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Real Meaningful Reform, or Throwing Some Low Level Foot-soldiers Under The Bus?

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Posted by:   bobo 5/18/2007 2:56 PM

Many have contacted me of late to herald a rumored criminal probe into the stock lending business.

Here's my take.

This will be the prosecution of some low-level schemers who are costing hedge funds dough, and helping competitors of the big banks.

What it won't be is a massive probe into stock counterfeiting, or into whether the entire market is now predicated on a lie and a sham. It won't target big names, or big companies. It may even target some of the newer stock lending companies who are COMPETING with the big names that own Wall Street - a la Milken getting the pork put to him when he started out-earning the big Wall Street names, and costing them their underwriting business.

Wall Street, for all its rhetoric, despises honest competition. It revels in a tightly-held market where it owns and controls all the pieces. The banks own the town, and the law. Simple. They just put on a nice show to convince the occasional watcher that they are subjects rather than rulers. Most don't question why a Bank of NY or any of the others can launder big money, and yet these for-profit companies aren't held to the same standard that you would be if you tried to launder a couple of hundred grand. Does anyone believe that the 85% of printed hundred dollar bills that aren't in the US got there via legal means, for the most part? Let's examine the possibilities: drug money laundered via US banks exports our inflation via hard currency to the rest of the world, OR all that money is simply stuffed into mattresses by the bad guys, who are stymied by the US' blindingly effective "war on drugs" and all the "anti-money-laundering" provisions that make it reportable for you to withdraw $3K you already paid taxes on, or criminalize your using that cash to buy things.

Which do you think is more likely?

Wall Street doesn't lose, and the banks that run the US financial system are pros when it comes to molding public opinion. When public outcry over Wall Street's larcenous ways reaches a crescendo, it will typically either crash the system, or throw some red herring minor figures to the wolves to create the illusion for the masses that the law is doing its job, and hunting down bad guys.

Russian mob laundering billions through Bank of NY? No executives in cuffs there. $7 billion in money laundering that it admits to, and the two primary execs that facilitated it got 6 months of "home confinement" and had to pay $725K. Big deal. A lot of the Wall Street crowd has had bar bills that big. Russia is suing for $22 billion, and Wall Street-employed analysts are rating the bank a buy, and pooh poohing the suit - apparently there really is no downside to laundering billions and billions for the mob. Why would there be ramifications, or accountability? Why would a for-profit bank be liable for the damage its money laundering caused in lost revenue to Russia? That's crazy talk. If Russia lost billions in tax revenue due to the direct actions of Bank of NY, it isn't their problem. 

But I guarantee you, that if a few guys figured out a way to intermediate the stock lending business, and cost any hedge funds who still bother to borrow shares extra money, that Johnny Law will come down on them like they were Martha Stewart. Ditto for anyone foolish enough to be making money that the big banks covet.

So that's my take. Create a distraction to the massive rhino in the room, the delivery failure issue, and instead focus on some minor angle, and make a big to do out of it.

Maybe I'm just too cynical. But one thing I do know is, Wall Street never loses. I'll go with the last 100 years of history, and bet that this time is no different.

Copyright ©2007 Bob O'Brien
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Comments (24)
Re: Real Meaningful Reform, or Throwing Some Low Level Foot-soldiers Under The Bus? By azkole on 5/19/2007 7:10 AM
What impact do you think this will have on the OSTK and NFI lawsuits?
Re: Real Meaningful Reform, or Throwing Some Low Level Foot-soldiers Under The Bus? By bbhindyou on 5/19/2007 7:10 AM
The time has come to tell the emporor he is naked and we all see it.
PEACEFUL protest time.
Where when and how?
Lets decide and do SOMETHING.
The waiting for the correct chanels to work time is over.
No one in a position of power in our government will protect us it's time they found out we the people are thir bosses and no one else.
I'm in.
Re: Real Meaningful Reform, or Throwing Some Low Level Foot-soldiers Under The Bus? By captdale on 5/19/2007 3:27 PM
Bobo - Yep, your 100% correct as usual. For some unexplained reason I still go through the motions of trying to find that "one honest man" in a position of authority that is able to address the issue and will do so even when time and time again I have been shown their is not one to be found. I will see it play out one way or another in my lifetime. It will be interesting to see if Truth and Justice prevails or not. How about a law suit against those specific regulators that know of the fraud and are doing nothing ? Has that been tired. One way or another it has to get into discovery and progress to a jury with all the facts in the open.
Re: Real Meaningful Reform, or Throwing Some Low Level Foot-soldiers Under The Bus? By tmg on 5/19/2007 3:27 PM
bobo -

I suppose the odds are that at some point (someday) the SEC will actually end the grandfathering and the options market maker exemption. Of course, we would like to think that all this time they are taking is to go beyond that and enact some more meaningful reforms. Assuming they do not, is getting rid of these two exemptions going to have an effect? Or will there be some other mechanism we haven't seen yet where they can plow FTDs through?

