Stock Exchange and Nasdaq Stock Market (NDAQ) make their info public.

    If they can see my trades, I should be able to see theirs.

    Remember, transparency and fairness are what make Wall Street great. Or maybe the dark pools have something to hide?

    1. I’ll spell it out:

      M-A-F-I-A.

      There,I feel better already.

      Now, when do the lawmakers start to spell it out?

  27. More Lip Service disguised as idle threats…It’s Business AS Usual.

    SEC Examining ‘Sponsored Access’

    OCTOBER 27, 2009, 12:45 P.M. ET
    By FAWN JOHNSON
    http://online.wsj.com/article/SB125665531530310503.html

    WASHINGTON — Securities and Exchange Commission Chairman Mary Schapiro on Tuesday said her agency will look more closely at high-frequency traders and a practice known as “sponsored access” in which brokers give their traders direct access to exchanges.

    Speaking before the Securities Industry and Financial Markets Association, Wall Street’s largest trade association, Ms. Schapiro also said that all people giving investment advice should be subjected to a high standard of conduct regardless of whether they carry the label of investment advisor or broker-dealer, according to the prepared text of her speech.

    The initiatives are part of a broad effort on the part of the SEC to restore investors’ confidence in the market.

    “If anyone was hoping for a respite from reform, I am afraid I will disappoint you,” Ms. Schapiro said.

    Ms. Schapiro said SEC staff is drafting a proposal on sponsored access.

    “I liken it to giving your car keys to a friend who doesn’t have a license and letting him drive unaccompanied,” Ms. Schapiro said. “The reason this raises concerns is that broker-dealers perform vital gatekeeper functions — functions that are essential to maintaining the integrity of the markets.”

    Ms. Schapiro also has asked SEC staff to propose ways the agency can collect more information about high frequency traders, noting that lightning speed trading now represents more than 50% of trading volume.

    “I believe we need a deeper understanding of the strategies and activities of high frequency traders and the potential impact on our markets and investors of so many transactions occurring so quickly,” she said.

    Ms. Schapiro’s comments on investment advisors come the same day the House Financial Services Committee is set to begin considering legislation that would create a harmonized fiduciary standard for stockbrokers and advisers who offer financial advice.

    Ms. Schapiro said that “the standard of conduct that should apply must not be a watered-down, “fair and reasonable commercial standard.” Instead it should be the type of standard that applies to a relationship of trust and confidence.”

    Ms. Schapiro’s comment responds directly to fears of some within the investment community that Wall Street will try to weaken the current fiduciary standard to which investment advisors are held during the harmonization process. Broker-dealers who may give investment advice are subject to a less stringent “suitability” standard.

    Advocates for a harmonized standard say individual investors often don’t know whether they are talking to a registered investment advisor or a broker-dealer who also can offer investment tips.

    SIFMA has endorsed a federal fiduciary standard for all financial professionals. The association hasn’t spelled out what that standard should be beyond that it should be based on traditionally recognized fiduciary duties: put investors’ interests first, act with prudence, don’t mislead clients, provide clear disclosure, and avoid or appropriately manage conflicts.

    Ms. Schapiro, while speaking with reporters, told Dow Jones Newswires that the agency will engage in a “very deliberate thoughtful process” about a fiduciary standard that would potentially affect business practices of broker-dealers, if Congress passes legislation requiring such a standard.

    “We’ve already started the process of gathering input,” she said. “It’s too early to consider whether a fiduciary standard would affect or eliminate current fundamental broker compensation practices, such as commissions,” she said.

    The House Financial Services Committee is slated Tuesday to consider a bill requiring advisors of unregulated hedge funds to register with the SEC.

    Ms. Schapiro threw her support behind that effort, warning that she would “work with Congress to avoid creating broad new carve-outs or exceptions that could come back to haunt investors in later years.”

    Ms. Schapiro also called on Congress to give the SEC more authority to look closely at asset-backed securities, which were at the heart of the credit crisis.

    Most legislative proposals now are looking for more disclosure about these complex securities products, but Ms. Schapiro said, “Substantive protections beyond disclosure requirements are needed” in this area.

    “Creating a new act directed solely at securitizations would allow Congress to specifically tailor solutions for these investment vehicles,” she said.

    SEC staff is now reviewing the agency’s regulation of asset-backed securities, including disclosures; the offering process; and reporting of asset-backed issuers, Ms. Schapiro said.

    But the SEC can’t address all the problems associated with those products under its current regulatory authority, she said.
    —Suzanne Barlyn contributed to this article.

