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Remarkable Speech By Senator Bennett

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Posted by:   bobo 7/22/2007 5:40 AM

Check this one out. It seems that the emperor's clothes are receiving greater recognition as being a sham. This is a podcast of last week's speech by Senator Bennett, calling for hearings on naked short selling - really just a hearing on massive market manipulation and systemic fraud against investors.

Bennett seems to have a good grasp of some of the ways that the bad guys destroy companies, as well as investor faith in the integrity of the markets. The only point we really disagree on is where he frames it as a small issue. I don't think anyone knows how large it actually is. I know the party line is that it is relatively minor, but so much of that relies upon the representations of the most rhetorically dishonest and self-interested parties, that I don't think anyone can really say for sure how big it is. We know from the SIA numbers that just on the NYSE we are close to a hundred billion in current fails at some points in time - at today's mark-to-market values, not the values when the delivery failures occured. Could those have declined by a factor of 5? 10? Choose your number. However you slice it, we aren't talking a small number.

Which brings us to Bennett's call for a hearing on the topic.

Apparently everyone's too busy just at the moment to actually hold the hearing on a practice that is now believed to be responsible for the outright theft of hundreds of billions, if not trillions, of investor dollars. You know, just as the entire judiciary committee besides Hatch and Grassley were too busy to attend the hearing where regulator corruption and fraud were revealed. Everyone has a lot on their plate, so why focus on stopping the robbery of a generation's retirement when there are pressing matters to attend to?

What is positive is that this issue has gone from one where Patrick and a few others, Easter Bunny included, have gone from deluded loons making it all up, to possibly having a very small point on a virtual non-issue, to maybe mostly right on an issue significant enough to be receiving a lot of press and regulator attention....to......

Invisible.

What do I mean?

I commented to a friend that Patrick could now walk down Wall Street buck naked, firing off a .45, and screaming Nirvana tunes, and nobody would comment. He's now more invisible to the NY press than a 60 year old man is to teen girls in a mall. It's almost as though the cone of silence has descended, and Patrick has been "disappeared." For example, the WSJ ran a largely fair piece on the DTCC's role in the delivery failure crisis, and Patrick, who has been the poster boy for this issue for the last 3 years, wasn't mentioned once. The WSJ, who has written countless "wacky Patty" blurbs, suddenly doesn't know who he is, even after interviewing him as background for that article.

Not that I subscribe to the notion that the NY media is largely controlled by the guys who run the financial system, but doesn't it seem a little odd that the single most visible guy on the planet when it comes to delivery failures and wall street corruption, is now invisible? Kind of like, since the prime broker suit and the Rocker/Gradient suit have now gone to the point where it looks like discovery will finally get going, they want to make sure nobody can hear Patrick when he starts discussing what was found. "Maybe if we don't talk about it, nobody will know!" Eerily reminiscent of the way the financial system dealt with delivery failures - deny everything, claim ignorance, demand proof, mock anyone with data contradictory or dangerous to your position. And ultimately, ignore anyone likely to be taken seriously, or whose position is fact based and irrefutable.

As a bonus, you can hire shills like 'lilGW to repeat any propaganda you cook up, in the hopes that the dimmest of bulbs believe it.

Not really any different than the techniques used by countless dictatorships and totalitarian regimes. Control and censor the information flow, limit access to data, ensure that all "news" fits the approved spin, declare any refutation of your obviously dishonest stance as dangerous or agenda-based propaganda, and sponsor lots of mindless events and such that will occupy the masses while you repeat, over and over, that they have it great the way things are. There are no new ideas.

The only wonder is that people reliably fall for it. But they do.

And the bad guys clearly know that. Which is likely a big part of the contempt they feel for the rank and file. The ants. They understand that most won't question the lies, and the larger the lies, the less they will be questioned. A simple fundamental of how to get what you want.

Consider the NY press' role in this over the last 3 years - the biased coverage, the flat out dishonesty, the militant railing on CNBC, the conflicts of interest conveniently ignored, the complicit politicians heeding their financial masters' call and doing their bidding. How is that any different than the countless other examples of the rich and powerful walking all over the less fortunate?

Answer. It isn't. It's been this way for a long time. If you were an Indian a hundred and fifty or so years ago, you got a taste of it first hand, as you were portrayed as a dangerous savage intent upon destroying the American way of life by the media - a terrorist, dark of skin and evil of intent - even as we engaged in genocide, and took all your property away from you, and broke every treaty we ever wrote. The spin was that we needed protection, you were bad, and we were protecting ourselves from you when we engaged in mass murder, internment camps, violations of all agreements time and time again...funny how we always wind up with someone's land, or resources, or money, whenever we're "defending ourselves", huh?

