May 11, 2008
Elaine Meinel Supkis
A reader kindly sent me a new link, 'Deepcapture.com' which is a site run by a businessman who believes that the phantom financial world of naked short sellers in the hedge fund pirate/hell hound high seas has defrauded himself and other business people. To explore this story means plunging deep into the darker pools of finance, news reporting and downright demonic affairs with everyone pointing fingers at each other. There are no 'good' people in this story. But lots of lost souls and quite a few swindlers not to mention outright criminals, corrupt politicians and the many despicable follies and wild games of the people who are the bleeding heart at the center of our financial world. Like the DTCC, the organization originally set up to transfer ownership of stocks! All are now in this bizarre universe where there are many secret portals, secret chambers and invisible monsters that destroy or create wealth.
The easiest way to figure out what is going on is to first watch this Bloomberg TV story. Bloomberg is by far, one of the least biased or outright fraudulent of the mainstream business news services today. Now that Murdoch has bought the Wall Street Journal, even the little sanity there has vanished.
Bloomberg News story From March 13, 2007,about phantom share sales:
It turns out, more than one media service like NBC or ABC has tried to cover this controversial story launched by the owner of Overstock.com, Mr. Byrne and the former editor of the business section of the Columbia School of Journalism's publications, Mark Mitchell. All the other media got cold feet or rather, realized their very best friends were in the bleeding core of this dark story, they all bailed. But not Bloomberg. In this video, we meet the head of Kynicos, a hedge fund whose Greek name means 'Cynical'. He, of course, considers this issue about using phantom stocks to 'short', stocks that are made out of thin air, to be so much immaterial junk, why would anyone notice this multi-billion dollar daily error rate? For this is what 'naked shorts' are: mistakes. At least, that is the story. Yes, whenever in business we encounter 'mistakes' that make the mistaken ones lots and lots of money, we are seeing 'fraud'. I remember over the years many a battle with billing agents who made, nearly universally, mistakes in their own favor. While cleaning up the messes they created, they would invariably demand I pay them first!
Nuts to that! Then I make a threat of going to the company headquarters in Manhattan and making tremendous noise while screaming about their stupid mistakes. Usually, they settle very quickly with me. Once in a blue moon, some corporation would take me up on this and I would show up in a full raging fury, shouting from the subway entrance, into the elevators and down the halls and past all the receptionists and onwards, not paying the slightest attention to anyone trying to stop me.
A typical line: 'Go ahead and arrest me! This will BE IN THE NEWS!!!' And of course, back then in the old days, they would retreat and do as I ask. Not bill me until they fix their own mistakes. This mentality is rampant in business for there is no better way to get one's paws on someone else's money than to keep making 'mistakes' that allow one to use or access someone else's money! Nothing is better than that! Not even playing gambling games on borrowed money! The only thing better is to be a mugger who is the son of the mayor or chief of police.
Being muggers, the people who play the naked shorts that take advantage of stock ownership being 'in limbo' usually focus their activities on weaker stocks in trouble already. So if they tank, no one notices that 50% or more of the outstanding stocks being traded downwards DON'T EVEN EXIST. They are made up, like all things in the Derivative Beast's universe, out of thin air. Like money itself. The actions of these fake stocks have real effects. But tracing them when a company goes bankrupt is very hard and no one really bothers! So the hell hounds and pirates troll the information stream by hanging out with their buddies in the media, seeking organizations that are going to go belly up, anyhow. Then they pile in and make some loot off of this, while not ONCE, owning any actual stocks.
Why is this? Simple: if they OWNED stocks, they might LOSE MONEY when the victim goes belly up! But if they never owned any stocks at all and are simply riding on phantom stocks that are the result of the organization set up to process the ownership of stocks, they might get some free loot with no strings attached and no one the wiser! Elegant and easy. And ILLEGAL. Now, let us visit 'Deep Capture.com' and it is an interesting read from the time but very time consuming so I will talk about only one aspect of all this:
The Story of Deep Capture - by Mark Mitchell
It is also important to recognize the role of The Depository Trust and Clearing Corporation (DTCC), an organization headquartered in New York City. DTCC is where stock trades are processed — more than $1.5 quadrillion worth of them every year. That’s 30 times larger than the entire gross product of the entire planet. According to the Wikipedia entry on the DTCC, authored largely by Gary Weiss, the DTCC “streamlines processes that are critical to the safety and soundness of the world’s capital markets.”Indeed, the DTCC is one of the world’s most important financial institutions. But what the Wikipedia entry does not mention is that the DTCC is one of the least transparent organizations on earth. No joke: America’s founding fathers would take up arms if they knew that anything like the DTCC could exist in this country. There are funds exceeding 30 times global output flowing through a sealed black box that is not understood even by the SEC officials who are supposed to regulate it.
One former SEC official describes his colleagues visiting the DTCC and asking, “So, what is it you guys do here, again?” A former DTCC employee confirms that the SEC would occasionally send junior people, and summarizes their oversight as follows: “The SEC staffers would say, ‘What do you do?’ and ‘How do you do it?’ After we would explain to the SEC folks what the DTCC did, the SEC people would say, ‘OK, are you doing it?’” These meetings would occur about once per year, and take no more than two or three hours. That was the oversight provided by regulators to the sealed black box corporation through which 30 times the economic output of the entire world flows.
Because the DTCC processes every short sale, it knows which brokers have hedge fund clients that are selling stock and not delivering it. The organization also knows precisely how much phantom stock is circulating in at least one part of the system (additional phantom stock is created outside the DTCC, or “ex-clearing”). Yet, perhaps because it is “user owned” - that is, it is owned and operated by the very Wall Street brokerages that sell the phantom stock - the DTCC refuses to release any information.
Meanwhile, the organization leads an energetic public relations campaign denying that phantom stock is a problem. It sics lawyers and a pit bull flack named Stuart Z. Goldstein on journalists who attempt to report on the subject. The few journalists who have managed to secure an interview with a DTCC official describe having to pass through a security cordon of machine-gun wielding guards, X-ray machines, and written questionnaires.
So, what is the DTCC? A crypt! A hiding place for invisible things! The place where ALL THE DERIVATIVE CONTRACTS ARE PROCESSED! HAHAHA.