    Write to Fawn Johnson at fawn.johnson@dowjones.com

    1. If Schapiro et al really gave a crap about restoring investor confidence, she’d impose an uptick rule post haste.

      She is doing anything but that in an effort to demonstrate ‘concern’, however it’s clear her paycheck, either present or future, comes from Goldman and she won’t do a thing to hamper their illegal methods.

      Time for yet more round tables, Mary?

  28. Here’s a snip-it from a recent paper I did that hopefully illustrates how the foundation for short sale regulation in general is faulty from the very get go. The problem is that nobody ever questions the arguments of these theoretically unbiased oracles on Wall Street.

    “This theoretically wonderful “liquidity” that short sellers provide is indeed a “measured” blessing for the purchasers of shares benefiting from a tightening of the “spread” between the bid and the ask and possibly a lower entry point into an investment but it is also a “measured” curse when those wishing to sell shares need to compete with these same short sellers that have a vastly superior visibility of buy orders and therefore “first dibs” on short selling into any buy order that appears. When the DTCC-administered clearance and settlement system allows those Wall Street “professionals” that sell nonexistent securities into these buy orders to still gain access to the unknowing purchaser’s investment funds without delivering anything then of course they’re going to exercise this “first dibs” option. It’s free money!

    Those selling “long” positions get access to whatever is left over after the short sellers have had their fill. The net effect of this supposedly wonderful “liquidity” is a net negative to those investors taking “long” positions while betting that the share price will go up. Note that since all FTDs and even legal short sales involving a pre-borrow result in the “issuance” and crediting to an a/c of a share price depressing “security entitlement” then the “supply” variable gets artificially manipulated upwards. Note also that since the usual share price buoying effect of buy orders actually gets neutralized by short selling the “effective demand” variable gets artificially reduced. These buy orders representing the “demand” variable get “intercepted” before they can interact with the “supply” variable to determine share prices.

    These phenomena result in an artificially increased “supply” variable interacting with an artificially reduced “effective demand” variable to result in the “discovery” of a share price well below the intersection of an unmanipulated “supply” variable and an unmanipulated “demand” variable. “Effective demand” refers to the component of “demand” that is allowed to interact with the ambient “supply” variable.

    Here’s the rub; historically short sale regulation has been crafted to minimize abuses but yet not interfere with all of this supposedly wonderful “liquidity” being “injected” by these supposed Wall Street do-gooders. If the very premise of this wonderful nature of all of this “liquidity” is off base then you can appreciate why our regulations are so weak. If you watch the 9 or so hour webcast of the recent SEC short selling “roundtable” I’ll bet you could count 50 or 60 times wherein the 95% Wall Street insiders that were invited to the schmoozefest implored the SEC Commissioners not to over-regulate in the abusive short selling sector and risk diminishing all of this supposedly wonderful “liquidity”.

  29. I forgot to mention that jacking up the “supply” while simultaneously manipulating down the “demand” is referred to as “pricing efficiency” which leads to an enhanced “price discovery” process. In fact, abusive short sellers can “discover” pretty much any price they wish to.

  30. Here is a letter to the Senate anyone can use as is, or as modified by you:

    Dear Senator xxxxxxxx,

    Senator Ted Kaufman of Delaware, together with three colleagues, distributed a letter to the remaining 96 members of the Senate formally requesting co-sponsors for SB 605: A bill to require the Securities and Exchange Commission to reinstate the uptick rule and effectively regulate abusive short selling activities.

    Why do we need this bill passed and made the law of American?

    On Wall Street, fraud is not called fraud, and counterfeiting is not called counterfeiting. Instead Wall Street and the SEC describe the counterfeiting fraud engaged in by Wall Streeters as “Liquidity” and “Market Efficiency.”

    Every Counterfeiter of $100 dollars bills would agree with Wall Streeters that every counterfeit $100 bill they create vastly improves the “Liquidity” and “Efficiency” of their bank account, just as every counterfeit share of corporate stock sold for “naked shorting” purposes by Wall Streeters vastly improves the “Liquidity” and “Efficiency” of their bank accounts. All talk by Wall Streeters about “Liquidity” and “Efficiency” are about their bank accounts, not about non-Wall Streeters.

    I wonder – What is the origin of the idea that the daily Fraud committed by Wall Streeters should not be called Fraud? And therefore should NOT be regulated?