The key in this example is that the media described, obligingly, how bad and mean and evil and dangerous the Indians were, and simply omitted everything that ran counter to an agenda that was pretty straightforward - confiscate all their assets, destroy them as a coherent group or race, and deny all the time that you were doing it, or alternatively, claim you were doing it to save yourself.

It isn't just Americans, incidentally. The Spanish did it to most of south and central America. Again, no new ideas.

We just kicked it up a notch with the media part of the equation.

Now fast forward to today. One of the new ways you can conquer and confiscate assets is by doing it financially, not with bullets. That's kind of what is going on with the financial system. Redistribute assets from "them" to "us", deny you are doing it, claim if caught you are doing it for the good of god and mankind (or the system, or liquidity, or increased efficiency, or whatever suits your mood), and tightly control what is said about it the entire while.

Not much changes, does it?
Copyright ©2007 Bob O'Brien
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Comments (24)
Re: Remarkable Speech By Senator Bennett By Convincing Joe Sixpack on 7/22/2007 11:11 AM
Any nugget of information the public cares about can circle the globe in a few days via email forwarding. Here's one draft you could consider sending to your email contacts or you could draft your own.

"I've learned of a stock scam that has cost me much of my life savings and want to warn as many people as possible so it doesn't happen to them. Please do me a favor and forward this to as many people as you can.

When Wallstreet computerized the stock market in the 90's, a loophole in the international clearing and settlement system was inadvertantly created that is likely directly responsible for many of your losses in the stock market. When you thought you were losing money because of a bad investment decision, the truth may have been a thief had reached into your pocket and emptied your wallet.

It's a perfect crime as it is hard for some investors to understand how they are being robbed and how criminals have gamed the system.

When you make a purchase, criminals at large foreign hedge funds can take your money without delivering the shares you purchased. They effectively sell you an IOU instead of a real share. This extra phantom stock supply creates a situation where they can't lose. They take buyers' money in a targeted stock until any upward momentum runs out of steam and the price begins to inevitably fall.

When you finally accept your loss and sell your shares, they return the remainder of your money keeping the difference as profit in a bet that was impossible for you to win and impossible for them to lose. They no longer owe you anything and your loss is their profit. The bet costs them next to nothing as they can make deals with clearing organizations to only fractionally back the value of their bet and their collateral requirements plummet as your investment goes down in value. It's like a license for them to print money off your back.

It would be as if you were sitting at a poker table, not realizing that the reason you were losing was because one of the other players was cheating. These criminal terrorists have fixed the system, so they can cheat and take your money in bets that you can't win and they can't lose on.

Chairman Cox of the SEC calls it a "serious problem" and Senator Bennet wants the Banking Commission to investigate.

The situation has become an emergency as terrorists and criminals beyond our regulators' reach are sucking the US stock market dry and in the wake leaving a trail of bankrupt companies and layed off employees. This has put our whole financial system, the economy and your standard of lving at risk.

The reason you may not have heard about it is the situation has become so dire that the regulators are concerned that fixing the problem or even bringing attention to it could cause a domino effect of clearing house bankruptcies. If everyone who was owed stock asked for a stock certificate (proof of ownership), there would not be enough shares to go around and the panic that would set it would be akin to a run on the bank. Unfortunately, the only way to fix this problem is to force the system to honor IOU's and let Wall Street take the losses they deserve for financing and supporting these criminals.

Fixing the problem will likely cause your investments to rise rapidly in value as the criminals are forced to honor IOU's by buying real shares.

It sounds outrageous and impossible to believe, but it is true. Trillions have been stolen over the last decade. They've likely stolen YOUR money.

Learn more:

http://www.thesanitycheck.com
http://www.investigate thesec.com

and spread the word.

Thanks for your help!"
Re: Remarkable Speech By Senator Bennett By Wicked World on 7/22/2007 11:09 AM
Wow. I'm listening to Sen. Bennett's voice but I'm hearing a lot of Bobo and Dave P. shine through! Very nice. I'm gonna have a Mojito now.
Re: Remarkable Speech By Senator Bennett By rtway on 7/22/2007 8:07 PM
Bobo,
You have heard me say this before and I'll say it again. WE FAIL TO SEE THE OBVIOUS. The democrats were handed the sword to slay the dragon that was imperiling the populace of this world of nirvana where all people will flourish as well as the economy and the last 6 years have been a storybook that Harry Potter could not replicate. If ever there was a time to find the Woodward, Bernstein story to expose the Republicans at these criminal deeds it is now. But why no takers for this task? I'll go out on a limb and say that there are as many crooks in the Democratic side as the Republican side and no one wants to lose the golden goose or give back any eggs. Our knight in shining armor has been Patrick and his band of merrymen including one rabbit. However I still contend the power is in a journalist rebel such as O'Reilly or Dobbs, that can rally a million people in a night. Another thing could be a grassroots organization like Numbers USA when they fought illegal immigration by creating a base of half a million people sending faxes and making phone calls.Pols can only run so far from the media and then it becomes cancerous and they know it.
Re: Remarkable Speech By Senator Bennett By Turtle on 7/22/2007 8:51 PM
Thanks for the link Bob; I would like to write a few comments in regards to the senators comments.

