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Article: The DTCC’s CNS naked short selling residue

Article - Media

The DTCC’s CNS naked short selling residue

Patrick Byrne

DeepCapture, 1 December 2008

In a previous post I named various places where unsettled trades can accumulate: in the desks of brokers, in pre-netting among brokers, in the Continuous Net Settlement (CNS) system, in the Stock Borrow Program (SBP), through ex-clearing, and in delivery mechanisms from offshore exchanges. For all I know, these represent just a subset of the cracks in the system. The great unanswered question is, How much financial toxic waste has naked short selling and its various equivalents left scattered throughout these cracks?

The answer is: I don’t know, and I think no one knows. I suspect no one agent has the full picture of what is going on across all of these cracks. In fact, I suspect some of these cracks are so obscure no one has a clear picture of what is going on in them individually, let alone collectively.

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Article: Goldman Targeted by Investor Complaints of Naked Short-Selling

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Goldman Targeted by Investor Complaints of Naked Short-Selling

Pierre Paulden, Caroline  Salas

Bloomberg, 17 November 2008

Investors in the $591 billion high-yield, high-risk loan market are accusing Goldman Sachs Group Inc. of naked short selling to profit from record price declines.

At least two fund managers complained verbally to officials of the Loan Syndications and Trading Association, saying they believe Goldman helped drive down prices by using the technique, according to people with knowledge of the objections. New York- based Goldman is acting against its clients by trying to profit at their expense, the investors said.

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Article: Naked Shorting Under Scrutiny

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Naked Shorting Under Scrutiny

Traders Magazine, 11 November 2008

Regulators are clamping down on broker-dealers that violate naked short-sale rules. Both New York Stock Exchange Regulation and the Financial Industry Regulatory Authority are making it a point to closely scrutinize brokers’ stock-loan practices. If they find brokers are not complying with rules targeting failures to deliver, they are penalizing them.

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Article: Fed Defies Transparency Aim in Refusal to Disclose

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Fed Defies Transparency Aim in Refusal to Disclose

Mark Pittman, Bob  Ivry, Alison Fitzgerald

Bloomberg cited by Yonkers Tribune

The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral.

Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson said in September they would comply with congressional demands for transparency in a $700 billion bailout of the banking system. Two months later, as the Fed lends far more than that in separate rescue programs that didn’t require approval by Congress, Americans have no idea where their money is going or what securities the banks are pledging in return.

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Article: The SEC bans naked short selling

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The SEC bans naked short selling

Daniel Dex, Tom Hameki

McMillian LLP, 5 November 2008

September’s upheaval in the financial markets prompted international securities regulators, led by the United States Securities and Exchange Commission (SEC), to adopt emergency restrictions on short selling of certain financial stocks. The SEC also enacted emergency measures that effectively banned “naked” short-selling of all equity securities. In support of the SEC’s measures and to avoid regulatory arbitrage, the United Kingdom’s Financial Services Authority and some Canadian regulators also implemented emergency restrictions on short selling of certain financial stocks. In October, the U.S. and Canadian emergency measures against short sales of financial stocks were allowed to expire, but the SEC took further action to extend its restrictions against naked short sales.

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Article: Crisis of Convenience for Roiling SEC

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Crisis of Convenience for Roiling SEC

David Patch

InvestigateTheSEC.com via Wayback, 30 October 2008

To say that support for the Securities and Exchange Commission is at an all time low would be an understatement. With Congressional Investigations into the agencies handling of critical investigations and recent reports out of the Office of Inspector General, investors are left guessing as to what exactly the agency is doing to police our markets. Heck, even a presidential candidate has suggested that the SEC Chairman should be fired and it was his party that hired him.

Access archived page.

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Article: Japan Cracks Down on Naked Short Selling

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Japan Cracks Down on Naked Short Selling

Takashi Nakamichi, Ayai Tomisawa

The Wall Street Journal, 28 October 2008

Japan moved Tuesday imposed new restrictions on so-called “naked” short selling of stocks, stepping up its efforts to arrest the tumble in domestic share prices.

The Tokyo Stock Exchange has asked member brokers to stop accepting naked short-sell orders, TSE President Atsushi Saito told a news conference.

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Article: Deutsche Bank Sold Massive Amounts of Phantom Stock

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Deutsche Bank Sold Massive Amounts of Phantom Stock

Mark Mitchell

DeepCapture, 14 October 2008

A couple of days before Lehman fell and all hell broke loose on Wall Street, Floyd Norris, the chief business correspondent of The New York Times, published a blog (headline: “Short Sale Conspiracies”) wherein he implied that I was mentally insane for suggesting that Deutsche Bank Securities had been caught selling “massive amounts of phantom stock.”