Obviously, if they don't start working the enforcement side then the rules continue to mean nothing.
Re: Real Meaningful Reform, or Throwing Some Low Level Foot-soldiers Under The Bus? By bobo on 5/19/2007 3:32 PM
TMG: Depends on what you mean by "get rid of them." If they do what they've done in the past, which is some idiotic half measure riddled with exceptions and loopholes, no, it won't have any effect. The water will simply divert and flow through the new channel. If they actually end the MM exemption and grandfathering, then yes, it will.

I have exactly zero belief that they will do anything that endangers the revenue stream of the big Wall Street interests. So look for more gobblygook that resembles the tax code for complexity, and leaves lots of wiggle room. The excuse given will be that the SEC doesn't want to shock the system (i.e. diminsih Wall Street's profits at investor expense) - which will of course fly in the face of the previous statements that this is a trivial issue impacting few.

Re: Real Meaningful Reform, or Throwing Some Low Level Foot-soldiers Under The Bus? By FC on 5/20/2007 9:17 AM
It gets worse and worse and worse.......
Re: Real Meaningful Reform, or Throwing Some Low Level Foot-soldiers Under The Bus? By mhelburn on 5/20/2007 9:17 AM
The OMM is going to say that he is at a disadvantage, having created all of these naked short positions legitimately, relying on Reg SHO and shouldn't have to close them out until the options expire. With LEAPs, this could mean years.

Of course, even discontinuing the exemption would stop the influx of counterfeited shares. If he is hedged with air-shares, will they allow him to maintain the hedge if the options are rolled out indefinitely?

Expect some sort of convoluted language that can be screwed, glued and tilted anyway that the mm's want. There will be lots of if's, and's, and but's. There will be no penalties for non-compliance. Penalties would imply some sort of enforcement.
Re: Real Meaningful Reform, or Throwing Some Low Level Foot-soldiers Under The Bus? By incest on wallstreet on 5/20/2007 9:36 PM
The last head of the SEC, Donaldson is skull and bones (see below) and founded a firm that was a major player in junk bonds and one of the first clearing firms to regularly tail to deliver.

They sold the clearing division, riddled with fails to deliver, Pershing to the Bank of NY. For some reason, Refco agreed to buy their unprofitable futures business.

- One of these was the Pershing Division, which cleared transactions for more than 550 brokerage firms that collectively maintained over 1.4 million client accounts.
- In 1985 DLJ sold its unprofitable futures trading businesses to Refco Inc.
- n 1990 DLJ further enhanced its junk bond activities by hiring at least 20 former Drexel investment bankers.
During the 1980s the junk bond percentage of the firm's underwritings trailed only Drexel Burnham Lambert Inc. The October 1987 one day stock market crash did not shake DLJ's faith in this means of financing, even though Drexel Burnham Lambert foundered and its junk bond chief, Michael Milken, went to jail.


William Henry Donaldson (born June 2, 1931 in Buffalo, New York) is a former chairman of the U.S. Securities and Exchange Commission (SEC). Donaldson attended both Yale University (B.A. 1953) and Harvard University (M.B.A. 1958). While he was a senior at Yale, he joined its Skull and Bones secret society [1]. Donaldson returned to Yale and founded the Yale School of Management where he served as dean and professor of management studies. He also served in the United States Marine Corps.

Donaldson served as Under Secretary of State in the Nixon Administration and as a special adviser to Vice President Nelson Rockefeller.

Donaldson founded Donaldson, Lufkin & Jenrette. He was Chairman of the Carnegie Endowment for International Peace from 1999 to 2003. In 2003 he was appointed Chairman and chief executive officer of the New York Stock Exchange and Chairman, President and CEO of Aetna.