What does the Cave of Wealth look like? We always have to answer this question when reading anything about the systems we depend on to create or regulate the flow of 'wealth'. Stocks and bonds are pieces of paper that are processed by humans and computers. Their relative level of wealth is very uncertain and shifts like the desert sands in the sighing night winds. The guardians of these various chambers in the Cave of Wealth call themselves 'wizards'. They know they are dealing with magical things and via joint efforts can assign values and purpose to all that they control. These wizards are supposed to be the gatekeepers who protect our joint wealth.
But they are sly and self-centered. They love to rig things and do riddles and such. They are also prone to playing games with gods and dragons. Always greedy and seeking some advantage over the masses of humans and giants working up above in the sunshine, these wizards hammer away in the darkness, seeking errors to exploit. They hope that gullible humans would say, 'Oh, you made a mistake,' or 'It takes you five days to process my check?' etc. I am old enough to remember the pre-DTCC days when stock certificates had to be moved from one broker to another. My previous husband had summer jobs working on Wall Street as a courier carrying these pieces of paper from broker to broker. He would go to the outer edges of the trading floor and wait to be called by a frantic trader and then would run off with a scrap of paper to some broker's office. A guy with the legendary green eyeshades would fetch the appropriate stocks from a big, fancy safe with lots of gold trim and pass it through a grill and he would have to sign off and put it in a pouch and physically carry it to the destination where the process was reversed. This took so much time, by the end of the day, there were stocks still not finished with this fetch and carry.
Eventually, during the run up to the big stock crash that ushered in the stagflation years where stocks were flatter than a pancake on a hot tin roof, every Wednesday the market had to close! Totally shut down so the young boys could run back and forth and finish moving stocks to their rightful owners who paid for them. Well, the Big Brains in charge of things said to the governing board, 'Let's build a house of bricks and the Big Bad Wednesday Wolf who shuts us down every week will huff and puff and we can still trade stocks!' So they built this big, brick and marble tower and locked the doors and not even young men wishing to get a start on Wall Street ever touched a piece of paper being traded again.
And when this new system happened, did the time lag between buying a stock and ACTUALLY GETTING IT vanish? HAHAHA. Being greedy, vicious monsters seeking eternal wealth with no labor or even ownership, the guys who set up this system said to each other, 'Those foolish humans and working giants are stupid. We will tell them that even though ALL the stocks are held now in our new brick and marble tower that looks like the Cave of Death, we will pretend that it STILL takes DAYS AND DAYS to process the paperwork and settle affairs! HAHAHA.' So they continued to pretend that it took at least 3 or more days to move the actual stocks into the hands of the actual buyers. Just like bankers, when computers removed all need to process mere 'money', pretend to this very day, it takes them several days to communicate with other computers that have electronic 01010s. Why, they have to use boys like 100 years ago to carry the bags to the front door and the the Brinks guards have to carry it to the other banks, etc! HAHAHA. Of course not. But it is a great fiction that allows banks to use our money for a few days on the overnight LIBOR markets which is yet another ancient thing that used to take time and now takes only a micro second to operate.
We see a pattern here: upgrade and modernize, speed things up to light speed or faster while at the same time, tell all the people being ripped off that the system is very slow and ancient and has many barriers to speed. Then, exploit this time frame ruthlessly to enrich the people who are 'in the know.' How simple is this? And it is also fraud, a swindle and totally evil. Thus, the childish glee this gives the wizards pulling off these tricks.
So the story here is about how the regulators of the stock markets who happen to all be PIRATES and RIP OFF ARTISTS have fixed flaws in the system so it gives them this open door in time and space which they may exploit to line their own pockets. This is why they have to be SECRETIVE about the entire thing! They have to prevent anyone from figuring out their system. They spend many, many billions of dollars buying off politicians or better still, being the rulers themselves. They must insure that no one from the outside interferes with their systems. This is why we must ask, 'Where did the Clintons get their $125 million in just 7 years after leaving office?' The list of buddies is long and coincides with the list of the wizards who run things. Obama is breaking into the system so he is being reeled in the exact same way. McCain was born inside the system as was his wife.
From Deep Capture.com:
As the media whines about the SEC’s investigation of Gradient being a violation of the First Amendment right to free speech, Rod Young, CEO of a telecom company called Eagletech, argues that the SEC has violated Fifth Amendment property rights by “grandfathering” the undelivered stock of all the companies on the SEC’s Reg SHO victim list. At this point, phantom stock is “pervasive” or “under control” depending on which SEC official is speaking. Either way, the agency has listed more than 300 companies whose stock has been sold and not delivered in excessive quantities.And to add insult to injury, it has “grandfathered” much of that stock, saying that anything sold before January 2005 doesn’t have to be delivered - ever. The SEC says it is allowing this phantom stock to remain in the system because forcing delivery of real stock would cause “excessive volatility from large preexisting open positions.” So on the one hand, the official policy of the SEC is that it has naked short selling under control. On the other hand, it seems to believe there is so much phantom stock in the system that there would be market chaos if it were to actually do something about it.
As many, many billions, nay, trillions of dollars vanish into thin air, we look at this other mess and see the same thing: our government's main aim is to make all the Funny Money™ as well as the Phantom Wealth™ remains or becomes actual dollar bills or Treasury bonds. The central bankers know that the more this stuff vanishes, the more the entire banking system collapses. So they try to make even total frauds become 'rationalized' or 'real'. So if it is discovered that a pile of CDOs are all worthless, the central bankers can declare them full value except maybe minus a small 'hair cut' which reduced the Phantom Wealth™ by say, 20% before the rest is converted into dollars. These dollars become 'inflation' since they are not expressing either real wealth or labor. As we see, the entire planet is suffering from inflation caused by this system.
The SEC, seeing that the three day lag for stocks has grown to sometimes a 600 day lag, they have decided all these fake stocks stuck in limbo should be given authenticity and declared real. Just like governments accepting counterfeits as real. This is inflationary, of course. They dare not paint lead bricks with gold paint and then tell us, these are real gold ingots. So this is identical but so 'mysterious', it being magical, we must accept this. Just like the new window the Fed opened: it leads directly into the Outer Darkness and the money that gushes out, first in small amounts as the bankers said they were 'testing' the new window to see if we panic. Now out comes fabulous billions and the bankers are swiftly shifting ALL their wretched paper to the central bank where it will lie in a dark, evil Cave of Death and not see the light of day again. This SEC solution to the dark pools of fake stocks is the same thing. Instead of arresting the people running the DTCC and stringing them up along Broadway or shooting them at Yankee Stadium or enrolling them in a Chinese reeducation camp in Tibet, the people who perpetrated this fraud are running the system still. Just like Bush has not been arrested for Crimes Against Humanity.
