Post by armondo on Nov 1, 2009 19:04:47 GMT -6
Request From Gus
« Thread Started Today at 4:47pm »
From Tramp's Board:
This is my challenge to all shareholders. I have thought long and hard about how to proceed, but it was actually easy when I thought about it. You and I are in a unique position, we watched the show, we know what happened, and we know who proved it.
We put together a package of evidence that is clear cut, open and shut, the sec committed fraud. We as insiders to the show got to see that evidence for years, thousands of links over the years to quotes by all the fighters in this, to sec rules that were against the constitution and against many laws, we witnessed madoff and his connections to the stock market, we saw gary aguirre, annette nazerath's quotes, harvey pitts quotes, david patch and dr. byrne's websites are full of evidence, quotes from mark faulk, bud, senators, different companies pr of fighting, eagetech's evidence, the list goes on for ever.
But what is the simplest but most effective way to put in my report of the evidence against the sec is easy, we have it as a group.
I want every shareholders to get their say, to get their evidence in, to be part of the class action.
I want you to simply think of the best evidence you can find with a link and we will put it in the suit, we will make a few ammendments to the statement of claim over time as evidence comes in.
You will all have your chance, I hope you take it. You just have to in this thread and hopefully other threads that are started, give one paragraph that explains your evidence and a link, if it is real we will put it in the case. You all deserve it
This is the best opening of any case, you can't say it better than this, I and I have the evidence to back this up totally. I have the sec saying it in their meetings, and we have it when the sec says it to bill, don't create a squeeze. Well that right there is mass market manipulation at its' worst kind, and it is totally illegal, and actually just plain sad to know that is what happened.
This from bob obrien completely backs up my case:
snoopstock5:
Systemic Problem of Critical Scope - Rule 17A Sought to Prevent This
Congress mandated in Rule 17A of the 1934 Securities Exchange Act that our markets have prompt, accurate clearance and delivery. It reads, "The prompt and accurate clearance and settlement of securities transactions, including the transfer of record ownership and the safeguarding of securities and funds related thereto, are necessary for the protection of investors and persons facilitating transactions by and acting on behalf of investors.�
That seems pretty clear. BOTH clearing (booking the sale and paying for it) and settling (delivery) need to happen promptly, and further, the transfer of record ownership needs to occur. The rule makers understood the temptation to come up with a way to game this, so were clear on the necessary predicates. Clear AND Settle, including transfer of ownership.
FTD's violate that mandate. No record ownership is transferred on a stock share via an IOU. Further, none is transferred via a Stock Borrow Program "loaned" share - because if it were, then the lender would lose his ownership, which would be a sale, not a loan - so either the "loan" is a disguised sale in which record ownership IS transferred, in which case the NSCC appears to be deliberately disguising a sale by erroneously calling it a loan, or no record ownership is being transferred, in which case it violates 17A. Those are the only two choices. Neither is pretty, nor legal.
So how does the SEC allow this to go on?
They typically cite Addendum C of the NSCC's rules, which allows for the stock borrow program to loan stock to cover TEMPORARY settlement failures - the kind resulting from lost certificates. The "temporary" caveat has been ignored, and it has instead become a long-term device to create an unlimited number of electronic book entries.
They also take the position that the ex-clearing transactions are the province of contract law, as the agreements to deliver are a contractual agreement, and the SEC doesn't mediate contractual disputes. A nice way to step out of the role of regulator of the markets, and create instant deniability. The NSCC takes the same position, leaving things up to the brokers, on the honor system.
So the back offices create an unknown number of IOU's, predictably resulting in depressed prices for the afflicted securities, and the regulators say it isn't any of their business.
Systemic Risk
Because of this unbridled FTD manufacturing, a tremendous contingent liability for the industry has been created over time, as the large float of FTD's represents stock that needs to be bought back at some point in the future, but for which there is no guarantee that stock is readily available. In some instances there are reports of companies where FTD's represent multiples of the issued genuine shares.
The collateral used to secure the FTD at the NSCC is cash, but it is marked to market against the price of the stock at the end of the day, and any overage is available to the seller. This means that if the FTD was created at $20 per share, and the stock has been run down to $5 per share, the seller gets to withdraw the $15 dollar difference. This creates a dangerous situation where the system is hopelessly under-collateralized for the true risk - the shares will cost far more than their current depressed price to cover, as the depressed price is often a function of massive selling of FTD's. This is the contingent liability risk. It is likely considerable, and is ignored by the system.
