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Senator Grassley Lays Down The Law

Location: Blogs Bob O'Brien's Sanity Check Blog    
Posted by:   bobo 10/29/2006 12:10 PM

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Sign the Market Reform Petition now. Click here to view it.

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Usually I disseminate 2000 words in my column like so much aspirin on New Year's day.

Today, fortunately, I don't need to. In two remarkable letters, Senator Grassley shows that not everyone is marching in lockstep to Wall Street's melody. Even though at times it seems that the bad guys own the system and can do whatever they want, every now and then we get a ray of hope, and an indication that there are a few honest men left.

The press has a wonderful way of softening and filtering topics that their masters wish to see massaged, so it's best that one go straight to the source documents if one wishes to know the truth. With that in mind, here are the two letters, absent any editorial.

http://www.senate.gov/~finance/press/Gpress/2005/prg091906a.pdf

http://www.senate.gov/~finance/press/Gpress/2005/prg091906b.pdf

Read them, and you get a sense that Grassley is on to the obfuscation campaign from our regulators, and isn't having any of it.

Now, if we can just get Congress to understand that taking investors' money and not delivering what they paid for is fraud, we could really move the ball down the field.

Baby steps. But this isn't a bad start.

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Ben Stein is a very smart man. His latest very smart column for the NY Times is also a must read - it approaches the rampant ransacking of American investors from a different angle, although one that is parallel to the overall take on things advanced by this site.

Check it out. A good read.
Copyright ©2006 Bob O'Brien
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Comments (17)
Re: Senator Grassley Lays Down The Law By InTheKnow on 10/29/2006 12:37 PM
How about an investigation of the Senate Banking committee on what they know and what they have done about naked shorting (counterfeiting stocks) and stock manipulation.
Re: Senator Grassley Lays Down The Law By yoda on 10/29/2006 1:38 PM
for NYT links try this site:

http://nytimes.blogspace.com/genlink
Re: Senator Grassley Lays Down The Law By bobo on 10/29/2006 6:00 PM
Intheknow:

The Senate Banking committee has done exactly nothing about naked shorting and stock manipulation. Their meetings typically involve congratulating the SEC on a job well done, and occasionally Bennett gets in a few jabs on naked short selling. That's the sum of it. They are always "Monitoring" things, keeping a vigilant eye on the markets as IPOs disappear almost as fast as investors' savings.
Re: Senator Grassley Lays Down The Law By rtway1 on 10/29/2006 7:42 PM
I like Ben Stein as a person and as a adviser for the common investor. He also is trying to change to inheritance or death tax where as the proceeds which would come from those of immense wealth, the top 1/2%. which represent the vast majority of Wall St., would go to increase the salaries of our volunteer troops who lay their life on the line for all of us. The money from the tax would not be accessible to the pols as is the general fund. This would make a soldiers salary commensurate with law enforcement personnel that we have here. Seems fair to me.
Re: Senator Grassley Lays Down The Law By clearthinker on 10/29/2006 8:25 PM
Shelby is the perfect front man for doing nothing....always setting up meetings that are cancelled at the last minute, always implying that he cares, when he doesn't...He has wasted months if not years of our time, waiting for him to do his job.

get him out of there...
Re: Senator Grassley Lays Down The Law By rtway1 on 10/29/2006 10:49 PM
Clear thinker , I have sent so many messages to the republican party about what you have said I have worn out the keys on this board. He is a political scum bag that will kill his party.
Re: Senator Grassley Lays Down The Law By New World Disorder on 10/30/2006 1:42 AM
http://www.ft.com/cms/s/cf698368-679b-11db-8ea5-0000779e2340.html

"Top Democract sees role for global regulator

By Jeremy Grant and Holly Yeager in Washington

Published: October 29 2006 22:35 | Last updated: October 29 2006 22:43

Financial regulators on both sides of the Atlantic may not be able to resolve policy disputes through co-operation and the creation of a global regulator should be considered, according to Barney Frank, the senior Democratic congressman.

The views of the man widely expected take over the chair of the House financial services committee if the Democrats retake the chamber stand in stark contrast to those of the Securities and Exchange Commission, the financial regulator that the committee oversees.