    I am not certain, but it is now clear that the former Fed Chairman Alan Greenspan thought that fraud committed by Bankers and Wall Streeters in the deviatives market should not be regulated as revealed in the PBS Frontline documentary entitled “The Warning” ( http://www.pbs.org/wgbh/pages/frontline/warning/ AND http://www.pbs.org/wgbh/pages/frontline/warning/etc/script.html ).

    So Alan Greenspan, Robert Rubin and Larry Summers hoodwinked the United States Congress into believing that the derivatives market should NOT be regulated. As MICHAEL GREENBERGER summed it up: “So now this is an unregulated market, no transparency, no capital reserve requirements, no prohibition on fraud, no prohibition on manipulation, no regulation of intermediaries. All the fundamental templates that we learned from the Great Depression are needed to have markets function smoothly are gone.”

    Congress, at the behest of these three powerful men, stopped Brooksley Born from regulating the derivatives market. In spite of the painful lessons of the last year, the derivatives market is still NOT regulated to this day.

    Wall Street proper does have some regulations to govern it. But today the leadership in the SEC acts as “Defense Lawyers” for their fraternity brothers on Wall Street, because they clearly know that if they act contrary to the financial interests of Wall Streeters they will be blacklisted and not able to obtain a multi-million dollar job on Wall Street after they leave the SEC. Additionally, the lower level SEC employees know that if they try to prevent fraud by Wall Streeters, they will be fired just as SEC lawyer Gary Aguirre was fired for pursuing an insider-trading investigation by a Wall Streeter along with the possibility of a cover-up amid allegations of political interference.

    You should note that Mr. Aguirre, as Brooksley Bornm did in different words, warned the United States Congress in his testimony about another 1929 type Crash occurring in our times, which went unheeded:

    “I believe our capital markets face growing risk from lightly or unregulated hedge funds just as our markets did in the 1920s from unregulated pools of money – then called syndicates, trusts or pools. Those unregulated pools were instrumental in delivering the 1929 Crash…. There is growing evidence that today’s pools-hedge funds-have advanced and refined the practice of manipulating and cheating other market participants …”

    In spite of Mr. Aguirre being thoroughly vindicated by an investigation of the United States Senate as detailed in its report released on August 3, 2007, the SEC to this day continues to act as “Defense Lawyers” for its fraternity brothers on Wall Streeter. And neither the SEC nor the United State Senate has done anything to right the wrong done to Mr. Aguirre and by extension the wrong done to America.

    By doing nothing, the SEC and the United States Senate have by default sided with the “Wall Street Counterfeit Machine” by allowing those Rich and Powerful Wall Streeters accessing this criminal machine to continue stealing money with impunity from Non-Wall-Streeters – from Corporations, from the investment funds of the Common American Worker, and even from the United States Treasury by allowing Wall Streeters to sell counterfeit treasury notes to unsuspecting buyers with impunity.

    Mr. Gary Aguirre’s story is explained in more detail here:
    http://www.deepcapture.com/wall-street-captures-the-sec

    For a more detailed explanation of how Wall Street defrauds American, see Dr. Jim DeCosta’s letter to the SEC detailing how even legal shorting has become fraudulent because of its share counterfeiting element and DTCC abuses: http://www.sec.gov/comments/4-590/4590-84.pdf

    It is clear to me that the SEC should no longer be allowed to protect Publicly Traded Corporations, Investment Funds of American Workers, and U.S. Treasury Notes as a Rancher protects its cattle – for the expected profitable slaughter by the Wall Street Fraternity Brothers. The SEC, as “defense lawyers” for Wall Street, is allowing its Wall Street fraternity brothers to steal money from publicly traded corporations, American workers, and even from the United States Treasury via the “Wall Street Counterfeit Machine.”

    I urge to stand up and be counted as an elected official who will no longer allow the “Wall Street Counterfeit Machine” to steal money from America. Please support SB 605 by becoming a co-sponsor. Please stop naked counterfeit shorting, and re-institute an uptick rule.

    Sincerely,

  31. What happens if a company wants to buy back their undervalued shares for cancelation? The SEC won’t let them.

    Look at the rules, limiting how many real shares a company can buy and cancel.

    Issuers are limited to the timing, price and volume of their purchases. You wouldn’t want to squeeze the counterfeiters…

    http://www.sec.gov/rules/final/33-8335.htm

    Note that a company can demand a real share instead of an entitlement, something that spooks Wallstreet to the core.

    They’d rather see a cash dividend they could match or an undervalued price to take the company private, which they could also match.

