The Real AIG Scandal: How the Game is Rigged at Wall Street’s Casino
AlterNet, 26 March 2009
There’s nothing like a grandstanding member of Congress to deflect attention from the real issues at hand by throwing a few juicy bones to the masses. Most legislators at a House Finance subcommittee hearing last week deftly avoided the real story of AIG’s collapse. Instead, they homed in on the public relations disaster of hundreds of top AIG officials and staff getting $165 million (later revealed as over $218 million) in bonuses.
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Save The Billionaire Short-Sellers!
Forbes, 24 March 2009
My, oh my. Here is a shocker. James Chanos, the billionaire short-seller, opposes any reforms that would tilt the stock market away from shorting selling. Here is his argument. Not surprisingly, Chanos, whose firm Kynikos means “cynic” in Greek, leaves out all the recent history that has made short-selling so lucrative. Such as:
3. Naked short-selling. Cox’s SEC failed to enforce its own rule against naked short-selling. Again, Wikipedia: “Naked short-selling, or naked shorting, is a type of financial speculation. It is the practice of selling a stock short, without first borrowing the shares or ensuring that the shares can be borrowed, as is done in a conventional short sale. When the seller does not obtain the shares within the required time frame, the result is known as a “fail to deliver.” The transaction generally remains open until the shares are acquired by the seller or the seller’s broker, allowing the trade to be settled. Naked short-selling can be used to manipulate the price of securities by driving their price down, and its use in this way is illegal. … Some commentators have contended that despite regulations, naked shorting is widespread and that the SEC regulations are poorly enforced. The SEC has denied these claims. However, the SEC and others have also defended the practice in limited form as beneficial for market liquidity. Its critics have contended that the practice is susceptible to abuse, can be damaging to targeted companies struggling to raise capital, and has led to numerous bankruptcies.”
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Naked short sales hint fraud in bringing down Lehman
Bloomberg, 22 March 2009
The biggest bankruptcy in history might have been avoided if Wall Street had been prevented from practicing one of its darkest arts. As Lehman Brothers Holdings Inc struggled to survive last year, as many as 32.8 million shares in the company were sold and not delivered to buyers on time as of September 11, according to data compiled by the Securities and Exchange Commission and Bloomberg. That was a more than 57-fold increase over the prior years peak of 567,518 failed trades on July 30. The SEC has linked such so-called fails-to-deliver to naked short selling, a strategy that can be used to manipulate markets. A fail-to-deliver is a trade that doesn’t settle within three days. We had another word for this in Brooklyn, said Harvey Pitt, a former SEC chairman. The word was fraud.
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Editor: bottom line up front: SEC does not “do” complaints and considers naked short selling to be legal and generally contributing to “liquidity,”
Practices Related to Naked Short Selling Complaints and Referrals
Naked short selling has been a controversial practice for several years and, while not illegal per se, abusive or manipulative naked short selling (e.g., intentionally failing to borrow and deliver shares sold short in order to drive down the stock price) violates the federal securities laws.
The prior GAO audit found that Enforcement’s system for receiving and tracking referrals from the Self-Regulatory Organizations (SRO) needed improvements and recommended enhancements that would facilitate the monitoring and analysis of trend information and case activities.
Continue reading “Report: SEC IG Practices Related to Naked Short Selling Complaints and Referrals”
Alexis Brown Stoke, Associate Professor of Finance & Economics at Texas State University, earned her Bachelor of Arts in Economics, Political Science, and Managerial Studies, cum laude, from Rice University, and her Juris Doctorate from Harvard Law School, where she served as president and editor-in-chief of the Harvard Journal on Legislation.
Continue reading “Academic: Alexis Brown Stokes”
In Pursuit of the Naked Short
Alexis Stokes, Texas State University
Journal of Law and Business 5/1 (Spring 2009)
This article explores the origins of naked short-selling litigation; considers
the failures of significant naked short-selling lawsuits in federal court;
surveys the obstacles erected collectively by constitutional standing requirements, the Federal Rules of Civil Procedure, the Private Securities Litigation Reform Act, brokerage firms, death spiral financiers, and the Depository Trust and Clearing Corporation; examines the efficacy of Regulation SHO, SEC rule 10b-21, and new FINRA rules; discusses recent state legislation and state court litigation; and identifies non-litigation options to curb naked short-selling. Ultimately, this article seeks to answer the question: If manipulative naked short-selling is more than a mythological scapegoat for
small cap failure, what remedies are, or should be, available?
PDF (62 Pages): Article In Pursuit of the Naked Short
Jim Cramer Called Onto The Carpet By Jon Stewart
Sanity Check via Wayback, 13 March 2009
Everyone needs to watch these three segments of the Jon Stewart show. They are remarkable, because they show an intelligent, reasoned man confronting the intellectual dishonesty, if not larceny, that is financial reporting in America.
What makes them so remarkable is that Stewart is not a top economist, nor a seasoned DA, nor an expert on financial markets, nor a skilled attorney. He’s a comedian. He makes funny remarks about things, and mocks the world, and is generally hysterically funny in his efforts.
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Jim Cramer knows how easy CNBC is to fool. He used to play the network himself. Here are five episodes from the stock speculator’s past that could use some dusting off.
Cramer avoided any career-ending gaffes on the Daily Show last night — like say, “when a performing monkey pundit does it that means that it is not illegal!”
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Random Musings On The End Of The American Experiment
Sanity Check via Wayback, 6 March 2009
I think the defining moment for me was when Bernanke responded to the question from Congress, as to whether the American people (and their elected representatives in Congress) would be told to whom all their tax dollars have been given or lent. That single word summed it up perfectly for me: “No.”
Any illusions that the money trust in the US, that collection of bankers and hedge fund managers and industrialists who are the beneficiaries of the systematic looting of the Treasury under the current “emergency” measures, is going to do anything other than precisely whatever it likes, or is going to report to those being looted, was dispelled at that moment. Likewise, nobody has been able to articulate why the massive swindle at AIG continues to be subsidized by our tax dollars – but again, no reporting on where those dollars are going will be forthcoming.
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Jim Cramer Uses CNBC to Manipulate Stocks
I’ve been waiting for a good time to bring this story to Daily Kos and, since it’s CNBC day (or week hopefully), I figured now would be a good time.
By now, everyone should have heard about the ongoing war that CNBC is waging against the Obama administration and its plans revamp the economy. From it’s constant anti-Obama propaganda and commentary to its shady PR stunt to manufacture a bogus uprising against Obama’s mortgage plan, CNBC has been working overtime as a propaganda front against the Obama agenda.
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