Specifically, I’m concerned about his suggestion that no more than 100% of a company’s stock should be allowed to be lent out for short sales, and that anyone making this assertion in the future must clearly define his or her terms.

Company XYZ has one share issued and outstanding (only). I am the sole shareholder of this one share of XYZ. If I lend out my share to a short seller, Mr. Black, and he sells it to Mr. Pink, then Mr. Pink is now the new property owner of that sole share. I am no longer a shareholder, but instead I hold an IOU from Mr. Black. If I were to incorrectly continue to count myself as a shareholder then an error of double counting would occur that gives the appearance of 2 shares now existing in XYZ stock, or as it goes, two times the issued and outstanding stock trading in the marketplace. Again, this is incorrect because it is only Mr. Pink who rightly owns the one and only share.

What Senator B. has proposed is that no more than 100% of a company’s stock should be allowed to be sold short. I agree, but he should be careful to define his terms.

For example: In the above, we would say that 100% of XYZ’s stock has been sold short. Correct? Yes and under the senator’s proposal no more short sales should be allowed to occur. But, this cannot be so, at least if we still believe in the notion of property rights. It cannot be argued that Mr. Pink is the sole and rightful owner of the sole share of XYZ, and as the property owner, he is afforded the property rights (within the law) to do as he pleases with that share. If Mr. Pink wanted to lend that share to short seller Mr. Black who in turn sells that share to Mr. White, then it is Mr. Pink’s right to do so. Of course, we now find that Mr. White is the sole and rightful owner of the share. Again, I and Mr. Pink are no longer shareholders, but instead hold one IOU each from short seller Mr. Black.

It is easy to double and triple count. We should be careful not to think that 3 times or 200% of the outstanding shares are being held in the market because in reality there is only one share and that share is now held by Mr. White. So much for my caution on defining of terms.

A suggestion:

One should note that there is nothing illegal in the above transactions. No naked shorting. But, even in my simple one share example, we can easily see how it would get a bit confusing to track down the one real share. To help alleviate this problem, we could easily require that brokerage firms notify both institutional and retail investors when their shares have been lent out and replaced instead by IOU’s. On their account screens and account statements, lent shares would simply read IOU 1 share XYZ. On my statement above it would show IOU 1 share XYZ. On Mr. Pink’s statement above it would show IOU 1 share XYZ. And, on Mr. White’s statement above it would simply show 1 share XYZ. You could easily replace the term IOU with share entitlement or whatever you want so long as the message was clear to the account owner that he no longer owned an actual share of stock but instead an IOU. The point being that you cannot restrict a rightful owner from exercising his right to lend his or her share. To that I should add, those who own IOU’s should not be allowed to sell them unless the buyer agrees to accept them in place of an actual share. If the buyer refuses IOU’s, then I or Mr. Pink or both wanting to sell should be able to force Mr. Black to replace our share so that we can sell it freely. Sorry Mr. Black.

In closing, I do find that last example cited by the senator to be most intriguing. A company out of business for 3 years with a stock that gets active every 13 days. Oh my word!
Re: Remarkable Speech By Senator Bennett By rtway on 7/22/2007 10:02 PM
Probably the largest generator of money or GDP is our capital market trading system and all the businesses that shadow that industry. I would say that they could afford the most sophiticated super computer that would overshadow any computers in our industrial world. We have the capability to smash atoms and protons and put the Bible on the head of a pin. If one can not envision a system that could track a stock and its owners in nanoseconds you would be a neanderthal. The excuse that they don't have the money or capacity to accomplish this task is comic book material. They do not want to track the stock, that is the obvious. They would lose their advantage and source of guaranteed wealth.
Re: Remarkable Speech By Senator Bennett By n-tres-ted on 7/23/2007 9:14 AM
To the best of my knowledge, Senator Bennett is not well informed with respect to the manner in which DTCC lends shares to short sellers. He doesn't mention the Stock Borrow Program. But I am not the best person to describe what really happens, because I have not been there. As bad as it would be for DTCC to be in the position of lending shares belonging to us without our knowledge, the situation is actually much worse. If the shares were really being loaned, then there would be no FTDs, since the loaned shares would be delivered to the buyers. In fact, the suits against the prime brokers allege the shares are never borrowed or delivered, meaning all shares sold short by hedge funds since 2000 have been phantom, counterfeit shares (FTDs). The SIFMA spread sheets show $82 billion undelivered shares as of the end of 2006.