The guys gaming this system should be forced to go back to the old days when they could not claim ownership of a stock while it was in transit. THERE IS NO TRANSIT. Since it doesn't move at all, much less across Broadway and Wall Street, they should have 'right on time delivery' of less than a minute. If Walmart can do this, they can too. Let's look at attempts to fix this obvious con game:
A Silent Lynch Mob - An Open Letter From Rod Young
Eagletech has alleged in its affirmative defenses that the SEC has illegally taken the property of shareholder’s in violation of the 5th amendment to the U.S. Constitution. By ‘Grandfathering’ pre-regulation SHO delivery failures this agency of our Federal Government has conducted an ‘inverse taking’ of shareholder’s property without due process and without compensation when ‘Grandfathering’ suspended the settlement process which they are mandated to maintain in the Securities Exchange Act of 1934. By Grandfathering and then by De-registering Eagletech shares the SEC has taken shareholder’s property and given it to the criminal perpetrators who have sold counterfeit shares to the public with no intention of, and now no requirement to ever deliver them.To everyone’s astonishment Administrative Law Judge Kelly gave leave to appeal his decision on this theory (see pages 4 and 5 of his opinion attached to this email).
The SEC’s Enforcement Division has chosen to blatantly ignore evidence of criminal Naked Short Selling misconduct and instead has chosen to sweep the crimes under the rug by De-Registering the Company’s stock. Eagletech has provided to the SEC the following evidence of criminal misconduct:
[List of charges against how the SEC handled the naked short selling scandal vis a vis Eagletech Communications]
17. Grandfathering! The SEC didn’t have the courage to make it a part of regulation SHO. Even they know how much it smells! They leaked it to the press in late December 2004 to an uproar of detractors, many of them still calling for a Constitutional test of their authority to suspend the settlement portion of their Congressional mandate to oversee the maintenance of an efficient clearing and settlement system. To the SEC and the DTCC efficient means de-materialization. De-materialization without transparency (access to short sale data) would be the final step in the perfect crime. I don’t know who to quote, reportedly somebody at NASAA said “Over my Dead Body.” Boo-Yaa!
18. Which brings us back to the subject of this appeal before the Commission; every shareholder of any Company in America who purchased shares and can not get delivery has a cause of action against the SEC as an agency of the U.S. Federal Government for violation of their 5th Amendment Constitutional property rights. An action brought as a Constitutional Tort under the ‘Federal Tort Claims Act’ in multiple Federal District Courts across the country is governed by the State eminent domain law where the shareholder’s property was taken (your home state). There is a multitude of case law in every state in the Union covering illegal inverse taking of property by Governments and their agencies. The governments successful defense using the discretionary exemption from Tort Claims in most cases since the 1947 case ‘Elizabeth Dalehite, et al. v. United States’ does not apply here. The SEC does not have discretion to suspend the settlement process (Grandfathering), even temporarily as they claim. The bottom line is they are vulnerable here. An agency with a strained budget, 1,500 mostly inexperienced attorneys, that brings 500 new enforcement actions per year would crack under the burden of 50 or 100 or 500 Constitutional Tort cases brought against it. The real benefit of such cases would be court ordered discovery of the short selling data that the SEC routinely denies shareholders, issuers and the media, under FOIA (Freedom of Information Act). The first survival of a motion to dismiss could alter the landscape.
Some companies have discovered to their horror, there are literally MILLIONS of their own stock that is owned by PIRATES who have NEVER PAID A PENNY FOR THEM floating around Wall Street, being traded madly back and forth sometimes for YEARS. And this was due to that tiny little loophole created by the Victorians who had to use boys to physically move stock papers from point A to point B. I agree with the litigants here who resent the Federal government stepping in and unilaterally diluting their own stock this way. Note the highlighted terminology here: this de-materialization without transparency is a CRIME. And I agree with this lawsuit filed against the SEC. It will take years to travel through the courts. Meanwhile, the characters who are criminals have to figure out a new open window, a door to the Cave of Death where they can cheat everyone or make money out of thin air. Like the Japanese Carry Trade which is predicated on the fiction of no inflation in Japan coupled with a cheap yen despite being the world's #1 export profiteer, so it is here: a system has been rigged up that is false from top to bottom and incidentally, leads to something rising to infinity. If they can create 100 million phantom stocks, why not create 100 billion phantom stocks? And this is why it must be ruthlessly terminated and the people doing this, punished. Here is a report from the Senate from last summer right when the Japanese Carry Trade window slammed shut on everyone's greedy little fingers:
SENATOR BENNETT DISCUSSES NAKED SHORT SELLING ON THE SENATE FLOOR
July 20, 2007
Replacing paper with electrons has allowed stock-trading volume to rise to billions of shares daily. The cost of buying or selling stock has fallen to less than 3.5 cents a share, a tenth of paper-era costs.
But to keep trading moving at this pace, the system can provide cover for naked shorting, critics argue. If the stock in a given transaction isn't delivered in the 3-day period, the buyer, who paid his money, is routinely given electronic credit for the stock. While the SEC calls for delivery in three days, the agency has no mechanism to enforce that guideline.
This is where the practice of naked short selling comes in. I did not really understand it until I had some investment bankers--not the kind you find on Wall Street but the more modest kind you find in Salt Lake City--sit me down in front of a screen and show me what happens with stock trading. To put it in the simplest terms, someone who wants to sell short--that is, sell stock he does not own--will place a sale order.
Now, when I first sold short as a participant in the market, my broker gave me this crude little poem to remember. He said: ``He who sells what isn't his'n, must buy it back or go to prison.'' He said: You have to understand, if you sell a stock short, the time is going to come when you are going to have to buy it back to cover that sale by delivering shares. In the days the Wall Street Journal talked about, that meant buying a crinkly piece of paper--a stock certificate--and delivering it so you have covered your short sale.
Today, that is not the case because all of the stock certificates are gone, and the crinkly pieces of paper have been replaced by electronic impulses in a computer. So this is what happens. A short seller enters the market and says: I want to short--I want to sell--1,000 shares of XYZ stock. That means at some point he has to produce 1,000 shares to cover his sale. How do you do that? You borrow the shares, and then you buy them back at some future time.