    If the company pays a dividend that can’t be matched, such as a share in a private sub., then Wallstreet just tells investors they can have their money back, because unfortunately they didn’t buy a real share.

    1. For those that don’t know, he was suing the industry for counterfeiting and said “this is bigger than tobacco” for lawyers. He had received death threats. It wouldn’t be a stretch to assume not every accident is an accident. This is from six years ago before they shut him up the first time.

      http://www.forbes.com/forbes/2003/1013/066.html

  32. “Could a ray of light be peeking through? Will the roached scatter?”

    Very interesting link! – Very interesting information!
    http://www.businessinsider.com/goldman-sachs-and-morgan-stanley-cannot-afford-to-remain-silent-on-galleon-charges-2009-10

    This story reminds me of the recent purchase of MEDX by BMY. Goldman Sachs was hired by MEDX and Morgan Stanley was hired by BMY to help in this merger.

    One very interesting piece of information became public after a shareholder lawsuit was filed… Goldman Sachs would receive 21 Million Dollar Payment if the merger went through (approximately 1% of the buyout price).

    By New Jersey law, if 90% or more of MEDX stock was tendered to BMY, then the merger would NOT have to be approved by a vote of the MEDX shareholders – in other words, there would be NO shareholder meeting called and the merger would be guaranteed and happen quickly – which it did.

    Here is the second very interesting piece of information….
    BMY just barely received 90% (90.x%) of MEDX stock via the tendering process. This allowed BMY to buy out MEDX shareholders at a low price ($16/shr), and Goldman Sachs received its 21 Million Dollar Bonus.

    This the questions that comes to mind….:

    1.) What service could Goldman Sachs provide to MEDX to justify a 21 Million Dollar Bonus?

    One possible answer to question #1, and I think very likely, is that Goldman Sachs used the “Wall Street Counterfeit Machine” to create counterfeit shares of MEDX to illegally push the percent of tendered MEDX shares to BMY over 90%.

    This is another way Wall Streeters illegally manipulates publicly traded companies… The 90% number is measured based upon the official number of shares that should be traded. In contrast, the total number of tendered shares includes ALL the COUNTERFEIT SHARES created by Wall Streeters. If the total number of shares trading was 100% greater than the official number that should be trading, then it the tendering of 25% of the total number of shares trading would equal 50% of the official number, and the tendering of 50% of the shares trading would equal 100% of the official number of shares that should be trading.

    —( So Goldman Sachs and all of the Hedge Funds that paid Goldman Sachs for insider information, could simple counterfeit enough shares of MEDX to guarantee the merger would occur and guarantee reception of a 21 Million Dollar Bonus Check.

    Another question comes to mind….:

    What happens on Wall Street if OVER 100% of the official number of MEDX shares were tendered to BMY?

    I am sure the “Wall Street Counterfeit Machine” has a method of “fixing” this issue… for example, having Wall Street firms UN-tendering their shares to bring the number down below the 100% mark.

    1. Awe shucks….you know you can trust me.
      A good honest liar is hard to find. Do we have enough rich
      honest people to kick some thugs ass? Me thinks one could
      be rich and honest. Keep fighting to win. *smile*

  33. The funny thing is that the last time congress passed a law to ban the shorts, the market tanked. Or have we forgotten the crash last year?

    Naked shorting should be banned, I agree, but Bear Stearns and Lehman did not collapse because of naked or any kind of shorting, they collapsed because they were broke/insolvent/unable to pay/done. Is that hard to freaking understand?? What is so difficult to understand about that? The shorts just benefited from their fall, that’s it. If Lehman and Bear were solid companies, their stocks would have moved higher and killed those shorts.

    Wake up people, when was the last time congress or anyone in Washington passed a law that made sense. How come they were not passing this law 5 years ago?

    I bet people don’t even understand the concept of shorting a stock on this board.

    Danny

  34. Danny,

    You said: The funny thing is that the last time congress passed a law to ban the shorts, the market tanked.

    WHAT LAW did Congress Pass?

    Are you referring to the SEC? The SEC is NOT Congress.

    You said: “If Lehman and Bear were solid companies, their stocks would have moved higher and killed those shorts.”

    So you think that it is OK for Wall Streeters to Naked Counterfeit Short any company they want to to make a profit?

    Any if a company is attacked by Naked Counterfeit Shorting, and is a strong company the company will survive the Naked Counterfeit Shorting? So no one should complain about the Wall Street Counterfeit Machine?