This risk creates a situation where the brokerage community has a vested interest in seeing the prices of victim companies stay down once they are down, as their best customers (hedge funds) have taken out the over-collateralization dollars over the years from the FTD's, and used them to collateralize other securities - many times, more FTD's.
The most obvious way to keep the price depressed and enable everyone to continue to make money is to issue more FTD's whenever the price of a victim security starts to rise. This creates a self-fulfilling prophecy of chronic price manipulation via the issuance of FTD's.
It is likely that there is a severe leverage crisis with the hedge funds that use FTD's, as they have used borrowed funds to collateralize the initial FTD, and then used the over-collateralization to create yet more FTD's. If one of these funds was to unwind it could vaporize the assets of the fund involved virtually overnight, and create yet more systemic problems for other hedge funds as their positions rise in value, triggering more de-leveraging.
It is the classic derivative risk de-leveraging scenario wherein one or two larger funds can cause a meltdown, a la Long Term Capital Management (LTCM) in 1998, where one highly leveraged hedge fund with $2.2 billion in assets caused the entire US credit markets to shut down. LTCM was not naked short selling - they are mentioned to illustrate how one leveraged fund can endanger an entire market.
The SEC is likely aware of this risk, as it heretofore inexplicably violated SEC Rule 17A, and grandfathered in all FTD's prior to 2005, even though long term FTD's were illegal for many years prior to that date, and even though it is in violation of their Congressional mandate. Further, and perhaps more disturbing, the grandfathering rules grandfathers current FTD's below the threshold once a stock hits the Reg SHO Threshold list - market manipulators still get one free bite of the apple even on new SHO entrants - all the fails up until the company lands on the list are inexplicably grandfathered as well, even if they happened today. Wild? It's fact.
SEC Forgives Past Larceny With No Penalty - Why?
Why would the SEC grandfather all prior fails, as well as current fails below the threshold, and knowingly violate their Congressional mandate? It is akin to allowing bank robbers keep the proceeds of all prior bank robberies. There are two logical explanations available to us:
1) The SEC knows about the systemic risk FTD's cause, it is terrified of the implications, and it wanted to, at the stroke of a pen, eliminate that risk from the system, even if it violated the law and was at the expense of shareholders who had been financially decimated by the practice.
A choice was made to allow the brokers and hedge funds to keep the proceeds of their ill-gotten gains, and not require them to ever buy in the shares they had printed whole cloth.
The SEC admits it, in their own bureaucrat-ese. From the February, 2005 Euromoney article on the controversy:
The SEC's Brigagliano says the commission made a choice. "We were concerned about generating volatility where there were large pre-existing open positions, and we wanted to start afresh with new regulation, not re-write history."
Substitute the words "not enforce existing, decade-old laws" for "not re-write history" and you have the plain English version. The SEC violated 17A, knowingly, because they were worried about causing "volatility" - SEC-speak for short squeezes, where stocks with millions of FTD's go through the roof as they are bought in - essentially a return of capital to those damaged by the FTD's, as their cash is returned to them, in return for selling their genuine shares. That would be the fair way equitable markets would work - those who had made untold billions using FTD's would have to pay most or all of it back in short squeezes, as legitimate supply and demand are returned to an unbalanced market (because of the current artificial supply of FTD's).
The SEC was apparently so concerned about that "volatility", that their solution was to give the violators a free pass, and allow the damaged shareholders and companies to remain damaged in perpetuity, never settling nor having record ownership transferred. This decision underscores the likelihood that the SEC understands the systemic risk years of FTD creation have created, and will go to great lengths to avoid triggering an event that would cause the violators to have to settle the trades.
A more cynical interpretation is that the SEC didn't want to cause undue financial hardship for the more politically and financially important violators (the violators would likely be both, as they had years of selling non-existent shares with which to build and solidify their financial importance - and to spread the wealth by supporting their elected officials with contributions), choosing instead to lock in the industry's illegally generated profits, rather than have the violators pay it back - the SEC favored the hedge funds and brokers that had violated the law, over the shareholders and companies that had been brutalized by the practice.