All right. From whom do you borrow them? The DTCC. They have all the shares on deposit, and so you go to the DTCC and you say: I want to borrow 1,000 shares of XYZ stock. They say: Fine, we have them on deposit. We will lend them to you so you can use them for your short sale. All right, everything is fine--except in this electronic age, it is possible for you to keep shuffling around the electronic impulses that represent the stock and never ever have to buy it back.
Stop and think about that. That is a pretty good business plan. You can sell as much as you want and never ever have to pay for it. If a stock is trading at $5 a share, you could go in and sell 1,000 shares, and you get paid $5,000 for selling 1,000 shares, and you never have to buy them. Because you are constantly moving around the electronic impulses that represent those shares, you never have to cover.
Now, when you talk to the DTCC people, they say, “No, we always make sure there is a delivery. And if there is not, it is not our fault. It is not our responsibility to police this. It is up to the brokerage houses to do this.”
Of course, the criminals running the DTCC never handed over anything. They held to stocks and they simply looked the other way while their lovers, buddies and drinking partners PRETENDED to have these stocks 'for only a few days' before the REAL owners would demand their stocks. But of course, why bother returning what was never actually physically picked up in the first place? Why not pretend ALL THE TIME, one is the real owner when one is a thief pretending to be the owner? Eh. So criminal minds think.
Our Faithful Senator continues:
So you can have a situation where people are selling shares that don't exist, taking commissions on the sale, and the profits of the sale, and never, ever having to produce the shares.
I think it is serious enough that we ought to have a hearing about this in the Banking Committee. I have spoken to the chairman of the Banking Committee, Senator Dodd, and asked him if it wouldn't be possible for us to have such a hearing at some point in the future. He has expressed a willingness to do that. I understand we can't set a time for that right now; there are too many other things going on in the Banking Committee.
But I am delighted to know he is willing to cooperate with us in examining this issue. I would like to suggest several things I would like to discuss at that hearing. First, by the way, I want the officials of the DTCC to have the opportunity to come in and explain how it works. I have seen letters to the editor in the Wall Street Journal, where they say this article is inaccurate, and I don't want to be relying on this article if it is inaccurate. I think a congressional hearing is a good place for those who are running the DTCC to explain to us how it works. I would like the SEC to come in and give us their background and information as to how their rules are working to try to stop the naked short selling. But I have these two additional recommendations that I would hope we could get done by regulation and, if not, I am prepared to introduce legislation to deal with them.
First, I think there should be a rule which says there cannot be borrowing, that brokers cannot borrow for short sales more stock than is on deposit with the DTCC. I think that is obvious. If there are 3 million shares of XYZ Company on deposit at the DTCC, people should not be able to short sell 4 million shares. I have seen the situation where people with these small companies--and all this happens primarily in little companies--people with small companies, in an effort to defend their stock against the short sales that are rolling over, are buying stock, and it is electronically credited to them and end up on paper, or at least on computer, owning more shares than exist. How can that be? If somebody buys the stock for his company and ends up owning 110 percent of the issued stock, and people are still selling that stock, you know you are dealing with phantom shares.
So my first recommendation would be that the DTCC cannot make available as loans for short sellers more stock than they have on deposit. Once they have reached the point that 100 percent of the shares they have on deposit have been loaned out, they can't loan out any more. I think that is an obvious commonsense recommendation, but it doesn't apply now.
Secondly, I think there ought to be a rule which says a broker cannot be paid a commission on a short sale until the shares are delivered. Back to the business model. The broker sells $5,000 worth of stock. He can do it every day. He can get $5,000 every day, without ever having to cover the stock, and he gets a commission on making the sale. So if you say, no, there will be no commissions paid until the stock is delivered, you will have a significant impact on stopping this activity.
I hear no hearings! DEAD SILENCE. What happened after this brave Senator made this demand for a hearing? Remember: last July, the stock market was roaring towards its final peak. It bounced around until late September and then in a repeat of 1929, went off the cliff in October. But the BANKING system went off the cliff the instant the Japanese carry trade ended with a loud bang. 'There is no liquidity!' screamed the bankers. Duh.
Anyway, the need to 'fix' a totally corrupt, stupid and utterly out of control banking system that flooded the entire planet earth with way, way, way too much 'liquidity' took precedent to stopping a bunch of Cramer-clones screaming, 'There is BLOOD in the streets!' demanding the Federal Reserve flush even more red ink, more bloody liquidity upon them. Stopping their financial games ended. They all snarled, 'If you stop ANY of our rip off schemes and plans to sink the entire planet into an ocean of red ink, we will destroy the banking system and the entire economic system and there will be a Great Depression!'
This black mail by black guards is working. Our entire government is focused on one thing: enabling a bunch of pirates, hell hounds, reckless bankers and exploiters of loopholes to continue their games and indeed, to increase this ten fold. And deep inside of all of this lurks the fearful Derivatives Beast! For its home is the DTCC. This is where all those 'swaps' are made. This is where the fearful 'interest rate swaps' are amassed. And lord knows how these things are multiplying in the dark over there! All I know is, this aspect is growing at a mad rate, doubling every two years and is now over $500 trillion in size, we just don't know how big it is.
All the debts of Americans, our governments at every level, all our own debts, our corporate debts are less than $45 trillion. The Derivatives Beast is well over $500 trillion. How can this mythological creature born in the bowels of this building in Manhattan grow over ten times bigger? It is impossible. But if a bunch of smirking con artist wizards can park all possible potential 'risks' this way, they will. And they will multiply these 'risks' so they can EXPLOIT THEM FOR PROFIT. The only cure is bankruptcy of our entire nation for at least 20 years if not forever. Why this is allowed baffles me except this Funny Money™ produced via magic is used to control our entire government. Let's go back even further, back to the height of the last bubble:
Congress Sells America Short
In yet another twist in the stock market scandal known as Stockgate, the Faulking Truth has learned that Senator Richard Shelby (R-AL), Chairman of the Senate Banking Committee, has shelved a planned Senate Subcommittee Hearing investigating the issue. Originally scheduled for February of this year, and then postponed several times, the hearing, which has been advocated by Senator Robert Bennett (R-UT), has been cancelled indefinitely.According to a reliable source inside of the planned investigation, "The authority and the responsibility to take the necessary steps to deal with the issue of naked short selling lies squarely at the feet of Senator Shelby, and he has chosen not to allow the planned Senate Banking Subcommittee hearing to go forward." In an earlier interview with the same source, we were told that "Senator Shelby tends to grab things like this for his own purposes, and his own purposes don't always mesh with what's best for the public."
