SEC’s Schapiro on market manipulation

This clip, which recently aired on CNBC, is probably the best insight yet into the current mindset of SEC Chairman Mary Schapiro, with respect to enforcing laws against illegal market manipulation.

This clip, which recently aired on CNBC, is probably the best insight yet into the current mindset of SEC Chairman Mary Schapiro, with respect to enforcing  laws against illegal market manipulation.

My impressions:

  • [00:25]Anybody who was manipulating the market or spreading false rumors potentially was violating the securities laws.”
    Potentially?(!) Isn’t market manipulation, by definition, a violation of the securities laws? Wasn’t the SEC itself created to restore public confidence in fair (meaning, non-manipulated) markets? I really doubt this is how Chairman Schapiro would have made this point in writing, but the off-the-cuff nature of the response makes it all the more indicative of how her organization really approaches the issue, I’m afraid.
  • [00:30] Even Chairman Cox has said subsequently that the ban on short selling and the other measures the SEC took might not have been the right thing to do at the time.”
    On this point, we agree. The ban on legitimate short selling was a ridiculous measure that some evidence strongly suggests was enacted solely to benefit Goldman Sachs and Morgan Stanley.
  • [1:29] Here, Chairman Schapiro offers her interpretation of the SEC’s new Rube Goldberg approach to dealing with bear raids. It takes her three dozen words to describe a likely counter-productive attempt to artificially solve a problem that I can naturally solve in six words: “borrow the shares, settle the trades.”
  • [2:10] (regarding whether or not manipulation was involved in the take-downs of Bear Stearns and Lehman Brothers) “The review is ongoing and we will go wherever the evidence leads us.”
    This made me angry, whereas up to that point, I was mostly amused. It’s been two years since Bear and 18 months since Lehman fell, sparking the largest economic crisis in our lifetimes, and the SEC’s review of is “ongoing”? The SEC “will go where the evidence leads”? This despite signs of illegal manipulation so obvious that former SEC Enforcement Director Irving Pollack compared them to the lights on an airport runway:
    “This isn’t a trail of breadcrumbs; this audit trail is lit up like an airport runway.You can see it a mile off. Subpoena e-mails. Find out who spread false rumors and also shorted the stock and you’ve got your manipulators.”
    This is insulting. Chairman Schapiro should treat us as adults and admit that the “review” is long over, assuming it ever really began.
  1. Mary repeating the shortseller’s mantra only proves that the very few neurons still functioning in SEC bobbleheads have been thoroughly washed by the likes of Chanos, Cohen and their spawn.

    This is such a sad and dreary tale. One that makes many investors lead a life of ‘quiet desperation’.

    When will this book be rewritten?

  2. Time after time SIRI stock has had false news stories. Most recently Wonderlich Securities said auto sales would be bad 2 days before SIRI would have made compliance on the NASDAQ. The next day auto sales came out and were amazingly off the charts. A day latter Wonderlich came out with a positive news story about auto sales.

    Wanna bet they knew before they tanked the stock they knew the auto sales would be great giving SIRI the boost to get compliance by trading over “One Dollar”. I contacted the SEC emailed the web link of the misleading and fake news.

    There were news releases about this manipulation and still the SEC did nothing. I think the SEC needs disbanded and a new organization founded to monitor stocks the way they should be.

  3. The time expired years ago for SEC to deserve any respectful parsing of its public statements as if the agency might be serious about protecting investors and market integrity. The agency and its officials have no credibility whatsoever. U. S. markets are the global scandal. Other nations know better than Americans just how fraudulent trading is here. This is unacceptable and must be remedied by insisting that Congress represent ordinary Americans rather than the Wall Street elite.

  4. I think all agree that the SEC pom pom cheerleaders for their Wallstreet heroes need to go. Anyone with half a brain can see they are a PR agency for Wallstreet and not a regulator. They were Wallstreet’s attempt at appeasing people after the Pecora hearings (google it).

    My question is why do the politicians refuse to disband them and save $1,230 million dollars? Why is Obama giving them an 11% increase instead of canning them and giving the money to the department of justice?

    Think about it?

    Obama reports to Wallstreet, just as Bush did.

    It’s a big, big problem and the Wallstreet Gang runs the country.

  5. These included a variety of conflicts of interest such as the underwriting of unsound securities in order to pay off bad bank loans as well as “pool operations” to support the price of bank stocks. The hearings galvanized broad public support for new banking and securities laws. As a result of the Pecora Commission’s findings, the United States Congress passed the Glass-Steagall Banking Act of 1933 to separate commercial and investment banking, the Securities Act of 1933 to set penalties for filing false information about stock offerings, and the Securities Exchange Act of 1934, which formed the SEC, to regulate the stock exchanges. Some argue that thanks to the legacy of Pecora Commission’s hearings and subsequent regulatory legislation, American economy had a sound financial system for roughly half a century.[1]

    Then what happened?


    See also Depository Institutions Deregulation and Monetary Control Act of 1980, the Garn-St. Germain Depository Institutions Act of 1982, and the Gramm–Leach–Bliley Act of 1999.

    The bill that ultimately repealed the Act was introduced in the Senate by Phil Gramm (Republican of Texas) and in the House of Representatives by Jim Leach (R-Iowa) in 1999.

  6. Then what happened?

    DTCC is a holding company established in 1999 to combine The Depository Trust Company (DTC) and National Securities Clearing Corporation (NSCC).

    Hmm, combining the clearing agency with the agency with the fiduciary responsibility to keep track of who owns what, no chance for hanky panky here…

    Nothing like not giving a crap about conflict of interest.