2) The far more ominous logical explanation is that the SEC grandfathered not out of concern for the system, but rather to limit its own liability under the law - that after years of permitting felony short selling/securities fraud manipulation, the SEC ultimately came to realize that it had committed collateral crimes, and could be held accountable - as accessories to the felonies. This explanation posits that in passing Regulation SHO, the SEC wasn�t just grandfathering the previous illegal short selling to protect the short sellers, but rather it was, much more importantly, protecting the SEC itself. And it focused the ire of the victims on the rule violators who financially benefitted, rather than upon the regulator that had permitted the felonious activity for years.
The legal argument would go like this (simplified): The felony committed and suborned in this situation is USC 18, Title 514, the commission of counterfeiting of a commercial security, a Class B Federal Felony. By permitting this felony to be an endemic part of the modern market system, and by knowingly failing to enforce rules designed to prevent counterfeiting of a commercial security, the SEC aided and abetted those who have done so, subjecting it to risk of civil and criminal redress. The permission of a large float of FTD's to be part of the markets is a de facto permission of counterfeiting (wherein the bogus IOU/Markers are represented as and have the effect of legitimate stock shares, on the auction price of the security as well as on the long term size of the float), and thus creates an accessory risk for the Commission. Arguments have been advanced that, as in the Elgindy case, naked short selling was used for money laundering for Middle Eastern arms dealers, thus constituting treason during a time of war (according to the Patriot Act), a Class A Felony - that the Commission was ignorant of the outcome of its permitting the counterfeiting does not absolve it of the legal jeopardy arising from that outcome, any more than the driver of a getaway car in a bank robbery is absolved of the murder of a teller during the robbery - even though he was ignorant of the ultimate crime committed. That is not how the law works.
Note that I take no position as to the likelihood of this second explanation being correct. It is a credible explanation advanced by several experts familiar with the legal ramifications of allowing FTD's to remain in the system in perpetuity, and failing to enforce rules designed to stop larcenous action, nothing more.
FWIW, it is far more likely that the SEC folks understand that upon retirement they will receive $700 per hour jobs with top lawfirms representing Wall Street, and that knowing this they are much more likely to favor Wall Street's interests. Most agencies of the Government have the conceit that comes from unbridled power, and it is hard to imagine Federal employees actually afraid of liability for anything. Thus, the second explanation is a hard one to swallow.
But whatever the motivation, charitable or cynical, you arrive at the same effective point: Years of lawless predation were pardoned (in violation of 17A's Congressional mandate), the profits kept by the criminals, with no penalty or sanctions imposed - leaving investors and the victimized companies out of luck, and money.
So what about now?
Since the new FTD rule was passed (Regulation SHO, for SHOrt) and went into effect January, 2005, more companies have gone onto the Threshold list (a list of companies whose FTD's exceed a "threshold" of 10,000 shares AND 1/2% of their total issued shares), and more FTD's have been created. The industry can't help itself (and truthfully why would they?) - it is just too lucrative to ignore the un-enforced rules, and continue to manufacture IOU's. The systemic risk continues to build, and the regulators that hoped the industry would heal itself are left unwilling or unable to act - the imperative to create fair markets is clearly subordinate to pandering to the financial well being of the violators.
The DTCC and the SEC take the position that information about this crisis is proprietary and secret, and that our elected officials and companies and we shareholders have no need or right to know the true parameters of the problem. The workings of the machine are opaque, and transparency is derided as an unnecessary invasion of the industry's privacy.
Again, the charitable explanation for this stance is because they want to avoid a potentially damaging meltdown (albeit of their own creation). The cynical explanation is that investors would riot in the streets or abandon the market if they understood what was being done to them, and would hold the SEC accountable for their role in it. Regardless of the explanation that one feels best explains the SEC and the DTCC's actions, what is unarguable is that the size, scope, and ongoing treatment of the crisis is top secret.
This is very much like the way the regulators handled the S&L crisis, allowing a large systemic problem to develop into a catastrophic systemic problem that wound up costing hundreds of billions of dollars, and every man, woman and child in the US about $2K in taxes. We are still paying for it today.