Translation: Senator Shelby has sold out America in the name of special interests, and sold out the small investors to the hedge funds and their multi-millionaire clients. According to a trader who has been in the business for over 20 years, "the issue of naked short selling, or to put it more bluntly, 'stock counterfeiting', affects nearly every person who has ever bought or sold stock or invested in mutual funds. This scandal has cost investors and companies trillions of dollars, cost our country billions in tax revenues, and the money stolen from investors has even found its way into the hands of organized crime and terrorist organizations."
HAHAHA. The Senate has brought this up before. And was silenced. But note how the other corrupt Senators lay all the blame on Shelby. When the Democrats took over after 2006, they claimed they would clean house. Which is why Senator Bennett spoke up and suggested a hearing. Only he was sidelined, too. The Senate has had YEARS to clean this up. Indeed, the problem has existed much of my life. It just was a small problem back in 1980 with Volcker stalking the deck of the Federal Reserve and Jimmy Carter trying hard to be non-corrupt. Once Reagan came into power, out the door went any controls and they have been less and less each year and the temptation to use all these glitches and time lags to expand criminal operations has strengthened to the point that it is totally out of control and utterly destructive and STILL no hearings! No laws are passed! And certainly no candidates at any level are talking about this.
Here is an example from the SEC files back in 2005, how the Phantom Stock fraud works:
SECURITIES AND EXCHANGE COMMISSION, WASHINGTON, D.C. 20549
On March 4, 2005, the Reporting Person acquired 100,000 shares, and on March 7, the Reporting Person acquired 80,000 shares, constituting a total of 15.45 percent of the issued and outstanding common stock of the Issuer, in the open market.
another investor, Paul J. Floto of Dallas, Oregon, bought another 15% of Global Links' stock just his week, and filed his shares with the SEC as well, even though Simpson had filed his claim to 100% of the shares of the same company a month earlier. "On February 3, 2005 a single investor reportedly purchased all the common shares issued by the company, plus 145 additional unissued shares.Subsequent to that date, over 95 million shares, or over 82 times the total shares issued, were reportedly traded, none of which were reportedly sold by the 100% owner of the common stock.
On March 4 and 7, I purchased a total of 180,000 shares, resulting in my obtaining 15.54% ownership of a stock reportedly already 100% owned by another investor. I assume that there may be additional investors who may also claim ownership of common shares of this company.
I have requested that certificates be issued to me representing my full 15.54% ownership interest, to protect my right to vote and enforce any other claims that may accrue to an actual documented owner.
In other words, when the stocks for Global Links were issued, a party owned 100% of the shares yet MORE shares were traded by broker who were 'borrowing' the 100% owned shares? And eventually, so many hedge fund scammers piled in, they ran over to the criminals running the vaults at the DTCC and 'borrowed' the shares 'sitting there in the vault' 82X over? Wow. Talk about speeding round and round through the same turnstile until it was spinning faster than a black hole! Again: in the secretive Cave of Death we find infinity. This poor man is suing back then because he thought he had a 15.54% ownership share only it was dreadfully diluted. And what is Global Link?
It is a trading firm! It plays the FX markets! It does spot trading! It is...hahaha....part of the scheming system itself! And it feeds the Derivatives Beast. It plays with future interest rate contracts. It is a bunch of wizards. Let's look at yet another SEC filing:
The SEC, March 24, 2008
Subject: File No. S7-08-08
From: THOMAS THORTON, Sir
Affiliation: Bear Stearns Bond holder
"Legal" naked shorting would normally be invisible in a liquid market, as long as the short sell is eventually delivered to the buyer. However, if the covers are impossible to find, the trades fail. A sudden rise in number of fail reports will alert the SEC that something irregular is going on. In some recent cases, it was claimed that the daily activity was larger than all of the available shares, which would normally be unlikely.The North American Securities Administrators Association (NASAA) held a conference on naked short selling in November 2005. An official of the New York Stock Exchange stated that NYSE had found no evidence of widespread naked short selling, and alleged "fear mongering that there's this rampant naked shorting that's gone unregulated." Cameron Funkhouser, NASD senior vice president of market regulations, noted that although companies have alleged stock manipulation through the Berlin stock exchange, the NASD has seen not one instance of naked short selling on the Berlin stock exchange". Ralph Lambiase, head of the Connecticut Securities Agency and the NASAA, declared his disappointment at how the industry was handling the issue as a whole.
A report issued in early 2006 found no evidence of naked short selling in US markets, despite allegations from many companies. The SEC's short selling FAQ also cites common misconceptions about the practice, such as the belief that naked shorting causes "phantom" shares to enter the market, as one source of confusion over the practice's market effect. Naked short selling, the SEC said, would not increase a company's shares outstanding shares nor result in "counterfeit shares."
Statistics on failures to deliver securities are sometimes used as evidence of naked short selling in specific stocks. However, the U.S. Securities and Exchange Commission stated in January 2008 that "fails-to-deliver can occur for a number of reasons on both long and short sales. Therefore, fails-to-deliver are not necessarily the result of short selling, and are not evidence of abusive short selling or 'naked' short selling."
Current legal naked shorting rules allow brokerages to make large profits doing "bona-fide market making" while stock markets are falling. The market maker exemption to the rules governing the practice is intended to allow market makers to naked short sell on a very temporary basis, in order to increase liquidity and stabilize markets.
However, Robert J. Shapiro, former undersecretary of commerce for economic affairs, has claimed that naked short selling has cost investors $100 billion and driven 1,000 companies into the ground.
The Depository Trust and Clearing Corporation has been criticized for its approach to naked short selling. DTCC has been sued with regard to its alleged participation in naked short selling, and the issue of DTCC's possible involvement has been taken up by Senator Robert Bennett and discussed by the NASAA and in articles -- disagreed with by DTCC -- in the Wall Street Journal and Euromoney Magazine.