On June 1, 2005, he announced he would step down as SEC chairman on June 30.
Re: Real Meaningful Reform, or Throwing Some Low Level Foot-soldiers Under The Bus? By incest on wallstreet on 5/20/2007 9:37 PM
It's hard to understand the regulatory / media / wallstreet failure to deliver problem without understanding this secret club and the way it overlaps membership in the wallstreet elite:

http://en.wikipedia.org/wiki/List_of_Skull_and_Bones_members

Look at how many names founded major brokerages or are now involved in regulation, media or politics. Both John Kerry and George Bush were members.

These members look out for one another.
Re: Real Meaningful Reform, or Throwing Some Low Level Foot-soldiers Under The Bus? By SteveM on 5/20/2007 12:02 PM
Discontinuing the OMM exemption would cause prices to return to fair market value. For this reason alone it will not happen.

The fraud must continue or the gravy-train ends for the primary players, and honest investors will be able to walk away from the table with a profit. This is never going to happen. This will be a fight to the death.
Re: Real Meaningful Reform, or Throwing Some Low Level Foot-soldiers Under The Bus? By n-tres-ted on 5/20/2007 12:58 PM
commentary from yesterday's WSJ on SEC rulemaking and enforcement:

We should also try out alternative ways to adopt rules. The worst way is for a public agency to unilaterally announce new ones. Instead, new rules should be promulgated in draft form for public comment, so that they will become as workable and clear as practical. In some areas, industry groups could take the lead in proposing rules, subject to veto by a public agency. This is the approach taken by self-regulatory bodies like the NYSE, subject to the oversight of the SEC. In other areas, the details of the regulation could be left to the market participant after the framework was established by a public agency. This is the approach taken by Basle II on bank capital requirements, which allows large banks to utilize their own risk models within the parameters set by the banking agencies.

Finally, U.S. regulators should follow a risk-based approach to rules as well as to principles. The adoption of rules should be targeted at areas where large groups of investors are at risk, while efforts to enforce rules should concentrate on the biggest players in the sector and those with typical patterns of egregious conduct.

http://snipurl.com/1lb63

The full article requires subscription. The commentator, Mr. Pozen, is chairman of MFS Investment Management.
Re: Real Meaningful Reform, or Throwing Some Low Level Foot-soldiers Under The Bus? By captdale on 5/21/2007 8:59 AM
Mary - The OMM is going to say that he is at a disadvantage, having created all of these naked short positions legitimately, relying on Reg SHO and shouldn't have to close them out until the options expire. With LEAPs, this could mean years.
--------------------
Thank you. I had completly overlooked that loophole. Ahhhhhhh..... What to do . What to do and I am not about to roll over and play dead.
Re: Real Meaningful Reform, or Throwing Some Low Level Foot-soldiers Under The Bus? By bbhindyou on 5/21/2007 9:00 AM
It is more profitable for wall street if companys fail and their stock gets cancelled never having to cover the failed to deliver positions.
The companys could have made themselfs and their stockholders more money if the company continues ,but wall streets profits are increased by a high company failure rate so the companys must be destroyed.
The products produced by theses companys COULD be a great benifit to many but wall streets profits are more important than anything or anyone else so kill the companys.
THIS HAS TO STOP!
Lets find a place and a time to get together and show we know and care about this tragic mess and those who are profiting must be named.
The victims too must be named and the advances they could have contributed to the world which are now lost.
In the name of profit for few we all pay with our lost jobs,retirement and investment accounts,and even our very lives through lost medical advances.
Lets get together and shout as long as we still can.
Our children depend on us.
Re: Real Meaningful Reform, or Throwing Some Low Level Foot-soldiers Under The Bus? By JulesG on 5/21/2007 9:02 AM
Extreme Motorsports of California, Inc. Confirms Symbol, CUSIP Change and Trademark Protection Strategy

New Ticker Symbol Is Part of Novel Branding and Copyright Protection Program to Include Piracy Protection of Shares of the Company's Common Stock

BAKERSFIELD, CA -- (MARKET WIRE) -- May 21, 2007 -- Extreme Motorsports of California, Inc. (PINKSHEETS: ETMO) (PINKSHEETS: XTMS) ("Xtreme" or the "Company"), has initiated a full program to promote its brand identity and associated trademarks. Soon, the Company will release, both on its website and at its corporate and dealer locations, new branding and corporate identity materials that are being registered with the United States Patent and Trademark Office. As a result of promoting its corporate identity and protecting its intellectual property, the Company now has the right to limit the unauthorized sale of its shares of common stock.