  7. Someone once asked if the “private partnership nominee”, Cede & Co, who is the ACTUAL OWNER of all electronic bonds (including all government debt) and shares as opposed to the beneficial owners like you that have IOU’s in their account would ever be so brave as to pledge the assets they ACTUALLY OWN as collateral.

    Ever wonder why governments are broke, but private interests have lots of money to buy up roads, etc.?

    There’s now evidence that world depository members of DTCC, like Canada’s CDS (Canadian Depository Securities), are collateralising funds to acquire major interests in a broad spectrum of industrial, commercial and natural resource companies from Australia and Peru to Sweden and Africa. (Equinox Minerals Ltd of Australia is a model operation involving CDS, their largest shareholder in July of 2004). It’s this bottomless purse that’s driving the global acquisition of public companies such as national airlines, railways, oil companies and telecommunication and postal services, under the clever guise of “privatisation”.

    And don’t kid yourself. In the 1970’s, the government tried to find out what law stopped the depositories, the ACTUAL OWNERS from voting against the interests of the people who hold IOU’s and the answer was “trust us, that would be wrong”. There’s nothing to stop them from ignoring IOU owner votes and voting int he boards of major companies as they see fit.

  8. Naked shorting of government debt dwarf’s naked shorting of equities.

    Jane and Joe Sixpack refuses to understand this scam at her and his peril.

    The bailout package was made into a massive financial scam, which would plunge the United States into unprecedented levels of debt, while pumping incredible amounts of money into major global banks.

    The public was told, as was the Congress, that the bailout was worth $700 billion dollars. However, this was extremely misleading, and a closer reading of the fine print would reveal much more, in that $700 billion is the amount that could be spent “at any one time.” As Chris Martenson wrote:

    This means that $700 billion is NOT the cost of this dangerous legislation, it is only the amount that can be outstanding at any one time. After, say, $100 billion of bad mortgages are disposed of, another $100 billion can be bought. In short, these four little words assure that there is NO LIMIT to the potential size of this bailout. This means that $700 billion is a rolling amount, not a ceiling.

    So what happens when you have vague language and an unlimited budget? Fraud and self-dealing. Mark my words, this is the largest looting operation ever in the history of the US, and it’s all spelled out right in this delightfully brief document that is about to be rammed through a scared Congress and made into law.[17]

  9. I can’t seem to acess the sanity check site, any one else have this happen or know what the problem imght be/
    Thank you!

  10. I can’t seem to acess the sanity check site.
    Any one else have this happen or know if there is a problem ?

    Thank you!

  11. Intelligence Report – SEC: Short Selling and the “Uptick Rule”

    Greetings from Washington….

    As the “Blizzard of 2010” rolls on with white-out conditions here in Washington and along the northeast corridor to NYC and Boston…Asian stock markets mostly rose Wednesday after Europe and Wall Street gained on hopes a government debt crisis in Europe can be quarantined to smaller economies…Investors turned optimistic on reports that plans are being developed in the European Union to rescue Greece. That raised hopes that policymakers will take bigger steps to contain debt troubles in other weak European economies including Portugal and Spain…Japan’s Nikkei stock benchmark gained nearly 1 percent as the dollar rose against the yen while oil prices fell after surging to near $74 a barrel on Tuesday…The dollar rose against the euro…Greece’s government has vowed wage and pension reform in an effort to gain credibility in its plan to drive down its debt load.

    Senate Banking Committee Chairman Chris Dodd wanted to get financial services reform legislation written by Friday but the weather has made that next to impossible. Dodd and his Republican counterpart, Richard Shelby of Alabama, are still talking financial reform – even if the pair called it quits Friday on formal legislative negotiations for now.

    Today we feature below an analysis of rules and regs that are being considered by the SEC re short selling and the “uptick rule.” We include them for our wide audience of traders, investors and asset managers who want a nice, concise summary of the latest moves the SEC is making regarding these two important issues.

    Follow us on Twitter @TheOSINTGroup or let us know how we can help you with other items of interest with a note to [email protected].

    Until then…I am,

    Michael Bagley
    Daily Intelligence Newsletter –
    Twitter: @TheOSINTGroup

    – Last April, the SEC proposed two broad possible approaches to restrict short selling: apply rules market-wide and on a permanent basis or apply rules only to any particular security during a severe decrease in its price. The first approach has been termed a “short sale price test restriction” and the second as a “circuit breaker” approach.

    – The SEC has identified three ways a ban could work: by implementing rules focused on the last sales price of a security (the “proposed uptick rule”), by implementing rules focused on the national best bid for that security (the “proposed modified uptick rule”) or by permitting short selling, but only at a price above the national best bid (the “alternative uptick rule”).

    – Under a circuit breaker approach, all short selling of a security would be prohibited; OR the proposed uptick, proposed modified uptick or alternative uptick rule could apply to the price of a particular security during a period of severe decline.

    – The proposed modified uptick rule and the alternative uptick rule are similar in that both use the national best bid as a reference point. However, under the alternative uptick rule, short selling would only be permitted at an increment above the national best bid unless an exception applied.

    – Possible exceptions include exceptions for delivery delay, odd lots, domestic and international arbitrage, over-allotments and lay-off sales, transactions on a volume-weighted average price (VWAP) basis, so-called riskless principal transactions, and market makers.

    – The Commission is leaning towards adopting a circuit breaker approach using the proposed modified uptick or alternative uptick rule. In addition, the Commission is likely to set the threshold at which the rule would be tripped at a 10% intraday decline in the price of a security from the prior day’s closing price. However, the Commission is still considering whether to administer the threshold flexibly, by imposing various lengths of short selling restrictions if the price of a security declines by amounts greater than 10%.