In that episode, the S&L's accounted for about a third of all the business Wall Street did in the 80's, and every big house stuffed the most larcenous of the S&L's with untold billions of junk bonds and options and precarious loans, knowing and understanding that the American taxpayer would ultimately have to pay the freight via secured deposits. Wall Street was assisted in this wholesale looting of the financial system by every major accounting firm in existence, and the most prominent attorneys in the country. Fraud of a mind boggling scale was perpetrated and perpetuated by that industry, and one of the primary beneficiaries was Wall Street, who that time also got to keep the money, laying off the blame on the S&L's. This time around we have hedge funds comprising over 50% of Wall Street's action, and we as a nation seem to have learned nothing from our prior fleecing. One can't understand that catastrophe and not draw striking parallels to this situation.
In fact, the entire FTD crisis is very similar to the S&L crisis, in the sense that staggering amounts of money are in play, private interests are operating in an unregulated environment (hedge funds and ex-clearing), leverage is being employed to compound the risk, Wall Street wunderkind are making preposterous profits, phenomenally wealthy players are receiving preferential treatment even as they knowingly violate the law, Greenspan is saying that no restrictive regulation is required, the industry is protesting that there is no problem, and the entire affair is taking place shrouded in secrecy.
That didn't end well.
The above is simplified, and is conceptual, as in reality there is no single share followed through the system - there are debits and credits to participant accounts at the NSCC, which are netted against total long positions, further obfuscating the mechanisms. But the fundamentals are accurate, if lacking in a certain specificity that could fill volumes. Hopefully it is enough for the reader to grasp the issue and the scope thereof.
* From "Symphony of Greed - Financial Terrorism and Super-Crime on Wall Street", by Bob O'Brien, in progress. Interested literary agents or publishers are encouraged to contact Bob at NCANS.mgr@gmail.com
www.ncans.net/intro%20to%20naked%20short%20selling.htm
tell me this isn't evidence, we can put together the most air tight case ever, we can be heard
please add your best evidence and your internet name or anonymous, but please add, it is vital the people are heard in my case, it is by the people!
cheers
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scruffy2
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« Thread Started Today at 4:47pm »
From Tramp's Board:
This is my challenge to all shareholders. I have thought long and hard about how to proceed, but it was actually easy when I thought about it. You and I are in a unique position, we watched the show, we know what happened, and we know who proved it.
We put together a package of evidence that is clear cut, open and shut, the sec committed fraud. We as insiders to the show got to see that evidence for years, thousands of links over the years to quotes by all the fighters in this, to sec rules that were against the constitution and against many laws, we witnessed madoff and his connections to the stock market, we saw gary aguirre, annette nazerath's quotes, harvey pitts quotes, david patch and dr. byrne's websites are full of evidence, quotes from mark faulk, bud, senators, different companies pr of fighting, eagetech's evidence, the list goes on for ever.
But what is the simplest but most effective way to put in my report of the evidence against the sec is easy, we have it as a group.
I want every shareholders to get their say, to get their evidence in, to be part of the class action.
I want you to simply think of the best evidence you can find with a link and we will put it in the suit, we will make a few ammendments to the statement of claim over time as evidence comes in.
You will all have your chance, I hope you take it. You just have to in this thread and hopefully other threads that are started, give one paragraph that explains your evidence and a link, if it is real we will put it in the case. You all deserve it
This is the best opening of any case, you can't say it better than this, I and I have the evidence to back this up totally. I have the sec saying it in their meetings, and we have it when the sec says it to bill, don't create a squeeze. Well that right there is mass market manipulation at its' worst kind, and it is totally illegal, and actually just plain sad to know that is what happened.
This from bob obrien completely backs up my case:
snoopstock5:
Systemic Problem of Critical Scope - Rule 17A Sought to Prevent This
Congress mandated in Rule 17A of the 1934 Securities Exchange Act that our markets have prompt, accurate clearance and delivery. It reads, "The prompt and accurate clearance and settlement of securities transactions, including the transfer of record ownership and the safeguarding of securities and funds related thereto, are necessary for the protection of investors and persons facilitating transactions by and acting on behalf of investors.�
That seems pretty clear. BOTH clearing (booking the sale and paying for it) and settling (delivery) need to happen promptly, and further, the transfer of record ownership needs to occur. The rule makers understood the temptation to come up with a way to game this, so were clear on the necessary predicates. Clear AND Settle, including transfer of ownership.