Christopher Cox, chairman of the SEC, has been at pains in recent months to highlight stepped-up co-operation with foreign regulators such as the UK’s Financial Services Authority."
Re: Senator Grassley Lays Down The Law By gregcable2002 on 10/30/2006 7:02 AM
STOCKGATE TODAY
An online newspaper reporting the issues of Securities Fraud

Banking Chair Shelby Continues to Rebuke Peers in Turf War - October 30, 2006
David Patch

Late last week, Senate Banking Committee chairman Richard Shelby (R AL) rebuked fellow Senator Charles Grassley (R IA), chairman of the Senate Finance Committee, over Grassley's public concerns regarding the objectivity of Securities and Exchange Commission enforcement process. Grassley's concerns stem from allegations over recent months that SEC investigations can be stalled or worse, closed out prematurely, when the suspicions of fraud are directed against politically connected individuals.

Shelby, through a banking spokesman, declared "Oversight of SEC enforcement of U.S. securities laws falls entirely under the jurisdiction of the banking committee'' as reported by Bloomberg.

This is not the first time Shelby has rebuked his peers publicly using similar commentary against Judiciary Chairman Arlen Specter (R PA) after Specter held hearings this past summer to discuss the role of the hedge fund in our markets. Specter quickly responded by reminding the banking chairman that the Judiciary Committee has criminal jurisdiction over the capital markets and thus would take all necessary actions to insure criminal activities were not being engaged by the hedge fund industry.

But Shelby has not limited his desire to block regulatory inspections in this arena to public rebukes.

Shelby has also been known to dismiss the concerns of fellow peers within the Banking Committee by routinely blocking all requests by committee members to hold public hearings regarding abusive short selling practices within the markets. One former staffer within the Committee quit after identifying the tension over the issue was too great and too divided. The staffer indicated that to simply inquire about where teh committee stood was enough to get you fired.

The abuses have been so pervasive over the years that while Shelby turned down all Congressional requests for hearings due to his personal belief that the problem did not exist, the SEC in 2005 initiated a reform package to the short selling laws and, barely 18 months later submitted modifications to the new rule change after identifying loopholes for abuse remained.

The exposure to the public of such market abuse concerns regarding this issue have been limited to Senate hearings on the capital markets whereby Utah Senator Robert Bennett has publicly addressed his concerns to the sitting SEC Chairman during these open public hearings. An opportunity Shelby has no control over and thus an opportunity to raise teh public's awareness. Bennett has taken to questioning the SEC Chairmen about abusive short selling in each of these past two years.

Investors, business issuers, and even members of Congress have all begun to wonder privately and publicly what is motivating Shelby to hush the potential conflicts that may exist between the SEC, hedge funds, and the politically connected executives of Wall Street.

Consider for example that Grassley's concerns over possible conflicts between politics and the actions of the SEC are not unfounded but based on documents submitted to the members of Congress by a former SEC Attorney; now turned whistleblower. According to a NY Times the documents, e-Mail communications between the former Attorney and staff of the division of enforcement specifically identify "political clout" and the "juice" of the suspect's attorney as reason to tread cautiously into an investigation.

According to the Times, in possession of copies of the e-Mails, "Mr. Hanson, the S.E.C. branch chief, acknowledged in e-mail messages that he had discussed Mr. Mack's "political clout" and the "juice" of his lawyers with officials at the commission."

And while it appears that Grassley and Shelby both retain copies of these key documents, concern over what the documents may expose rest solely with Grassley. Shelby appears as disinterested in these e-Mail communications as he has appeared disinterested in avoiding the next major market scandal by aggressively getting ahead of the curve.

Shelby remains publicly outspoken in the defense of the hedge fund investing class citing his lack of concern over their role in the public markets. Shelby's concerns are again running divergent to those of his peers and those of the regulatory arm responsible for evaluating such roles in our markets.

Again, it was only a month ago that SEC Director of Enforcement Linda Thomsen spoke before the members of Senate Judiciary Committee and specifically identified the concerns the staff at the commission had over the rise in insider trading allegations. The SEC staff showing most concern over the link between the insider trading rise and hedge funds. Thomsen declaring "there are important areas of concentration we can consider. One such area involves insider trading by hedge funds-an area of significant concern to the Commission, the Enforcement Division, and I know, to this Committee."

According to a Shelby spokesman responding to the GAO inquiry into the SEC, "The chairman [Shelby] does not feel that further regulation of hedge funds is necessary at this time; however the banking committee will continue to conduct vigilant oversight of hedge funds and the overall regulation of U.S. securities markets.'' And while "continue" implies the pre-existence of vigilant oversight, records will show that little oversight by the committee has taken place over the years with most public hearings being orchestrated with a stacked panel of hedge fund defenders and very limited in the topics under evaluation.

With all this suspicion regarding the actions of Senator Shelby, the public can only wonder what his motivations are. How safe can the capital markets be if the top federal regulator is embroiled in a conflict between politics and law enforcement and when the political oversight of this agency is Chaired by a Senator who seems content to block investigations that could lead to an increase in investor protection?