On the other hand, I'm glad that an investment banker in Salt Lake City showed Senator Bennett how those brokers are still ping-ponging shares of dead companies back and forth so they don't have to pay taxes and don't have to cover by buying the shares even at low/no cost.
Re: Remarkable Speech By Senator Bennett By Willie Loman on 7/23/2007 11:53 AM
Who needs terrorists when we've got Big Media? It's ironic (not to mention hypocritical) that the press would fear sparking a financial meltdown by discussing the naked shorting issue when they're basically in the business of manufacturing and selling fear.
Re: Remarkable Speech By Senator Bennett By bobo on 7/23/2007 11:59 AM
Willie: Actually, I have come to believe it is worse than that. Imagine an industry devoted to creating issues and entertainment to keep the masses distracted so they don't understand their indentured servitude. Racism? Foster it. Differences between virtually identical political parties? Make much ado about it. Bogus international incidents any thinking biped understands are unlikely, if not impossible? "Report" them with breathless belief. Issues that are meaningless in the scheme of things? Saturate the airwaves with them - immigration, the enemy within, terror, political division - anything to keep the masses enthralled and away from asking tough questions about their government and their financial system. If one is completely cynical, one views the lesson about the complete breakdown of the media in coverage of the NSS issue, and extrapolates that to everything - we are being lied to, all the time, by professionals chartered with keeping us busy, and away from the man behind the curtain.

Seems pretty obvious to me.
Re: Remarkable Speech By Senator Bennett By Earlytobed on 7/23/2007 9:47 PM
Bob,

What about the NFI shareholder? When will they get their vindication against the naked short sellers once and for all?

When will you talk about NFI again?

I miss your comments.
Re: Remarkable Speech By Senator Bennett By rtway on 7/23/2007 9:48 PM
I think you summed it up perfectly. One of the greatest and funniest scenes of all times was Peter Sellers in a Pink Panther movie where he was a policemen on duty and was doing his duty by verifying that the blind organ grinder who had a monkey and a tin cup was trying to get donations from the public in front of a jewelry store. Sellers was obsessed with finding out if the blind organ grinder had "a license for his MAHNKAY and repeatedly asked for the license "Of the MAHNKAY". While he was interrogating the organ grinder for the monkey's license the jewelry store was being robbed in broad daylight and the perpetrators walked right pass Sellers while he was doing his monkey license inspection. This is exactly the same thing. Well said Bobo.
Re: Remarkable Speech By Senator Bennett By wake up! on 7/23/2007 9:49 PM
Bobo, you're bang on.

Imagine you want to be king and you want other Americans to be a serfs who will work all day to provide you a nice life style. How do you convince the serf to do that which is against his or her own best interests?

The short answer is you gain control of the media, government and military apparatus, then convince the serfs to fight amongst themselves.

- crime always comes from below. People poorer than you commit crimes, but people richer than you are of higher moral character

- Divide and conquer. How often have you seen CNN run the headline for any issue as "America Divided: Fill in the blank for the issue". From abortion to gay marriage, they like to cover the most decisive issues, painting everything as black and white with no gray. Democrats vs Republicans is a BS division as they are two halves of the same beast. It's like a game of good cop / bad cop.

- enemies are foreign. Keep the masses busy with wars abroad so they won't think to remove domestic enemies.

- keep the population dissatisfied and in a constant state of fear (terrorist alerts, remember the bomb shelters) and constantly be at war on things. War on drugs. War on poverty. War on illiteracy. but never solve anything. The goal is to be at endless war, not to enter into wars that can be won.

- bread and circuses. Any time something REALLY IMPORTANT is happening that you don't want the serfs to know about, fill their brains with something that doesn't matter. OJ to Hilton, keep the people preoccupied. Do you remember Chandra Levy? Why did we hear about her every day on the week of Sept. 11? Usually something important is happening when they put distract-a-news on 24/7.

- if the people start figuring out about an issue, give it a bit of coverage, but make people look like nut cases. Anyone that wants to investigate 911 (a crime scene that was never investigated) is a loony tune. Anyone that wonders about share settlement problems is part of the baloney brigade.