While there is no dispute that illegal naked shorting happens, there is a fight as to the extent to which DTCC is responsible. Some blame DTCC as the keeper of the system where it happens, and say DTCC turns a blind eye to the problem. DTCC says naked shorting is not widespread enough to be a major concern. "We're not saying there is no problem, but to suggest the sky is falling might be a bit overdone," DTCC's chief spokesman Stuart Goldstein said. DTCC General Counsel Larry Thompson calls the claims "pure invention." The SEC, however, views naked shorting as a serious enough matter to have made two separate efforts to restrict the practice. And in July 2007, Senator Bennett suggested on the U.S. Senate floor that the allegations involving DTCC and naked short selling are "serious enough" that there should be a hearing on them with DTCC officials by the Senate Banking Committee. The committee's Chairman, Senator Christopher Dodd, indicated he was willing to hold such a hearing. The North American Securities Administrators Association, representing state stock regulators, filed a brief saying that if the claims were correct, its shareholders "have been the victims of fraud and manipulation at the hands of the very entities that should be serving their interest."
Critics also contend DTCC has been too secretive with information about where naked shorting is taking place. In 2007, WayPoint Biomedical sued DTCC for DTCC's refusal to comply with a subpoena request for documents Waypoint needs to track trades in the company's shares. Ten suits concerning naked short-selling filed against the DTCC were withdrawn or dismissed by May 2005.
A system with this many 'flaws' should be utterly overhauled, not excused. The SEC should have a ZERO TOLERANCE for flaws, slow receipts of stocks to the real owners, etc. They have the ability! They have the powerful computers! They have the staff! IF they don't have this, they should be SHUT DOWN NOW. And replaced with something more reliable. Better computers, better staff and better systems. If they want me to help design this, I am willing and ready. HAHAHA. Good for a few laughs.
SEC lawsuit:
The illegal practice of short selling shares that have not been affirmatively determined to exist. Ordinarily, traders must borrow a stock, or determine that it can be borrowed, before they sell it short. But due to various loopholes in the rules and discrepancies between paper and electronic trading systems, naked shorting continues to happen.Naked shorting is illegal because it allows manipulators a chance to force stock prices down without regard for normal stock supply/demand patterns.
This Rule must be passed and not covered up. As it looks today on Wall street the word is out on naked shorting and must be stopped , and all who profited from stealing trillions be put in jail.
And this is the final word: ARREST THEM ALL! This is like an open rat hole leading to the sewer system. You have to plug the holes and kill the rats.
Less than a week later, short sellers come close to toppling the American financial system. They do this by taking down Bear Stearns, the country’s fifth largest investment bank.On March 10, 2008, Bear’s chief executive, Alan Schwartz, says that the firm’s “balance sheet, liquidity and capital remain strong.” But a small group of hedge funds circulate rumors that Bear Stearns is in crisis. At the same time, they pull their money out of the bank in order to create a crisis. Days later the stock is plummeting and money is exiting the bank at such an accelerated rate that it appears that it might have to declare bankruptcy - which would send shockwaves through the entire financial system.
To prevent this, the Federal Reserve, for the first time since the Great Depression, invokes a law allowing it to lend money to banks. JP Morgan, a rival bank, steps in to swallow Bear Stearns’ mangled remains.
Perhaps to distance himself from the scandal, Jim Cramer goes on CNBC to decry the antics of short-sellers. He says, “a bunch of hedge funds come in to do a gang tackle…is that capitalism? I don’t regard that as capitalism. I regard it as the destruction of capitalism”
The SEC, meanwhile, launches an investigation into hedge funds who may have coordinated the attack on Bear Stearns. SEC Chairman Christopher Cox, just a couple of days after the Inspector General’s meeting with “bozo” Dave Patch, tells Congress that he is “very aggressively” pursuing “the market manipulation and the kinds of illegal naked short selling that have been very publicly alleged in this case.” In other words, the chairman of the SEC tells the Senate that it is investigating the possibility that phantom stock contributed to the demise of Bear Stearns and the near collapse of the US financial system.
But this does not deter short-sellers from launching a similar attack on Lehman Brothers, an investment bank that is even larger than Bear Stearns. Richard Fuld, Lehman’s chairman, tells lawyers and the SEC that he has information proving that hedge funds orchestrated the demise of Bear Stearns - and that they have similar intentions for his bank.
We are still trying to figure out the Bears Steans business. This is a good thing to take into consideration. Remember: all the hell hounds and pirates don't attacks HEALTHY, STRONG organizations. They go after the weak, floundering, sick ones. Like any good hunting lions or other predators, they systematically cut out from the herd, the weaker members and pull them down and rip them apart. The SEC should not allow this since it is very destructive and it is causing the damn Derivatives Beast who is where they park their risks, to grow like Gargantua.
In an e-mail to some business journalists and sources, Mitchell wrote, “I have resigned from my job at the Columbia Journalism Review and will no longer be using this email.”Mitchell’s experience includes stints with the Wall Street Journal in Europe, Time magazine in Asia, the Far Eastern Economic Review, and the English-language Cambodia Daily. He also put in several years as a management consultant to Fortune 100 companies. Mitchell holds a BA from Wesleyan University and an MBA from the Kellogg Graduate School of Management.
The CJR Daily has had a section called The Audit that was designed to critique business journalism. But there have been just three posts on it in the past month. Earlier in the year, the CJR Daily staff was posting on it almost daily.
Two other editors resigned at CJR Daily back in August after the dean of the Columbia journalism school cut its funding.
Mitchell and business journalism Gary Weiss got into it earlier this year after Weiss criticized a post on The Audit. Mitchell then responded with anonymous posts on Weiss’ blog. Mitchell also had a run-in with journalists at BusinessWeek about its 2006 investment outlook issue.
Meanwhile, former Wall Streeter and current writer Joseph Wiesenthal criticized Mitchell for a commentary about corporate earnings that missed the real story. Cal-Berkeley economist Brad DeLong, who helps teach an economics reporting class at its journalism school, also expressed some disappointment with Mitchell and the site.
Mitchell was the writer who worked on all these stories and who broke some of them. He lost his job which is the reward anyone gets who figures out the con games that control our systems. Just as I am not on TV or published by the mainstream, he is now in the Cone of Silence and can be heard only dimly, online, if we seek him out. He will never be allowed 'inside' again. Many a reporter commits suicide when treated this way, I have tried to help more than one by begging them to not give in to despair or fear. After all, I lived in a tent for ten years due to being too proud to bend a knee! I hope Mitchell doesn't give up. His position at Columbia was replaced by a woman whose job is subsidized by a hedge fund which gives the University money to keep her on as a cover for their criminal actions. She will probably teach students how to work with the Bad Guys and never, ever uncover real crimes or real problems. And so our Faux media grows ever dimmer.