The overall strategy is designed to protect shareholders from purchasing shares from naked short sellers, which the Company believes may be counterfeit and violate copyright and trademark protection laws. The Company intends to pursue those who wrongfully "naked short sell" its common stock to the extent that the common stock of the Company is now part of its intellectual property portfolio.

Since February 2007, the Company has been working with its corporate and securities counsel to develop a means of protecting its brand and corporate identity, including stock certificates, under U.S. Code, Title 15, Chapter 22 - Trademarks and Title 18, Part I, Chapter 113 - Stolen Property.

From a civil law perspective, violations under these laws provide for the recovery of the violator's profits, damages caused by infringement of the trademark and the costs of prosecuting the violation. The statute also provides for treble (three times) profit or damages, whichever is greater, when the violator knowingly uses the pirated mark in connection with a profit-seeking activity. If a trademark infringement is indeed confirmed by final judgment by a trial court, the holder of the trademark can elect to recover up to $1,000,000 per counterfeit mark if "the court finds that the use of the counterfeit mark was willful."

From a criminal law perspective, trafficking in counterfeit trademarks carries potential fines up to $2,000,000 and/or imprisonment of not more than 10 years for an individual and fines up to $5,000,000 for violations by companies. In the case of multiple convictions, the fines and imprisonment double for individuals and fines triple for companies.

As part of this program, the Company has developed a new certificate which contains both trademarked identity and copyrighted materials. To ensure it would be able to avail itself of the highest level of protection, Xtreme applied for a new CUSIP number, the standard numbering system developed for all U.S. debt and equity securities. This new CUSIP number for the Company's common stock necessitated a corresponding ticker symbol change. As of May 21, 2007, Extreme Motorsports of California, Inc. will trade under the symbol "ETMO."

James A. Reskin, General Counsel of the Company stated, "The Company can now claim that its materials are subject to copyright as well as trademark protection and intends to enforce its rights under these laws. Legitimate buyers of the Company's common stock will not be affected, including those who buy and sell electronic representations of our copyrighted and trademarked common stock.

"However, those entities who sell stock purported to originate from the Company but which does not, in fact, originate from the Company, may be selling counterfeited and pirated copies of copyrighted or trademarked materials. Therefore, whether due to illegal naked short selling or issuance of counterfeit securities, the Company intends to pursue the unauthorized duplication of its trademarked materials and believes that the remedies available under intellectual property laws should allow us to pursue violators in criminal and civil proceedings for the benefit of all of the Company's shareholders."

Xtreme will update shareholders regarding any future legal proceedings the Company may undertake to protect its copyrighted and trademarked common stock.

About Extreme Motorsports of California, Inc.

Extreme Motorsports of California, Inc., operating under the trade name "Xtreme Motorsports," is a manufacturer of custom and production-line sandrails, desert and dual sport racecars. Founded in 1983, Xtreme's sandcars have been sold to customers in England, the United Arab Emirates, Australia, South America and the US. For more information, visit the corporate web site www.xmssandcars.com.

Forward-Looking Statements

Certain statements in this release, and other written or oral statements made by the Company, including the use of the words "expect," "anticipate," "estimate," "project," "forecast," "outlook," "target," "objective," "plan," "goal," "pursue," "on track," and similar expressions, are "forward-looking statements" and are subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance, or achievements of the company to be different from those expressed or implied. The Company assumes no obligation and does not intend to update these forward-looking statements and takes no obligation to update or correct information prepared by third parties that are not paid for by the Company.





--------------------------------------------------------------------------------


Contact:

Investor Relations
661.310.7880
Email Contact


SOURCE: Xtreme Motorsports of California, Inc.
Re: Real Meaningful Reform, or Throwing Some Low Level Foot-soldiers Under The Bus? By JulesG on 5/21/2007 9:03 AM
Patrick sold all of his stock except overstock. He says it in this inverview

click here to listen to this Patrick Byrne radio interview.

http://www.iamthewitness.com/mp3/Patrick_Byrne_naked_short_selling.mp3

Re: Real Meaningful Reform, or Throwing Some Low Level Foot-soldiers Under The Bus? By tmg on 5/22/2007 10:41 AM
As a form of cover, the SEC seems to use the laisser-faire-trust-the-industry-to-police-itself approach (a/k/a let the convicts run the prison), although I don't believe for a second this is the true motivation. For instance, in grandfathering the FTDs, the SEC reasoned that this would give the issuers of these unregistered shares a chance to clean them up in an orderly fashion. Well guess what, they didn't clean them up or they wouldn't have had to propose to eliminate this clause a year and a half into Reg SHO.