Maybe this will spark some answers.

After the hedge funds were caught cheating the public in the mutual fund late trading scandal, and the SEC initiated an investigation into forcing Hedge Funds to register, Hedge Fund Cerberus pitched to Shelby in political fashion by throwing a fundraiser, netting the senator's leadership PAC $99,500 from Cerberus executives and allies. The PAC's total haul Feb. 17, 2004, the day of the fundraiser, was $217,750. Records make it unclear from Federal Election Commission (FEC) data how much of the non-Cerberus contributions were solicited or bundled by fund executives.

While Shelby is far from alone in raking in money from the financial services industry, Shelby's role as the Chairman of the Senate Banking Committee chair present considerable conflicts for the Senator and his actions to date have not demonstrated a capacity to avoid such conflicts in his decision making process.

In this heightened awareness over the potential disruptions the hedge fund industry can have over our capital markets, and based on the scintillating details of those e-Mail communications by a member of the SEC staff discussing political clout as being a factor in an enforcement investigation, the banking chairman should be the first to react to red flags and yet he is the last. Shelby stands alone, and most vocal holdout against taking any actions to investigate possible political misdeeds.

Re: Senator Grassley Lays Down The Law By gregcable2002 on 10/30/2006 7:13 AM
Shelby has to go,why? Because it's plain as day who he really works for and it's not the citizens of this country.
Re: Senator Grassley Lays Down The Law By n-tres-ted on 10/30/2006 7:27 AM
Bobo,

The GAO investigation of the SEC is as close to an independent counsel or special prosecutor as the Senate can deliver, I think, so your calls for a special prosecutor apparently were heard. Interestingly, the letters do not refer to the Aguirre evidence, so GAO may not even look into it. I wonder if that means Grassley/Specter will continue to do that directly.
Re: Senator Grassley Lays Down The Law By bryedge on 10/30/2006 8:32 AM
BobO,

"The Senate Banking committee has done exactly nothing about naked shorting and stock manipulation. Their meetings typically involve congratulating the SEC on a job well done, and occasionally Bennett gets in a few jabs on naked short selling. That's the sum of it. They are always "Monitoring" things, keeping a vigilant eye on the markets as IPOs disappear almost as fast as investors' savings."

And what does this say for Orin Hatch, who SUPPOSEDLY, is helping Overstock?

I am not sure America can stand much more of that type of help.

As for the GAO, how many years do you think it will take for their investigation to be concluded and do you think it will even cover such scandals as Global Links, NFI, CMKX, etc, etc, etc.?

Best regards
Re: Senator Grassley Lays Down The Law By Willey Loman on 10/30/2006 8:40 AM
Grassley should send a letter to the GAO asking them to investigate Shelby. What a POS...
Re: Senator Grassley Lays Down The Law By InTheKnow on 10/30/2006 12:29 PM
Investiate Shelby's finances!
Re: Senator Grassley Lays Down The Law By bobo on 10/30/2006 12:47 PM
Byedge: Is Hatch on the Senate Banking Committee?

What is odd is that we are really talking about gross stock manipulation by an organized group of criminals, and yet none of the legal apparatus chartered with protecting companies and shareholders is doing a thing to stop it.

It's really amazingly blatant.
Re: Senator Grassley Lays Down The Law By Who is Banking Protecting? on 10/30/2006 2:56 PM
Treasury Trading Draws Scrutiny
SEC Investigation of UBS Focuses
On Possible Supply Manipulation;
Credit Suisse Bond Dealer Resigns
By GREGORY ZUCKERMAN and SERENA NG
October 30, 2006; Page C1

The Securities and Exchange Commission is investigating whether UBS AG was involved in improper manipulation of Treasury-securities prices. And a Credit Suisse Group bond trader has left the firm amid broad regulatory scrutiny of the $4 trillion Treasury market, people familiar with the matters say.

The developments mark potentially important steps in a government inquiry into trading in the Treasury market that has been quietly unfolding for several weeks.

The Treasury Department is especially sensitive to trading in the huge market for its bonds, notes and bills. It depends on selling these securities to raise cash to finance the budget deficit, and the Federal Reserve uses Treasury securities to conduct monetary policy. The market is generally seen as among the most efficient in the world. But if it becomes viewed as unruly or tilted against any group of investors, it could drive away investors.