    – VIEWS OF COMMISSIONERS: Commissioners Casey and Paredes have expressed skepticism as to whether further action is needed to curb short selling. Commissioner Aguilar is more supportive, but has expressed concern that because the SEC does not have current legislative authority to police credit default and reverse equity swaps, imposing increasingly stringent requirements on short sales might not appreciably reduce risk and could incentivize market participants to avail themselves of the “shadow market.” Finally, Commissioner Walter and Chairman Shapiro are the most bullish on adopting new curbs on short selling. However, liked Commissioner Aguilar, Commissioner Walter also wants to proceed cautiously because she is hesitant to impose costs on markets given that the benefits of further restrictions on short selling are unclear. However, Walter has only been so receptive to the cost argument: she has expressed “surprise” that a number of market participants who had complained about increased regulatory costs have not submitted alternative proposals of their own.

    – On Friday, during a forum on SEC initiatives, Chairman Shapiro announced that “in the coming weeks, we will consider proposals to restrict the practice of short selling.” However, the Commission is still split 3-2 on whether action is necessary and is favoring a lighter regulatory touch for the time being. It is still unclear whether the stricter alternative uptick rule is too burdensome relative to the modified uptick rule, or whether the alternative uptick should be preferred if it has the benefit of being less costly to administer. Although the formal comment period has closed, Commissioners are still receiving information from interested participants in determining how best to craft further restrictions.

  12. Where is CNBC in covering the Movie about Naked Short Selling called : STOCK SHOCK – The Short Selling of the American Dream

    This 72 minute documentary clearly explains the difference between Short Selling and Naked Short Selling and also clearly explains and Shows the news media collusion, including many CNBC video clips of their false reporting. Jim Cramer is in the video as he explains how he lies to CNBC and his viewers by creating false rumors.

    That my friend is why CNBC will not cover the movie called STOCK SHOCK

    here is the movie info.

    Richard Keane

  13. Judd, Mark, Patrick et al, do you think that the SEC would ever regulate their masters. Look at the money they would stand to lose in compensation. Do you think these big boys would ever let their gravy train(us small investors)stop? You have got to be kidding. Just read on here….

    Pay of Hedge Fund Managers Roared Back Last Year

    The Lazarus-like recovery of the nation’s big banks did not benefit just the bankers — it also created huge paydays for hedge fund managers, including a record $4 billion gain in 2009 for one bold investor who bet big on the financial sector.

    Full List of the Wealthiest Fund Managers (

    Top Hedge Fund Managers Do Well in a Down Year (March 25, 2009) The manager, David Tepper, wagered that the government would not let the big banks fail, even as other investors fled financial shares amid fears that banks would collapse or be nationalized

  14. Maria Bartiromo: “Do you think people did that (abusive naked short selling) and tried to do that in regards to Lehman Brothers and Bear Stearns”?

    Chairman Schapiro: “I really don’t know.”

    Now let me get this straight, an in depth “post-mortem” was done on the trading in Lehman Brothers and Bear Stearns by Dr. Rob Shapiro the former Undersecretary of Commerce in the Clinton administration and Dr. Nam Pham. It found that the FTDs in Bear Stearns went up 145-FOLD during the time period of this attack. The FTDs in Lehman Brothers went up 151-FOLD. The Bear Stearns FTDs represented a 57-FOLD INCREASE FROM THEIR ALL-TIME HIGH NUMBER OF FTDs and after nearly two years of review you still “really don’t know” if abusive naked short selling was involved in their demise?

    The question arises as to why the SEC after two years would make an embarrassingly obvious misrepresentation of the truth like that. What would you do in the SEC’s shoes if the admission that abusive naked short selling played a significant role in nearly bringing down our entire financial system and that many of the investments we have been making especially in development stage U.S. corporations never did have a chance to succeed?

  15. Due to their own fault both Bear Stearns and Lehman Brothers found themselves in the “easy prey” category. Development stage U.S. corporations, by definition, have to go through several stages of development during which they become an “easy prey”. Historically the fate of many of these corporations unfortunate enough to have been targeted for a “bear raid” attack has been thrown like a piece of red meat to these predators by the SEC, FINRA and the DTCC congressionally mandated to provide “investor protection”. The quid pro quo is often a trip through the “revolving door” to much higher paying jobs on Wall Street and in the hedge fund community. This “revolving door” is only accessible to the regulators and SROs on Wall Street that refuse to “make waves” and do anything to disrupt the corrupt status quo.

  16. No one ever makes them discuss naked short selling. They always evade and move to short selling. Maria M. is probably too dumb to know how to pin down anyone on this issue, even if she were inclibed to do so,

  17. So let me get this right.. The MFA (I can come up with another description for this acronym) spent $3.7 million so they could earn 25.3 billion in salaries. That is what I can call the purchase of the best goverment (very little))money can buy. Talk about a return on investment.

  18. “No one ever makes them talk about naked short selling, it’s always about short selling”

    Going up one level, no one ever talks about how they lie about custody. They tell you you have “securities held long” without telling you they are IOU’s.

    Even without any active naked shorting, there’s nothing to stop your brokerage from selling your shares “long” and turning your long position into an IOU. No naked shorting here as every share sold by your custodian is long…

    The biggest scam isn’t the verb of naked short selling.

    It’s the noun of “where the heck are the shares I trusted you to hold on my behalf, you lying scumbag? How dare you then send me a brokerage statement that implies they are there WHEN THEY ARE NOT?”