FTD's violate that mandate. No record ownership is transferred on a stock share via an IOU. Further, none is transferred via a Stock Borrow Program "loaned" share - because if it were, then the lender would lose his ownership, which would be a sale, not a loan - so either the "loan" is a disguised sale in which record ownership IS transferred, in which case the NSCC appears to be deliberately disguising a sale by erroneously calling it a loan, or no record ownership is being transferred, in which case it violates 17A. Those are the only two choices. Neither is pretty, nor legal.
So how does the SEC allow this to go on?
They typically cite Addendum C of the NSCC's rules, which allows for the stock borrow program to loan stock to cover TEMPORARY settlement failures - the kind resulting from lost certificates. The "temporary" caveat has been ignored, and it has instead become a long-term device to create an unlimited number of electronic book entries.
They also take the position that the ex-clearing transactions are the province of contract law, as the agreements to deliver are a contractual agreement, and the SEC doesn't mediate contractual disputes. A nice way to step out of the role of regulator of the markets, and create instant deniability. The NSCC takes the same position, leaving things up to the brokers, on the honor system.
So the back offices create an unknown number of IOU's, predictably resulting in depressed prices for the afflicted securities, and the regulators say it isn't any of their business.
Systemic Risk
Because of this unbridled FTD manufacturing, a tremendous contingent liability for the industry has been created over time, as the large float of FTD's represents stock that needs to be bought back at some point in the future, but for which there is no guarantee that stock is readily available. In some instances there are reports of companies where FTD's represent multiples of the issued genuine shares.
The collateral used to secure the FTD at the NSCC is cash, but it is marked to market against the price of the stock at the end of the day, and any overage is available to the seller. This means that if the FTD was created at $20 per share, and the stock has been run down to $5 per share, the seller gets to withdraw the $15 dollar difference. This creates a dangerous situation where the system is hopelessly under-collateralized for the true risk - the shares will cost far more than their current depressed price to cover, as the depressed price is often a function of massive selling of FTD's. This is the contingent liability risk. It is likely considerable, and is ignored by the system.
This risk creates a situation where the brokerage community has a vested interest in seeing the prices of victim companies stay down once they are down, as their best customers (hedge funds) have taken out the over-collateralization dollars over the years from the FTD's, and used them to collateralize other securities - many times, more FTD's.
The most obvious way to keep the price depressed and enable everyone to continue to make money is to issue more FTD's whenever the price of a victim security starts to rise. This creates a self-fulfilling prophecy of chronic price manipulation via the issuance of FTD's.
It is likely that there is a severe leverage crisis with the hedge funds that use FTD's, as they have used borrowed funds to collateralize the initial FTD, and then used the over-collateralization to create yet more FTD's. If one of these funds was to unwind it could vaporize the assets of the fund involved virtually overnight, and create yet more systemic problems for other hedge funds as their positions rise in value, triggering more de-leveraging.
It is the classic derivative risk de-leveraging scenario wherein one or two larger funds can cause a meltdown, a la Long Term Capital Management (LTCM) in 1998, where one highly leveraged hedge fund with $2.2 billion in assets caused the entire US credit markets to shut down. LTCM was not naked short selling - they are mentioned to illustrate how one leveraged fund can endanger an entire market.
The SEC is likely aware of this risk, as it heretofore inexplicably violated SEC Rule 17A, and grandfathered in all FTD's prior to 2005, even though long term FTD's were illegal for many years prior to that date, and even though it is in violation of their Congressional mandate. Further, and perhaps more disturbing, the grandfathering rules grandfathers current FTD's below the threshold once a stock hits the Reg SHO Threshold list - market manipulators still get one free bite of the apple even on new SHO entrants - all the fails up until the company lands on the list are inexplicably grandfathered as well, even if they happened today. Wild? It's fact.
SEC Forgives Past Larceny With No Penalty - Why?