Last month, in a speech to the Bond Market Association, a Treasury official expressed concern that Treasury-securities prices were possibly being manipulated. The activity involved traders' controlling the supply of certain Treasury issues, making it hard for others to obtain them, and then profiting by lending those securities out at favorable interest rates. James Clouse, deputy assistant secretary for federal finance, said he was concerned about trading in the bonds and notes themselves, in futures markets and in other corners of the market.

Any improper activity doesn't seem to have had a big impact on interest rates, which remain quite low. And many dealers counter that the practices under question often occur as part of normal trading activity. But regulators aren't taking it lightly.

Mr. Clouse said the matter had been referred to the SEC and Commodity Futures Trading Commission. Nov. 6, officials from the Federal Reserve Bank of New York will meet with 22 big bond dealers to discuss these concerns.

Regulators have occasionally cracked down on Treasury-market misdeeds. In the early 1990s, Salomon Brothers was caught skirting rules at Treasury-bond auctions, and its top executives -- some of Wall Street's most prominent figures -- were forced to step down. A Goldman Sachs Group Inc. economist was jailed for relaying an insider tip about Treasury bonds in October 2001 that allowed Goldman to earn millions of dollars in trading profits.

It isn't clear whether the current probe will lead to such serious fallout. "UBS is cooperating in the government's investigation," a spokesman for the firm said.

The Credit Suisse trader, Thomas Brown, born in 1962, couldn't be reached. Credit Suisse's trading is being scrutinized by regulators, according to a person familiar with the matter, but it isn't clear which federal agency is conducting that scrutiny. A Credit Suisse spokeswoman declined to comment.

The investigation of UBS involves trading activity that took place in February of this year, people familiar with the matter say. It isn't clear which Treasury issues are being probed by the SEC. But one possibility is a five-year Treasury note due in January 2011, with a coupon that pays annual interest of 4.25%. It was in especially short supply that month.

When Treasury notes are in short supply, holders of the securities can profit by using them as collateral for loans in a market called the repurchase, or repo, market. In the repo business, bond dealers and investors effectively swap Treasurys for cash. Traders who hold highly sought-after Treasury issues can profit by getting the cash at a very low interest rate. Regulators are concerned that traders might be intentionally squeezing supply to profit this way.

In the case of the January 2011 note, the security was in such high demand in mid-February that its holders could use it as collateral on cash loans and pay interest of just 0.25% in return, according to data from a GovPX, a unit of interbroker dealer ICAP PLC. The going rate at the time was more than 4%

Credit Suisse's Mr. Brown left the firm Sept. 29, according to a filing with regulators. He was part of the bank's repo team, according to another filing. Mr. Brown's activities, Credit Suisse told regulators, related to trading in two-year notes. The firm added in its filing that he was allowed to resign because of matters related to that trading.

Credit Suisse declined to provide details on the trading. It also declined to provide contact details for Mr. Brown, or to say whether Mr. Brown had a lawyer who could be contacted.

It is unclear whether the trader was trying to generate a profit for Credit Suisse or for a client of the firm. It is also unclear whether any other Credit Suisse traders were involved in the trading that led to his departure, how large the positions were or whether any issues besides two-year notes were involved.

In recent weeks, after the Treasury discussed the potential problems in the market, traders say there has been a decline in the number of securities in short supply. That has eased pressures on the market and raised questions about whether the extra scrutiny forced some traders to clean up their activities.

One senior bond trader familiar with the concerns of regulators says officials also have been worried about whether hedge funds or other investors were asking brokers to take certain securities off the market, to make certain positions more valuable.

"The games haven't changed in 15 years," says Michael Basham, who oversaw the Treasury's debt-management activities during the Salomon affair.

Bond traders say there could be many legitimate explanations for the bond shortages' driving price movements. Some bond issues become very popular in the normal course of business. Moreover, some foreign investors buy and hold large amounts of Treasury securities, reducing the supply. Others traders complain of the lack of clear rules to delineate what traders can do.
Re: Senator Grassley Lays Down The Law By Wicked World on 10/30/2006 9:42 PM

"Emilia DiSanto, chief investigator for committee Chairman Chuck Grassley (R-Iowa), arrived at her suburban Virginia home after work Wednesday about 6:30 p.m. As she was unloading belongings from her car, a 6-foot-1-inch white man dressed in black struck her repeatedly with an unidentified object believed to be a baseball bat."

www.libertypost.org/cgi-bin/readart.cgi?ArtNum=116117
Re: Senator Grassley Lays Down The Law By Paladin on 10/31/2006 2:43 PM
Here's the GAO's response to Sen. Grassley's request for the SEC investigation....

http://www.senate.gov/~finance/press/Gpress/2005/prg101606a.pdf

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