    It’s the passive custody problem that’s the real problem. Who gave them the right to fractionally own the shares they are supposed to own as if they are some bank. It’s a major breach of trust for the custodian to lie about what they claim to hold in custody.

    Like a magician with sleight of hand, they keep your eyes on who is selling short or naked short, to distract you from the idea the whole damn system FRACTIONALLY BACKS share ownership from failing to deliver to more complicated repurchase agreements and as the actual owner of your property, they have the nerve to pledge it as collateral for loans to further their own businesses.

    Fraud. Mail fraud. Etc. come to mind.

    Why aren’t these thieves ever arrested? The problem is both Republicans and Democrats report to the same masters, the same masters the SEC provides public relations for.

    Enough money is stolen that it can be used to control who runs things in this country.

  19. We should be policing Wall Street
    We don’t need to wait for financial reform to start busting some fraudsters
    This story has been corrected since it was published.
    The Securities and Exchange Commission announced Monday it had begun an inquiry into two dozen financial companies to determine whether they followed accounting practices similar to those recently disclosed in an investigation of Lehman Brothers.

    Where on earth has the SEC been?

    It’s now clear Lehman Brothers’ balance sheet was bogus before the bank collapsed in 2008, catapulting the Street and the world into the worse financial crisis since 1929. The Lehman bankruptcy examiner’s recent report details what just about everyone on the Street has known since the firm imploded — that Lehman defrauded its investors. Even Hank Paulson, in his recent memoir, referred to Lehman’s balance sheet as bogus.

    In order to look like it could borrow $30 for every dollar of its own money, Lehman shifted liabilities off its books at the end of each quarter. Its CPA, Ernst and Young, approved of this fraud against the advice of a whistle-blower, who was fired by Lehman after alerting Ernst and Young.

    Lehman’s practices couldn’t have been all that different from those of every other big bank on the Street. After all, they were all competing for the same business, and using many of the same techniques. Lehman was just the first to go under, causing a financial run that led George W. Bush to warn “this sucker could go down” unless the federal government came up with hundreds of billions to bail out the others.

    In other words, the TARP covered the other bankers’ assets and asses.

    We now know, for example, Goldman Sachs helped Greece hide its public debt and then placed financial bets that Greece would default, using credit-default swaps to avoid risking its own capital. It’s the same tactic Goldman used for (and against) American International Group (AIG): Hide the ball, and then bet against the ball and fob off the risk to investors and taxpayers, using derivatives to remove the risky tactics from the balance sheets. Even today no one knows the fair value of the complex derivatives underlying these and related maneuvers, which is exactly the point.

    Congress is now struggling to come up with legislation to stop this from happening again. And the Street is struggling to stop Congress. As of now, the Street’s political payoffs seem to be working. Proposed legislation still allows secret derivative trading in foreign-exchange swaps (similar to what Goldman used to help Greece hide its debt) and in transactions between big banks and many of their corporate clients (as with AIG).

    But wait. We already have a law designed to stop this sort of fraud. It’s called the Sarbanes-Oxley Act of 2002.

    Think back to the corporate looting scandals that came to light almost a decade ago when the balance sheets of Enron, WorldCom, and others were shown to be fake, causing their investors to lose their shirts. Nearly every major investment bank played a part in the fraud — not only advising the companies but also urging investors to buy their stocks when the banks’ own analysts privately described them as junk.

    Sarbanes-Oxley — Sarbox, as it’s come to be known — was designed to stop this. It requires CEOs and other senior executives to take personal responsibility for the accuracy and completeness of their companies’ financial reports and to set up internal controls to assure the accuracy and completeness of the reports. If they don’t, they’re subject to fines and criminal penalties.

    Sarbox is directly relevant to the off-the-balance-sheet derivative games the Street played and continues to play. No bank CEO can faithfully attest to the accuracy and completeness of its financial reports when derivatives guarantee that the reports are incomplete and deceptive.

    So where has the SEC been?

    I was on a panel a few weeks ago with a former chair of the Securities and Exchange Commission who was asked why the commission has so far failed to enforce Sarbox against Wall Street. He had no response except to mumble that legislation is meaningless unless adequately enforced. Exactly.

    Bottom line: While financial reform is needed, there’s no reason to wait for it. Sarbox is already there. And even if financial reform is enacted without loopholes, there’s no reason to think it will be enforced if laws already on the books, such as Sarbox, aren’t.

    This article was adapted from my column in The American Prospect.

  20. Follow the money back to the hedgefunds and fatcats who bankrolled Obama if you believe real reform is coming for hedges and wallstreet.

    I voted Obama, I’m not anti-Obama, I’m pro-FACT!

    Note O’s righthand (seated on O’s left, interestingly enough) man.

    Great Work If You Can Get It Dept:

    So what are the odds of real reform against the hedgies and wallstreet?