    So you believe as Ex Fed Chairman Alan Greenspan that fraud on Wall Street should NOT be regulated or punished?

    You said: “I bet people don’t even understand the concept of shorting a stock on this board.”

    Danny, you really need to read Dr. Jim DeCosta’s letter the the SEC so you can see the light shining on this topic:

    http://www.sec.gov/comments/4-590/4590-84.pdf

  35. Danny,

    I agree that both Bear Stearns and Lehman were “broke/insolvent/unable to pay” as you posit. They were in a business 100% based on confidence and everybody lost confidence in them. This put them within spitting distance of the edge of a cliff. The 131% of all of Bear’s shares sold in one day and the 57-fold increase in FTDs of Lehman above their previous all time high water mark PUSHED them over the cliff. All of the money of those U.S. ctizens that incorrectly thought they were buying at the bottom is now in the wallets of those that entered into a contract to deliver that which they were selling on T+3 but intentionally reneged on the contract. The mistake of those investors was not just trying to guess the bottom which is inherently dangerous their bigger mistake was assuming that our regulators and SROs were rigorously providing investor protection andmaking sure that the selleres of shares upheld their half of the contract. Maybe these investors did accurately guess the bottom of where these prices should have ended up in an environment where investor protection was rigorously provided. We’ll never know will we? I see your argument up to a point but your argument necessitates explaining away those aberrant statistics as background noise which is pretty tough to swallow.

  36. I know a lot of market reform advocates were pretty excited about the new Reg SHO 242.204’s “permanent” mandate that any FTDs that occur by the end of trading on T+3 must be addressed by a “borrow or purchase” BEFORE the opening of trading on T+4 (extended to T+6 for theoretically bona fide MMs). A lot of you have inquired as to why the SEC didn’t just make the “borrow or purchase” mandate by the close of business on T+3 after all what happens in between the close of biz on T+3 and the opening of trading on T+4?

    Well, what “happens” in this timeframe is one of the pillars supporting abusive naked short selling. The NSCC’s “Automated Stock Borrow Program” (“SBP”) just so happens to have a “night time cycle”. Any FTDs registered at the close of biz on T+3 can be “cured” via a “borrow” (which qualifies as a “borrow or purchase”) from the SBP. Why is this a rip off to “long” investors? It’s because the SBP has a self-replenishing nature to it. When an FTD occurs the NSCC management reaches into it and grabs a parcel of IMPOSSIBLE TO IDENTIFY (due to “anonymous pooling” and “dematerialization”) shares to “cure” the FTD. These shares are electronically transferred to the broker of the purchaser of the recently borrowed shares. As the new “legal owner” of these recently borrowed shares this broker has all of the right in the world to re-donate them right back into the very same SBP lending pool of shares from whence they just exited AS IF THEY NEVER LEFT IN THE FIRST PLACE. It’s self-replenishing and not “decrementing” wherein previously borrowed parcels of shares are identified and made unavailable for reborrowing. The same IMPOSSIBLE TO IDENTIFY parcel of shares may have “cured” a dozen different FTDs and may be simultaneously loaned out to a dozen different b/ds.

    Why would a broker donate shares to the SBP lending pool in the first place? A broker is highly motivated to donate as many shares as possible (even if it is illegal to do so) because they can convert an electronic book entry gathering dust into its cash equivalent and retain the interest earnings on the cash. Wow, with a temptation to cheat like that being that parcels of shares are impossible to identify due to “anonymous pooling” and “dematerialization” there must be all kinds of rigorous monitoring of what types of shares are being donated to these lucrative SBP lending pools, right? Wrong, the NSCC puts all of their b/ds on the “honor system” in this regard.

    Here’s the catch; the same corrupt phenomenon can occur with legal “pre-borrows” as the broker/dealer of the investor purchasing these legally “pre-borrowed” shares that were sold short becomes its new “legal owner” and has all of the right in the world to rent them out to a different short seller. So why do they refer to these transactions as “borrows” when the legal ownership is transferred? Well, if they referred to them as “sales” which is what they are then the “seller” would lose the right to resell that which he purchased and all of this rental income and ability to amass huge short positions and predictably kill U.S. corporations for a living would be lost. If you had to tell the purchaser of shares that he lost his right to resell that which he purchased then that would give away the entire fraud. I wonder what the increase in the activity levels of the SBP occurred when the new law became effective. Maybe it went up 57-fold like the FTDs in Lehman Brothers did when they WEREN’T being naked short sold to death.

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