But not Culture of Life News!
Thank you Elaine, for this article.
It reminds me of Pavel Volfeyn and Alexander Belopolsky, former employees of James Simon's Renaissance Tech.
They claim to have been asked to develop trading algorithms which violate securities laws and if they are truthful, were fired when they said no. Good for them.
One comment about Bear Stearns though, is that if you live by the sword you should die by the sword. Bear executives made millions of dollars over the years by executing similar strategies of "arbitrage"...another word for piracy the way they do it.
Unfortunately SO many people rely on this system, since there is hardly a safety net left, that even the peons will fight to the death to keep it around. Just imagine all of the 401k's in jeopardy, the teacher's retirement funds, the hospital/educational endowments that are caught in their web.
Even good natured people will allow the bottom 80% of this country to live in squalor, if that means they have their retirement fund or Sally can go to her expensive school.
Look at Mexico and South America ( save for Venezuela for now)...that is what will happen to the U.S. if not worse. Look at Santa Cruz and Zulia now...screw the rest of the country we have riches underground and its ours! Kind of like Golum and the ring of power.
And to think that privatization of social security could have happened....crazy world.
"Insert Mad Mike's trademarked slogan"
Posted by: Abelian | May 12, 2008 at 01:37 AM
Is there a red hot hell in Cabalistic Freemasonry?
http://www.masoncode.com/Masonry%20and%20Cabala.htm
"The Magical Language is a mode of cryptic writing used to preserve and transmit the practical secrets of the Western Tradition of Ageless Wisdom. It is an artificial language, combining Hebrew, Greek and Latin elements. Its outstanding characteristic is that the letters of the three alphabets it employs serve also as numbers. Consequently, every word, phrase, or sentence is also a number, the sum of the values of the letters"
Posted by: GK | May 12, 2008 at 01:39 AM
Great post! Short selling is a legitimate contra-force in economics. It balances the overall positive bias in the "interested parties" commentary about things economic.
Naked short Selling is without any value - even market makers don't need this ability. Failure to deliver should simply be called fraud and punished according to long-standing laws.
This is so simple that I can't believe it is even an issue - although it clearly is as the the DTCC/Prime Broker/"Connected" Criminal element prospers.
Thanks for the exposure.
Dave
Posted by: David Bish | May 12, 2008 at 02:06 AM
Elaine, Great job on a tough subject. Anyone who has money in the market in any form or fashion should take this problem very seriously. The entire 'end game' that financial writers such as 'Deepcaster', Jim Willie and others write about could hinge on this tactic of selling phantom shares with the intent of never, ever having to cover. The thing is so big that if regulations are passed it will cause a market meltdown....just what the 'perps' want anyway. If the markets tanks 'big time' they could cover for pennies on the hundreds of dollars....not just dollars.
As Mitchell and others have discovered, the money is gone....gone forever, never to be retrieved. The best defense for your readers is to extricate themselves from the market and move their money into other forms that cannot be manipulated so easily. Precious metals, agricultural land, oil & gas producing royalties etc. We are being robbed on a systematic basis...and worse, being laughed at in the process by the likes of guys like Jim Cramer.
Posted by: hardrock | May 12, 2008 at 02:06 AM
Greed, greed, greed....everywhere! It seems to have corroded in a 360 degree spectrum. Everywhere you look...it lurks!
What folly!
Posted by: Oz Observer | May 12, 2008 at 02:40 AM
Elaine, Further to the point of 'how it works' for the benefit of the perps. Let me quote Jim Willie of The Hat Trick Letter, where he says:
"The USGovt and Wall Street carnival barkers want your money still, for yet another shift of wealth from the plebeians to the elite. They took your pensions in year 2000. They have taken your home equity in the past year. They plan to take your desperate borrowings in the next year."
Let none be deceived, America has entered a severe downturn which was caused by greed, ignorance and sloth. It will not end in our lifetimes. Our children and their's will pay one helluva price for our indolence....some would call it tolerance. We failed to discriminate, we failed to recognize bullshit when we saw it, we failed to call it by its right name and were fed a constant stream of BS from educated [so called] idiots who knew nothing of where things came from, including 'bullshit'!
Posted by: hardrock | May 12, 2008 at 03:06 AM
I have no special knowledge about these Wall Street shenanigans. But maybe it works like this:
There are insiders, day traders, and hapless gamblers. The hapless ones eventually go bankrupt. The insiders have inside information, and use it to make big bucks. The day traders tread water, making money on good days, losing money on bad days. They "pay" a small tax on the days when they gain. On the days they lose, they "write the losses off" on their good day "taxes." So they lose nothing on bad days, and pocket taxless gains on good days. So they end up getting white collar welfare. Just a guess.
I think I can now define the concept of "derivatives." If I owe Joe Blow $1000 (plus interest), Joe Blow is free to sell my indebtedness to some third party, without even warning me in advance. The agreement that formalizes that sale would be a "derivative." Loans are abstract relationships to begin with, and these derivatives allow the creation of yet another layer of abstraction. So derivatives are basically new layers of abstraction piled upon relationships that are themselves of an abstract nature, including transactions other than loans. There is no limit to how many layers of abstraction can be added. So these relationships can become complex without limit. And we should all understand that complexity is the best friend of the cunning schemer.
I would suggest simply outlawing these derivatives, so things like indebtedness can never ordinarily be sold to third parties. That would enforce simplicity, which is the best friend of the honest dealer. Being no expert, I am only expressing my best guess about these matters. The extreme complexity of these derivative transactions would seem to engender a frightening potential for instability that could easily lead to total systemic collapse. Not good!
As to the manifestation of unchecked greed, I offer the following sad story:
The Independent, UK
Exclusive report: Soldiers need loans to eat, report reveals
((----- Copy & Paste - W/O The Line Breaks -----))
http://www.independent.co.uk/news/uk/home-news
/exclusive-report-soldiers-need-loans-to
-eat-report-reveals-825928.html
«The analysis, described by General Dannatt as "a comprehensive and accurate portrayal of the views and concerns of the Army at large", states: "More and more single-income soldiers in the UK are now close to the UK government definition of poverty." It reveals that "a number of soldiers were not eating properly because they had run out of money by the end of the month". Commanders are attempting to tackle the problem through "Hungry Soldier" schemes, under which destitute soldiers are given loans to enable them to eat.»