  21. Ron doc,

    That’s an excellent link, thank you. I can’t tell you how exciting things have become in the study of abusive short selling crimes since that CFTC meeting shining a light on the naked short selling of silver and gold. Every modus operandi revealed in the short selling of these commodities has an analogue in the abusive short selling of securities. Both have investors thinking they “own” something yet all they ever received was the “entitlement” to resell it. Both involve “depositories” flagrantly abusing their mandates. Both involve investors secretly being converted into “UUCs” (unknowing unsecured creditors). Both involve misrepresentative monthly brokerage statements. Both involve the use of “unallocated” accounts like the NSCC’s famous “C” sub accounts. Both involve depositories refusing to audit their holdings and compare them to the “long positions” their “participants” imply they are holding on behalf of clients.
    The poor buyers of gold and silver thought they had a piece of bullion basically with their name on it being held in the LBMA vaults but all they really had was an IOU. They thought they were hedging themselves against the risk of fiat currencies and all they ended up buying was fiat gold. Just like in the abusive short selling of securities the financial media won’t touch this commodity story. What will be interesting to see is how the facilitators of the commodity short selling will react when the purchasers demand delivery of that which they purchased. Will there be a commodity analogue of a DTCC “chill” wherein the DTCC will refuse to deliver demanded for shares despite their congressional mandate to “promptly settle” all securities transactions? Will the CFTC “pull an SEC” and cave in to the wishes of powerful behemoths on Wall Street and do everything in its powers to stall meaningful reform? I would predict an amalgamation of the efforts of the “GATAs” of the world and the “Deep Capture” investigative reporting types.

  22. Dr. DeCosta, my son’s new wife is working Psychologist, who is also a full time student working on her Ph.D. Before she got into this field she got a degree in finance and worked in banking for a short time…all quite amazing as she is not yet 30 years old. She started University at a young age. A bright young lady who surprised me last summer just before the wedding to my son. There is a point to this background.

    I was working in the state where she and my son live and stayed at here home for a day. While there I noticed books on the Great Depression and wondered why she had them. That is when I first learned she had worked in banking, or even had that degree previous to what she now does. My two questions to her were one, what was a young lady doing studying the depression and second, why did she not stay with banking?

    She said since she had a facination with people,and how they react to crisis. Also she had a fear of what was happening in our economy presenty that she wanted to try and figure out what might be coming and what might be done to protect against what is coming. Her actions impressed me. They include among other things the buying and holding of PM’s and more basic items stored for just in case. Blew me away!

    As to banking she said very early on she decided that the banking industry was unethical and she did not want to stay so she headed back to school.I told her I was aware of the same and agreed with her on the subject.

    This following, if the writer is right in just some of it, might also be insight into why ‘They’ think they have the right to swindle the rest of us.
    Could this be the psychology these people have that allows them to think swindling us is just the birthright they have…over ALL the rest of us?

  23. Dr. DeCosta, further to your statement: “I would predict an amalgamation of the efforts of the “GATAs” of the world and the “Deep Capture” investigative reporting types.”

    Two summers ago I tried to get several of the knowledgeable people together. A friend and myself were able to get Jim Sinclair and Bud Burrel on the phone together about this subject, as well as getting Sinclair to talking with Jim Puplava of Finacial Sense about this problem.Sinclair knew Puplava. Jim Sinclair also supports GATA in his writing on his websight I also left messages with Patrick’s phone about them all getting together to form what I hoped could be a brain trust on the subject. I don’t know as this ever happened.

    The one problem, as I see it, is while all these folk are smart people, and all understand the problems and are in heavy battle against the bad stuffon thier own they are also all have large ego’s and maybe that is why we have such smart guys working this from many separate angles. Our mistake in my opinion. I strongly hope you are right on a future amalgamation of the efforts.

    I still believe if all these guys would work together be would have a much more effective weapon against the bad guys….but what do I know? I am just a blue collar guy baffled by most of this including the technical trading devices used against us. Thanks for you schooling us in the mechanics.

  24. Fiat Commodities = Fiat Securities = Fiat Bonds = Ponzi Scheme

    A custodian is supposed to hold 100% of the items they are being paid to hold in trust.

    They aren’t like a bank, where depositors know ahead of time that their funds are only fractionally backed.

    Who gives them the right to sell the same commodity, share, government bond, etc. to more than one person? Who gave them the right to let the same homeowner mortgage back more than one bond? (That’s why the bailout totaled much more than the value of the bad mortgages, think about it.)

    This is a criminal conspiracy ponzi scheme and the only reason people aren’t being arrested is the criminals control the regulators, media and politicians and the public is blissfully unaware of how they are being ripped off.

    When you steal a loaf of bread, you go to jail. When you steal a trillion dollars, you become king.

  25. ron doc,

    That’s an interesting thought. Over the years I’ve had an opportunity to write extensively on the psychology of abusive short selling. First of all the shorts do indeed have a superior knowledge of the mechanics involved in our currently corrupt clearance and settlement system. Some feel that it is their RIGHT to leverage that superiority.

    Others portray themselves as “shareholder advocates” and are of the mindset that killing a corporation that they deem to be a scam or a pump and dump actually saves FUTURE investors from getting ripped off. I refer to this as the “benevolent vigilante” mindset. I’m not quite sure how entering into a contract to deliver that which you are selling by T+3 and then refusing to honor that contract results in “shareholder advocacy” when this new shareholder/investor never got what he paid for.

    Others proffer that our regulators are so inept that we need vigilantes like them even if there is a little “collateral damage” involved.

    Many claim that they bring to the markets 4 wonderful services. #1 they bring “new information”. #2 they enhance “market efficiencies”. #3 they enhance the “price discovery” process. #4 they enhance “pricing efficiencies”. #5 they tighten up the bid-ask “spread” so that investors can buy in at lower share price levels.

    All 5 arguments are 100% baloney yet to this very day investors, regulators, SROs, the financial media and even many academics refuse to challenge it. For example, how can flooding the share structure of a corporation with the readily sellable share price depressing “security entitlements” that are generated each time the seller of securities REFUSES to deliver that which he sold enhance the “price discovery” process as the “supply” of that which by law must be treated as being readily sellable goes through the roof and therefore the share price has to drop? Isn’t the “price discovery” process supposed to involve an unmanipulated “supply” variable interacting with an unmanipulated “demand” variable to “discover” and unmanipulated price? In regards to #5’s “tightening of the spreads” what the investor is buying is a discount ticket onto the Titanic.