Why would the SEC grandfather all prior fails, as well as current fails below the threshold, and knowingly violate their Congressional mandate? It is akin to allowing bank robbers keep the proceeds of all prior bank robberies. There are two logical explanations available to us:
1) The SEC knows about the systemic risk FTD's cause, it is terrified of the implications, and it wanted to, at the stroke of a pen, eliminate that risk from the system, even if it violated the law and was at the expense of shareholders who had been financially decimated by the practice.
A choice was made to allow the brokers and hedge funds to keep the proceeds of their ill-gotten gains, and not require them to ever buy in the shares they had printed whole cloth.
The SEC admits it, in their own bureaucrat-ese. From the February, 2005 Euromoney article on the controversy:
The SEC's Brigagliano says the commission made a choice. "We were concerned about generating volatility where there were large pre-existing open positions, and we wanted to start afresh with new regulation, not re-write history."
Substitute the words "not enforce existing, decade-old laws" for "not re-write history" and you have the plain English version. The SEC violated 17A, knowingly, because they were worried about causing "volatility" - SEC-speak for short squeezes, where stocks with millions of FTD's go through the roof as they are bought in - essentially a return of capital to those damaged by the FTD's, as their cash is returned to them, in return for selling their genuine shares. That would be the fair way equitable markets would work - those who had made untold billions using FTD's would have to pay most or all of it back in short squeezes, as legitimate supply and demand are returned to an unbalanced market (because of the current artificial supply of FTD's).
The SEC was apparently so concerned about that "volatility", that their solution was to give the violators a free pass, and allow the damaged shareholders and companies to remain damaged in perpetuity, never settling nor having record ownership transferred. This decision underscores the likelihood that the SEC understands the systemic risk years of FTD creation have created, and will go to great lengths to avoid triggering an event that would cause the violators to have to settle the trades.
A more cynical interpretation is that the SEC didn't want to cause undue financial hardship for the more politically and financially important violators (the violators would likely be both, as they had years of selling non-existent shares with which to build and solidify their financial importance - and to spread the wealth by supporting their elected officials with contributions), choosing instead to lock in the industry's illegally generated profits, rather than have the violators pay it back - the SEC favored the hedge funds and brokers that had violated the law, over the shareholders and companies that had been brutalized by the practice.
2) The far more ominous logical explanation is that the SEC grandfathered not out of concern for the system, but rather to limit its own liability under the law - that after years of permitting felony short selling/securities fraud manipulation, the SEC ultimately came to realize that it had committed collateral crimes, and could be held accountable - as accessories to the felonies. This explanation posits that in passing Regulation SHO, the SEC wasn�t just grandfathering the previous illegal short selling to protect the short sellers, but rather it was, much more importantly, protecting the SEC itself. And it focused the ire of the victims on the rule violators who financially benefitted, rather than upon the regulator that had permitted the felonious activity for years.
The legal argument would go like this (simplified): The felony committed and suborned in this situation is USC 18, Title 514, the commission of counterfeiting of a commercial security, a Class B Federal Felony. By permitting this felony to be an endemic part of the modern market system, and by knowingly failing to enforce rules designed to prevent counterfeiting of a commercial security, the SEC aided and abetted those who have done so, subjecting it to risk of civil and criminal redress. The permission of a large float of FTD's to be part of the markets is a de facto permission of counterfeiting (wherein the bogus IOU/Markers are represented as and have the effect of legitimate stock shares, on the auction price of the security as well as on the long term size of the float), and thus creates an accessory risk for the Commission. Arguments have been advanced that, as in the Elgindy case, naked short selling was used for money laundering for Middle Eastern arms dealers, thus constituting treason during a time of war (according to the Patriot Act), a Class A Felony - that the Commission was ignorant of the outcome of its permitting the counterfeiting does not absolve it of the legal jeopardy arising from that outcome, any more than the driver of a getaway car in a bank robbery is absolved of the murder of a teller during the robbery - even though he was ignorant of the ultimate crime committed. That is not how the law works.
Note that I take no position as to the likelihood of this second explanation being correct. It is a credible explanation advanced by several experts familiar with the legal ramifications of allowing FTD's to remain in the system in perpetuity, and failing to enforce rules designed to stop larcenous action, nothing more.