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Letter: Michael Kushner to Legislators

Letter

Michael Kushner to Legislators

Michael Kushner

11 October 2008

The economic problems we are facing have more than one cause. There is an elephant in the room and nobody is saying a word. The financial collapse that resulted in a 2.5 billion-dollar tax payer bail out is not only a result of greed and mismanagement in the sub -a prime mortgage lending market, but is a direct result of hedge funds forcing 16% of listed companies into bankruptcy this year through unregulated criminal naked shorting, shorting with insider information, and criminal programed trading.

PDF (16 pages): Michael Kushner to Legislators

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Article: Dick Fuld’s Vendetta Against Short-Sellers—and Goldman Sachs

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Dick Fuld’s Vendetta Against Short-Sellers—and Goldman Sachs

Heidi N. Moore

Wall Street Journal, 7 October 2008

Fuld didn’t let up on his hatred for short-sellers–primarily David Einhorn–even after his company filed for bankruptcy last month, and he believed the shorts were part of a cabal driven by Goldman Sachs Group.

In April, Fuld reported back to general counsel Thomas Russo about a dinner with Treasury Secretary Hank Paulson that Lehman had a “huge brand with treasury,” which “loved our capital raise” and, in perhaps an oblique reference to short-sellers, that Treasury “want to kill the bad HFnds + heavily regulate the rest.”

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Article: Cox’s SEC Censors Report on Bear Stearns Collapse

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Cox’s SEC Censors Report on Bear Stearns Collapse

Mark Pittman, Elliot Blair Smith, Jesse Westbrook

Bloomberg cited by RGM Communications via Wayback, 7 October 2008

U.S. Securities and Exchange Commission Chairman Christopher Cox’s regulators stood by as shrinking capital ratios and growing subprime holdings led to the collapse of Bear Stearns Cos., according to an unedited version of a study by the agency’s inspector general.

The report, by Inspector General H. David Kotz, was requested by Senator Charles Grassley to examine the role of regulators prior to the firm’s collapse in March. Before it was released to the public on Sept. 26, Kotz deleted 136 references, many detailing SEC memos, meetings or comments, at the request of the agency’s Division of Trading and Markets that oversees investment banks.

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Article: SEC Gave “Preferential Treatment” to Wall Street CEO

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SEC Gave “Preferential Treatment” to Wall Street CEO

Brian Ross, Rhonda Schwartz

abc News, 6 October 2008

The SEC gave “preferential treatment” to Wall Street executive John Mack during an insider trading investigation three years ago because Mack was about to become CEO of the Morgan Stanley investment banking firm, the SEC’s inspector general concluded in a report obtained by ABC News.

The report recommended disciplinary action against the SEC’s chief of enforcement, Linda Thomson, and said the firing of an SEC lawyer was “connected” to his persistent attempts to take Mack’s testimony. Read the report’s conclusion and recommendations here.

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Article: Fuld says Lehman victim of short sellers

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Fuld says Lehman victim of short sellers

Stephanie Kirchgaessner and Greg Farrell

Financial Times, 2 October 2008

Dick Fuld, Lehman Brothers’ chief executive, broke his silence on the collapse of his bank by telling a congressional committee on Monday that he would go to his grave wondering why the US government opted to save AIG but allowed Lehman to fail.

Three weeks after the 158-year-old firm sought bankruptcy protection – the largest such filing in US history – Mr Fuld blamed Lehman’s collapse on a plague of naked short selling, and said in response to a question that he had no idea why US regulators would judge his company unworthy of a federal bail-out.

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Article: The Naked Short Selling That Toppled Wall Street

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The Naked Short Selling That Toppled Wall Street

Mark Mitchell

DeepCapture, 2 October 2008

The Wall Street Journal stated in a lead editorial last week that the SEC was “reasonable” to “clamp down” on naked short selling. Well, that was progress of sorts, though one wonders how it could have taken all these years for the nation’s most important newspaper to suggest that it might be “reasonable” to put an end to criminal activity that has eviscerated hundreds of companies and destroyed countless lives.

And now that this criminal activity has been implicated in the Humpty Dumptying of our financial system, one grows wistful for the golden age of journalism when editorialists (people working for famous newspapers, not just cyber weirdos) would express a little outrage, demand that heads roll – muster something better than “reasonable” to describe the limpid “clamp down” of an SEC that bows in oily servitude to the very short-sellers who manhandled our markets.

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Article: Emails show journalist rigged Wikipedia’s naked shorts

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Emails show journalist rigged Wikipedia’s naked shorts

Cade Metz

The Register, 1 October 2008

Two and a half years ago, Overstock.com CEO Patrick Byrne penned an editorial for The Wall Street Journal, warning that widespread stock manipulation schemes – including abusive naked short selling – were threatening the health of America’s financial markets. But it wasn’t published.

“An editor at The Journal asked me to write it, and I told him he wouldn’t be allowed to publish it,” Byrne says. “He insisted that only he controlled what was printed on the editorial page, so I wrote it. Then, after a few days, he got back to me and said ‘It appears I can’t run this or anything else you write.'”

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