  26. The SEC really needs to get its act together, as what its been doing lately is largely window dressing for the inept behaviour all these years and their continued unwillingness or inability to investigate and pursue companies before they implode by their own doings, which is costing investors millions.

  27. The Dodd “Financial Reform” Bill Lets Soros Off the Hook
    Written by Zubi Diamond
    FRIDAY, 02 APRIL 2010 14:27

    Accuracy in Media

    The Chris Dodd financial reform bill is totally unnecessary, unwarranted and will be harmful to the Republic. The “too big to fail” concept is not the reason for the economic crisis. The problem is not Wall Street as a whole, but the hedge fund short sellers on Wall Street. They call themselves the “alternative investment community” and have organized themselves into a special interest group called the Managed Funds Association (MFA).

    In order to understand where Dodd went wrong, the public must learn to differentiate between what I call the “good” Wall Street and the “bad” Wall Street, and what roles they play in our economy.

    An example of the good Wall Street would be someone like Warren Buffet, Steve Jobs or Sandy Weill, and many more. These people create, run or finance money-making companies and serve the community with much-needed jobs and employment, products and services. The good Wall Street includes the general public mutual funds, retirement portfolios, common investors, banks and venture capital investors who finance and fund the loans for our homes and businesses. They fund and finance economic growth and expansion.

    An example of the bad Wall Street would be someone like George Soros. These people are the financial hedge fund short-selling operators who make money by betting on company collapse, economic calamities and catastrophes.

    Soros and his collaborators have an anti-capitalism agenda, an anti-industrialized nation agenda, and a far-left liberal, Marxist radical agenda. Most hedge fund short sellers are not capitalist. They are anti-capitalist and they are not investors. They are anti-investors. They succeed when companies (or countries) fail.

    For the good Wall Street to make money, prices have to go up. In this way, everybody makes money, the companies and their shareholders make money, jobs are safe and secure, the economy grows, and the economy expands. This is capitalism in action. The action of the good Wall Street grows and expands the economy.

    For the bad Wall Street to make money, prices have to go down, which means that companies and their investors have to lose money or even go broke and collapse.

    The bad Wall Street is the hedge fund short sellers. They destroy companies, take away liquidity, destroy investor capital and slow down the economy.

    The bad Wall Street, in the form of the hedge fund short sellers, engineered the economic collapse, looted every portfolio that had exposure to the stock market, and blamed George Bush and the Republicans, enabling Barack Obama and his backers, including Soros, to take power.

    The hedge fund short sellers, who are members of the Managed Funds Association, are running our government today. They are the ones who authored the Dodd bill. The Dodd bill is punishing the victims of the Hedge Fund short sellers. The Dodd bill is punishing the good Wall Street.

    Unless the truth about the role of the MFA in our government policies and regulations is revealed, and some courageous lawmakers free our economic system from their grip, the United States is in for a long time of hurt and possible bankruptcy.

    George Soros is the leading member of the MFA. He is also the most influential and the most politically active member. He was behind Barack Obama’s election as President, he led the Managed Funds Association engineering of the economic collapse, as I covered in my book Wizards of Wall Street.

    The Dodd bill does not mention anything about regulating the hedge fund short sellers. The Dodd financial reform bill punishes the victims and rewards the looting bandits and basically sets up the publicly traded companies, the shareholders and the American families to be victimized again. The Dodd bill doesn’t offer any protection for the invested capital and assets of the shareholders, but instead allows their wealth to be seized and confiscated by the Treasury Secretary and distributed to MFA members, the hedge fund short sellers.

    This Dodd “financial reform” bill is just round two of the scam to defraud the publicly traded companies and their shareholders, all over again.

    This Dodd bill represents the biggest effort so far by the hedge fund short sellers to have the government seal of approval, to cover their role in engineering the economic collapse which has ravaged the American economy

    As I document in my book, The Wizards of Wall Street, the problem, in essence, is that safeguard regulations which had been in place since 1938 to prevent a repeat of the stock market crash were repealed.

    The measures I recommend address the root cause of the economic crisis. They are absolutely necessary to protect investors, the invested capital and the publicly traded companies who are at the heart of American capitalism. They are based on my own experiences in the financial markets and my historical analysis of what has worked in the past to prevent economic and financial catastrophes. They have worked and served us well for 72 years, until then-Securities and Exchange Commission (SEC) chairman Christopher Cox removed them due to the lobbying influence of the Managed Funds Association, the hedge fund short sellers.

    Some say the answer is some kind of financial transactions tax, perhaps on a global basis. But I say no. That will only hurt the common investors, retirement portfolios, ordinary Americans with investments in Mutual Funds and IRAs and their pensions and savings. The transaction tax is too exorbitant and is designed to further punish the victims of the crisis, the common investors, and the American families, and traps them for looting down the road. The financial transaction tax is designed as a major source of income redistribution for the Obama administration. This is not good for capitalism.

    The socialists believe that to effectively control the people, you have to take away their money and control their wealth. This Dodd financial reform bill is filled with land mines and traps that will do just that.

    All freedom lovers, all capitalists, and all patriotic Americans must say no to the Dodd bill. It does not address the cause of the financial crisis.

    The Dodd bill will suppress business freedom and economic growth. It will work against the interests of Americans and their liberty.