Next up, I predict they will say that in proposing elimination of the options MM exemption, they were putting them on notice to stop it. And guess what here, all that has happened is they have been behaving as you might expect and getting all they can in as if it will go away any minute. So the FTDs have gotten worse, the FOIA data shows this, and you are right, perhaps they will turn around and use this as a means to come to their defense.

Let's hope the impending HFS hearing shakes some action out of them soon. I am sure they are aware that anything that does not meet the securities acts will bring a court challenge so that really puts them on the spot to come up with something very creative.
Re: Real Meaningful Reform, or Throwing Some Low Level Foot-soldiers Under The Bus? By rollerskate on 5/22/2007 10:43 AM
JulesG, thanks for the Patrick Byrne interview. In my opinion the best I have heard. I learned some things about more things breaking in national media soon. It really is happening. I have been educating myself for past 5 years and just this past Nov. a decision was made for our family to dump all equities. We are old and no time to wait this out.
Re: Real Meaningful Reform, or Throwing Some Low Level Foot-soldiers Under The Bus? By ginger on 5/23/2007 4:33 PM

http://www.tradersmagazine.com/magazine2.cfm?id=1&aid=2810&year=2007
Re: Real Meaningful Reform, or Throwing Some Low Level Foot-soldiers Under The Bus? By hedgie on 5/24/2007 10:10 AM
Comment period extension now ended.

http://www.tradersmagazine.com/magazine2.cfm?id=1&aid=2810&year=2007
Re: Naked Shoting, Money Laundering.... By Willy Loman on 5/27/2007 9:22 PM
I thought I'd toss the following out for general consideration. According to Leslie Boni's paper, "[t]he [mandatory] close-out provisions do not apply to fail-to-deliver positions established prior to the security’s achieving threshold status. . . . This exception applies unless the amount of fails of this grandfathered position decreases once the security achieves threshold status. In the event of a reduction in the size of the grandfathered position, only the reduced amount remains exempt from the close-out position." (P. 8 & FN "L".) Thus in January 2005, I corresponded with one Jocelyn Mello of the NASD for further clarification about Reg SHO. She assured me at that time that at the end of each trading day, the amount (or an amount, I forget which) of a "grandfathered" position in a particular security is, in fact, used in the calculation of the aggregate number of fails of the security. In this way, the NASD apparently believed, the "grandfathered" fails would eventually be weened out of the system. If that has been the case, is it possible that although the total number of fails has been increasing (as more and more of the grandfathered position gets accounted for), the amount of "new" FTDs is actually declining?
Re: Real Meaningful Reform, or Throwing Some Low Level Foot-soldiers Under The Bus? By JLB on 5/25/2007 3:47 AM
This seems to express what Cox' feelings are toward the investor:
http://www.nypost.com/seven/05252007/business/report_rips_cox_business_paul_tharp.htm
Re: Real Meaningful Reform, or Throwing Some Low Level Foot-soldiers Under The Bus? By namingnames on 5/27/2007 9:23 PM
It's time to name names.

Chairman Christopher Cox is obviously a member of this criminal cartel as is Annette Nazareth. Shelby (thank god he's gone) was obviously on the take.

Other criminals include Gary Weiss and scumbags like Stuart Goldstein who lies for a living for the DTCC.

Steven A Cohen accounts for 3% of the daily trading volume and makes over a billion per year. Out of who's pockets does his "in come" come in?

http://en.wikipedia.org/wiki/SAC_Capital_Partners

We need to start compiling a list of names and addresses of people that need to be arrested for either counterfeiting securities or protecting the counterfeiters.

We aren't fighting "the system". We are fighting specific scumbag human beings who are stealing from us. I'm sure there are members of law enforcement that read these blogs.

Re: Real Meaningful Reform, or Throwing Some Low Level Foot-soldiers Under The Bus? By davidn on 5/27/2007 9:24 PM
Goldman Sachs private stock exchange!!!

http://cryptogon.com/?p=777
Re: Real Meaningful Reform, or Throwing Some Low Level Foot-soldiers Under The Bus? By bbhindyou on 5/27/2007 9:26 PM
Hello darkness my old friend.
Silence too I know you.
Darkness and silence are not fitting memorials to those who gave their lives trying to fight against them.

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