British soldiers depending on loans for food!
Posted by: blues | May 12, 2008 at 04:35 AM
This is the 'mercenary trap', blues. The mercenaries were kept artificially poor and the only relief was for them to LOOT someone while the generals turned their backs deliberately.
Note that we let our soldiers LOOT Iraq. It was very medieval.
About these various 'windows of opportunity': whenever any system has a time lag problem somewhere, the people in control of this system will exploit it in order to make unregulated profits. After a while, they focus more and more in the loopholes and glitches because the profits occur in both GOOD AND BAD times! This means these glitch problems will grow ever larger until they totally displace the system.
This is why they should always be ruthlessly eliminated. When the DTCC was first organized, it was to fix the 'empty space' in the delivery of stocks from seller to buyers. But instantly, the guys running the system realized people didn't know that all stock sales could be finalized INSTANTLY. So they LIED about the time lag and it grew and grew and grew until it is over 400 days long in some cases!
This is why it takes laws and regulations to prevent these things. Note that the ruling rich have propagandized to us all that laws and regulations 'slow them down' and are evil.
Posted by: Elaine Meinel Supkis | May 12, 2008 at 06:57 AM
Bravo Elaine! Bravo!
Finding the hideout of the Derivatives Beast is a truly magnificent feat of mental detective work. You should be proud.
This is why I hold out little hope of America achieving "greatness" again, unless you consider a small, self-sustaining agrarian republic that can somehow defend itself from rampaging empires a sign of "greatness".
(For the record, I would.)
Posted by: DeVaul | May 12, 2008 at 12:53 PM
If I had any money to invest, I think I would avoid the entire stock market altogether. Maybe I'd think a lot, and invest in some small business that could be both innovative and "safe." About maybe seven years ago, some Chinese-Americans bought out a local laundromat. They are running a successful, tight little business. I think these Chinese have this laundry business thing down. They probably train each other in the intricacies of the trade. Too bad I don't have some group that would help me do that. Locksmiths do that too. You have to be born into a locksmith family, basically, to become a locksmith.
These stock market DTCC thing was born just in time to swindle investors with computers. I personally think the computer business might actually come to an end. I've read that an automobile consumes about as much energy just being manufactured as it will when it goes out on the road. I've also read that the manufacture of just three computers consumes about as much energy as the manufacture of one automobile. So there is some deeply hidden subsidization going on in the computer marketing business!
And, probably any half-competent intelligence agency could hack all our computers to bits in about three days! So this almost seems inevitable. So I think we should be stockpiling bicycles! Going back to that old super light-weight "airmail" paper would help tremendously. Another thing to stockpile!
Posted by: blues | May 12, 2008 at 12:55 PM
No way is that true, blues.
1. Cars have lots of computer parts inside of them.
2. Mining the iron ore, processing it, mining the alum and processing it, moving scrap metal around by ship, processing it, all this is very, very energy intensive. The sheer weight of a car must be part of the calculations
3. Transporting cars is 10X more than computers!
Just from these three objections, it is obvious that cars eat up way more resources than mere computers.
Posted by: Elaine Meinel Supkis | May 12, 2008 at 07:01 PM
The devil resides in the details, Elaine.
Manufacture of computers requires at least an order of magnitude greater precision than manufacture of mechanical devices. Modern vehicles do incorporate a lot of electronics, but that is not essential to their operation.
Great precision = extreme industrial operations = huge energy input.
Just tantalum capacitors require refinement of tantalum from coltan ore, from 400 parts per million concentrations. Coltan comes only from Africa, although Australia provides a small amount. Its production is extremely energy intensive.
Electronics grade silicon wafers require processing with silane gas. Very toxic, very hard to produce, very energy intensive. The purity of the silicon wafers must be astronomically high. And that is super energy intensive. So silicon chips are super energy intensive components to manufacture.
So, modern electronic components require vast amounts of energy to produce.
Posted by: blues | May 12, 2008 at 09:14 PM
The "three computers = one auto" assertion is just something I read somewhere. I didn't detect any bias in the statement, but I must admit it strains credulity. Just think of the sheer mass of iron in a car! I always thought that, like aircraft, they should be made of aluminum. Aluminum "rust's" very little, only forming a thin, hard-to- see-even film. So it can be recycled without huge losses due to rust. On a "volume basis" it's not nearly as strong as steel, but pound for pound, it is. That means thicker parts are needed, which means it presents less surface area susceptible to oxidation (rust). It is vastly more recyclable, although it is very hard, very energy intensive, to extract initially from bauxite.
I gather that there are probably zero steel mills left in the USA at this point. So I guess we can't gripe too much about Venezuela nationalizing theirs! See:
((----- Copy & Paste - W/O The Line Breaks -----))
http://www.nytimes.com/2008/05/13/business/worldbusiness
/13fobriefs-STEELCOMPANY_BRF.html?ref=worldbusiness
Posted by: blues | May 13, 2008 at 02:31 AM
Here it is for all of you afraid of fascism and war, Amerika gets the alternative....
http://www.bloomberg.com/apps/news?pid=20601087&sid=aHhguABj3V.g&refer=home
Green, is the new red. MWHAHAHHA LET THE BEATINGS BEGIN!
Posted by: Royal Dutch | May 13, 2008 at 02:40 AM
Hmmmmmmmmmmm. a ten year plan.
doesnt smell of fascism at all.......
Posted by: Royal Dutch | May 13, 2008 at 02:42 AM
Thanks for the further information, Blues.
Royal Dutch, thanks for the link. Yes, the New World Order is all about chaos being fixed in odd, stupid ways. I guess there is no 5 year plan due to the obvious reference to Communist dictators.
Posted by: Elaine Meinel Supkis | May 13, 2008 at 11:48 AM
An acknowlodgement of nobility is always appreciated. Love your posts Elaine.
Posted by: Royal Dutch | May 14, 2008 at 11:46 AM
Elaine,
Nice post. Thank you for the kind words (even if you think there ARE no good guys).
Patrick Byrne
Posted by: Patrick Byrne | July 12, 2008 at 03:19 AM