    The only financial reform needed today is to regulate and monitor the hedge funds and the hedge fund short sellers, some of them which are registered off-shore to avoid scrutiny. These global operators, with investors who remain mostly anonymous, must be compelled to register with the Securities and Exchange Commission (SEC), publicly disclose their positions in the markets, and maintain accounting and trading records for a period of 10 years so their activities can be monitored and scrutinized. Just like mutual funds, they must be prohibited from engaging in day trading activities.

    Many people do not realize that the hedge funds are responsible for 75-90 percent of all trading activities on Wall Street. They are responsible for the extreme market volatility. They are responsible for everything that is bad on Wall Street.

    Other measures — and the most important measures which must be taken — include:

    Reinstate and restore the short sale price test regulation known as the uptick rule (to its original condition and not modified).
    End mark to market accounting and replace it with book value, historic cost accounting.
    Reinstate the “circuit breakers” and the trading curbs to kick in whenever the Dow Jones industrial average drops 150 points to reduce market volatility and massive panic sell-off in order to allow investors time to think before they act.
    To fix the economic crisis, our lawmakers need to put everything back the way it was in 2006 before Christopher Cox became chairman of the Securities and Exchange Commission (SEC) and started “fixing things” that were not broken. In short, every regulation that was repealed or watered down through the influence of the Managed Funds Association should be reversed to what it was before, with no exception.

    By removing the rules and regulations that protected the capitalists and their shareholders over the years, the SEC left all of us vulnerable and susceptible to looting through unrestricted short selling by the hedge fund short sellers. That is how millions of ordinary Americans lost trillions of dollars in wealth.

    The hedge fund short sellers looted $11 trillion from the U.S. economy. They walk away with all our invested capital and they walk away with the intrinsic profit from devalued home mortgages (our homes) through short selling. Yet, no one goes to jail. Why? Answer: they are too chummy with the Obama administration. The looters have been given a seat at the table in the White House. They are being protected by our government.

    If they are left unchecked, the worst will be still to come. We will be witnessing the complete collapse of the capitalist system. And that means more profits for the hedge fund short sellers.

    The collapse of the U.S. economy began in 2008 and is, as I state in my book Wizards of Wall Street, just the first phase of the plot to destroy capitalism and impose socialism on the American people.

    The subsequent phases of the plot are now upon us, and are being implemented, beginning with the health care reform bill. The financial reform bill, the cap and trade bill, the card check bill, and the immigration reform bill are now on the agenda.

    All of these “reform” bills are part of an orchestrated attack on freedom, liberty and justice. They have been written in order to transform America from capitalism to socialism — to dilute and change the political and economic structure of America.

    All capitalists, all freedom lovers, all patriotic Americans must reject and say no to all the above listed reform bills, regardless of party affiliation. We do not want the tyranny of socialism.

    As an immigrant who came to America to achieve success, I understand the stakes, perhaps more than most. This is a fight to save America, to save capitalism and protect us from the disaster of socialism.

    I know that the liberals, who say they want to help the poor, think that the solution is socialism. But socialism never helps the poor; it only traps them indefinitely in poverty. You will never have a rags-to-riches story in a socialist economy. Liberation from poverty is only possible through capitalism.

    The economic success of China did not come from socialism, but rather from capitalism.

    The Chinese Communists authorize capitalist ventures to sustain socialism in their country. Without capitalism, socialism cannot survive.

    It is the wealth generated from capitalism that sustains socialism. Socialism does not produce wealth, only capitalism does.

    The only wealth associated with socialism is the wealth the socialists have stolen from the capitalists, through seizure, confiscation and redistribution of the capitalists’ wealth.

    Once there is no more wealth left to seize, confiscate, or redistribute, socialism dies.

    Socialism has a perfect record of failure.

    *The author of The Wizards of Wall Street, Zubi Diamond….

  28. The SEC has ignored these type violations when brought to their attention because they have considered these insignificant.

    Finra Fines Citigroup $650,000

    The Financial Industry Regulatory Authority has fined Citigroup Inc. $650,000 for disclosure and supervisory violations in the authority’s first enforcement action involving a broker-dealer stock borrow program.

    Citigroup suspended all new borrows through its Direct Borrow Program on Nov. 30, 2008, and had returned all shares to customers who had lent through the program. The banking giant neither admitted nor denied the charges. A representative wasn’t immediately available to comment.

    The industry-funded regulator of securities firms doing business in the U.S. said Citigroup’s Direct Borrow Program borrowed fully paid hard-to-borrow securities owned by the firm’s customers between Jan. 1, 2005, and Nov. 30, 2008, and put them in a pool of securities used for the bank’s clients’ short-selling strategies.

    Finra also said Citigroup failed to disclose information to customers participating in the Direct Borrow Program, including that dividends could be subject to higher tax rates, and the program operated without procedures designed to supervise its staff and the firm’s brokers and to adequately monitor the accounts of customers who participated in the Direct Borrow Program.

    The program arranged for more than 4,000 loans of more than 770 different securities borrowed from more than 2,300 customers. The average annual value of outstanding loans from customers was $301 million.

    Write to Kathy Shwiff at [email protected]

  29. My employer and I were victimized by naked short sellers in 1997-2000.
    The practice has grown to encompass every security traded on the exchanges, and every commodity traded in the futures markets.

    The 100:1 naked shorting of gold and silver is especially corruptive of our economic system, since these metals form the foundation of our monetary system, and provide the measure of value for every other thing traded in commerce, and every hour of labor offered in paid service.

    The crooks that have bought our government have cooked the books.
    Which books?
    All of them.