FWIW, it is far more likely that the SEC folks understand that upon retirement they will receive $700 per hour jobs with top lawfirms representing Wall Street, and that knowing this they are much more likely to favor Wall Street's interests. Most agencies of the Government have the conceit that comes from unbridled power, and it is hard to imagine Federal employees actually afraid of liability for anything. Thus, the second explanation is a hard one to swallow.
But whatever the motivation, charitable or cynical, you arrive at the same effective point: Years of lawless predation were pardoned (in violation of 17A's Congressional mandate), the profits kept by the criminals, with no penalty or sanctions imposed - leaving investors and the victimized companies out of luck, and money.
So what about now?
Since the new FTD rule was passed (Regulation SHO, for SHOrt) and went into effect January, 2005, more companies have gone onto the Threshold list (a list of companies whose FTD's exceed a "threshold" of 10,000 shares AND 1/2% of their total issued shares), and more FTD's have been created. The industry can't help itself (and truthfully why would they?) - it is just too lucrative to ignore the un-enforced rules, and continue to manufacture IOU's. The systemic risk continues to build, and the regulators that hoped the industry would heal itself are left unwilling or unable to act - the imperative to create fair markets is clearly subordinate to pandering to the financial well being of the violators.
The DTCC and the SEC take the position that information about this crisis is proprietary and secret, and that our elected officials and companies and we shareholders have no need or right to know the true parameters of the problem. The workings of the machine are opaque, and transparency is derided as an unnecessary invasion of the industry's privacy.
Again, the charitable explanation for this stance is because they want to avoid a potentially damaging meltdown (albeit of their own creation). The cynical explanation is that investors would riot in the streets or abandon the market if they understood what was being done to them, and would hold the SEC accountable for their role in it. Regardless of the explanation that one feels best explains the SEC and the DTCC's actions, what is unarguable is that the size, scope, and ongoing treatment of the crisis is top secret.
This is very much like the way the regulators handled the S&L crisis, allowing a large systemic problem to develop into a catastrophic systemic problem that wound up costing hundreds of billions of dollars, and every man, woman and child in the US about $2K in taxes. We are still paying for it today.
In that episode, the S&L's accounted for about a third of all the business Wall Street did in the 80's, and every big house stuffed the most larcenous of the S&L's with untold billions of junk bonds and options and precarious loans, knowing and understanding that the American taxpayer would ultimately have to pay the freight via secured deposits. Wall Street was assisted in this wholesale looting of the financial system by every major accounting firm in existence, and the most prominent attorneys in the country. Fraud of a mind boggling scale was perpetrated and perpetuated by that industry, and one of the primary beneficiaries was Wall Street, who that time also got to keep the money, laying off the blame on the S&L's. This time around we have hedge funds comprising over 50% of Wall Street's action, and we as a nation seem to have learned nothing from our prior fleecing. One can't understand that catastrophe and not draw striking parallels to this situation.
In fact, the entire FTD crisis is very similar to the S&L crisis, in the sense that staggering amounts of money are in play, private interests are operating in an unregulated environment (hedge funds and ex-clearing), leverage is being employed to compound the risk, Wall Street wunderkind are making preposterous profits, phenomenally wealthy players are receiving preferential treatment even as they knowingly violate the law, Greenspan is saying that no restrictive regulation is required, the industry is protesting that there is no problem, and the entire affair is taking place shrouded in secrecy.
That didn't end well.
The above is simplified, and is conceptual, as in reality there is no single share followed through the system - there are debits and credits to participant accounts at the NSCC, which are netted against total long positions, further obfuscating the mechanisms. But the fundamentals are accurate, if lacking in a certain specificity that could fill volumes. Hopefully it is enough for the reader to grasp the issue and the scope thereof.
* From "Symphony of Greed - Financial Terrorism and Super-Crime on Wall Street", by Bob O'Brien, in progress. Interested literary agents or publishers are encouraged to contact Bob at NCANS.mgr@gmail.com
www.ncans.net/intro%20to%20naked%20short%20selling.htm
tell me this isn't evidence, we can put together the most air tight case ever, we can be heard
please add your best evidence and your internet name or anonymous, but please add, it is vital the people are heard in my case, it is by the people!
cheers
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scruffy2
DIAMOND JEDI WARLORD
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Joined: Jan 2007
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