    I am removing all of my capital from our financial system, buy buying gold and silver and taking physical delivery. Let them all rot in hell.

  30. Short selling is the root of all evils. Short selling is the cause of crashes of all stock markets, and the cause of American recession and world recession. Short selling causing 401K to 001K. Short selling should be banned indiscrimately. Short selling should be banned altogether, both naked or not. Why ?
    If someone does not own a car, does he have a right to short sell your car and keep the money ? Of course NOT. If someone does not own a stock, who gives him the right to short sell your shares with an aim to knock down your share price ? The real so-called borrowed shares heartily approved by share holders is not existent. If you own a stock, do you want to lend your shares to short sellers for them to knock down your share price? Of course not. But why there is so called borrowed shares ? Because the brokerage firms forced you to lend your shares. If you do not agree to lend your shares to short sellers, you will not be not allowed to open an account with that firm. That is as good as forcing you to agree to lend shares to short sellers. That is actually violating your constitutional rights. Brokers should be banned from requiring you to agree to lending shares to short sellers as a condition to open an account for you. Here I give you another example: When you shop in car dealership for a car, if the dealership requires you to sign an agreement that you must lend you car to other people during the hours when your car is not in use, otherwise you are not allowed to buy a car from them. Is that dealership violating your constitutional right to buy a car ?
    So, to protect all Americans, it is imperative to ban all short sellings, whetherr naked or not. It is also imperative to ban brokers from forcing you to lend shares to short sellers.
    If you do not own shares of a company, you have nothing to sell. Why are you allowed to shart sell other shareholders’ shares to knock down the share price?
    If you like a company, you can buy their shares. If you own shares, you can sell any time. But if you do not own shares, you do not have the contitutional right to sell something you do not own. That is the very basic bit of common sense of capitalism.

  31. TO: Dr Jim DeCosta &
    Owner & Founder of DeepCapture.Com &
    Mr Zubi Diamond and
    Mr Michael Roberts and
    Writer & Producer of and
    All Others:

    1) Not only ban naked short sell, but ban short sell with so-called “borrowed” shares; Ban all short selling should be the law.
    So-called up-stick rule would not be enough; circuit breaker would not be enough. Those who do not own shares of your stock do not have a constitutional right to short sell your shares. That is a common sense. What’s more, short sell is the root of all evils, including causing the so-called flash crash on May 6, 2010, and of causing economic recession in US and the world.
    2) Not only write to SEC, but also to CFTC, but also to each and all U.S. Senators and U. S. House Members, but also to the White House, the Secretary of Treasury and Fed Chairman about your suggestions on banning short selling;
    3) Set up a peaceful legal Coalition Fighting for Banning All Short Selling, which will coordinate & organize all peaceful & legal & common sense efforts to lobby and persuade congress and regulatory agencies for the ban on all short sell in US. Banning short sell must be through help & support from Congress, SEC might not be able to do it alone.
    4) Try use more media, TV, Radio, Web, newspapers, etc to explain why short sell is root of all evils and all types of short sell should be banned
    5) Rebut all erroneous arguments one by one (with facts and law and common sense )
    6) Set up a combined anti-shortsell web site.
    7) Solicit donations to support the efforts !!

    Thank you all very much for your excellent work and efforts on fighting short selling !!!!!!

    All short-Selling should be banned by the law !!!

    Not only naked short sell, but also all short selling !

    The so-called borrowed share short selling is violating the law also. Because brokerage firms forcing customers to lend shares to short sellers itself is illegasl !! It should be banned by law also !!!

    The stock market, commodity market and the whole economy would not be stabalized without banning all short selling !!!
    Banning short selling is in the best interests of all American people and the world people !!!

    Thank you for all your excellent works and efforts in opposing short selling !!!

    Thank you again !!!! God bless you and SAmerica !!!!

    1. My posting a minute ago has some typing errors:
      1) “illegas” should be replaced by “illegal”

      2) “SAmerica” should be replaced by ” America ”

      Sorry for the error above.

      Again, God bless you and America !!!!!!

  32. Short selling is the cause of the 1000 point drop on May 6, 2010.


    According to CNBC & Reuters, just one mutual fund allegedly short sold 75,000 contractsd of e-mini S & P 500 futures in a matter of 19 minutes time in the afternoon of may 6, 2010.
    That one mutual fund short selling alone ( if the report is right) surely caused the flash crash, as I see it. That is common sense. Of course other short selling accelerated the free fall of the market.

    Because bombarding the future market with such a great number of short sell contracts in such a short time of course would have caused the S& P 500 free fall, which would cause the DOW & Nasdeq
    also free fall. That is common sense. if you do not believe this, just use a computer to do a fake trading with so many crowed short selling, and you will find it is the cause of the crash.

    You do not need to look through trillions of data on the several exchanges to look for an answer of the 1000 points drop.
    Just use common sense. Just use this one reported mutual fund short selling of the so many mini S & P 500 future contracts in such a short duration of time as example. You will know what is the cause of the so-called flasj crash of the 1000 points in the market.

    That is why we need to ban short sell of all kinds.
    You do not need other facts and reasons. Just uus the May 6 crash as an example to show the damaging effect of the short- sell upon the whole stock and future markets.

    Just use common sense. Just stand on the unbiassed side of the whole American people, not on the biased short sellers interests.
    And you will support the ban on all short selling, including the so-called borrowed shares short selling and naked short selling.

    Unite peacefully and use all legal methods to request the Congress and the government to ban all short sell to protect our American people’s best interests and prevent the economy from being knocked into recession by short selling forces.

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