How do you get to be king? Convince everyone else to sell their labor, goods and services for money or shares, then put yourself in the position of printing that money or shares out of thin air.

When you print the money, you can buy any media outlet and you can control any politician. Your only real fear is the serfs figure out they don't have to be serfs and if they'd get the parasite off their back, they wouldn't have to have two wage earners struggling from paycheck to paycheck in the richest empire in the world.
Re: Remarkable Speech By Senator Bennett By wake up! on 7/23/2007 9:55 PM
"mort gage" is french for "death pledge"

When you buy a home that will take most of your income for most of your productive years, you've entered into indentured servitude.

The banks don't actually lend you any money when you buy that home. They monetize your "note" or loan and net obligations amongst themselves.

I met a cab driver from Egypt in Manhatten that told me $150,000 quality homes sell for $30,000 in Egypt because they don't believe in usary (charging high interest). They save up and pay cash for their homes, so the amount we save up for our down payment is the amount they can afford for a home. Supply and demand dictates their homes will be a lot cheaper.

My guess is that one of the reasons Arabs are painted as terrorists is because they are a threat to a banking system that believes on charging interest on paper and ink they create out of thin air that isn't backed by anything.

The good news is that the scrawny old man behind the curtain is not powerful and he is scared to death the population will figure out how he has been ripping them off.
Re: Remarkable Speech By Senator Bennett By oldfeller on 7/23/2007 9:56 PM
While writing letters to congress at this point in time might seem a lot like writing santa when you were a kid there is a difference. Those letters go on record and will stay there as long as records are kept. In the future they won`t be able to say they didn`t know about what was going on. They will be seen as knowing exactly what was happening and probably profiting from it thru campaign contributions or worse yet even thru investments. Does anyone really believe Hillary just stumbled into a cattle trade with a crooked bucket-trading broker and got lucky? We the people see, we the people know. We the people are watching closer than ever. Write the letters, send the emails. Tell everyone who will listen.
Re: Remarkable Speech By Senator Bennett By Sean on 7/23/2007 9:58 PM
A rude awakening is coming for the criminals, but I fear we are going to pay for it...

OSTK.. Federal Judges in the pocket?? Who would have thought?

http://axisoflogic.com/artman/publish/article_24957.shtml

Train Wreck of the Week
By Bob Chapman
Jul 23, 2007, 18:00


Building permits falling down, Bernanke's pill for the economy, OverStock.com suing brokerage firms, jail likely for Conrad Black, Virginia speeding ticket money grab, American assets being scooped up, credit derivatives bought and sold, bank risks "Train Wreck of the Week"

Home construction rose 2.3% in June, but building permit activity, a sign of future construction plans, fell to its lowest rates in ten years. Building permits fell 7.5% in June to a 1.406 million units.

Ben Bernanke’s delivery to Congress was pathetic and we predicted it would be - a moderate advancing economy and persistent inflation problems. It never occurred to Ben that he might tell us the truth. All he did was supply a verbal tranquilizer.


All the major brokerage firms are in serious trouble and the financial damages they’ll have to pay will be enormous if they lose the lawsuit brought against them by Overstock.com for naked short sales. Of course the SEC is nowhere to be found.

The California Superior Court for San Francisco has found Overstock.com and its co-plaintiffs have stated viable claims for market manipulation under California Securities Law for common law claims for conversion (stealing) and trespass to chattels, as well as for injunctive relief under California’s Unfair Business Practices Act against the defendant prime brokerage firms based on those defendants allegedly executing the shares of those companies’ stocks. The court granted the co-plaintiffs leave to amend their other claims of interference with advantage, to more specifically plead the factual basis of these claims.

The federal court system should have handled these cases, but because federally appointed judges are in Wall Street’s back pocket the plaintiffs had to go through state court. The SEC has done virtually nothing under “Show” and at that was forced to act by exterior forces. Let’s hope the plaintiffs win. These brokerage firms have been screwing the public for years.

Lord Conrad Black will get no special treatment to restore his citizenship or to return to Canada to serve a possible prison sentence. Canada’s jails for white-collar crooks are palatial compared to the US equivalent. In Canada lawbreakers can be paroled after serving only 1/6th of a sentence.

Black’s turncoat deputy David Radler, who lives in Vancouver, BC, will probably only serve six months in a county club jail for ratting out his old boss.

Moody’s has been excluded from 70% of new commercial mortgage-backed securities after toughening up guidelines. It has been shut out of nine of the past 13 deals as underwriters shopped for higher ratings from rivals. Normally they’d rate 75% not 30%.

Virginia has imposed huge new fines for driving 20 miles over the speed limit – up to $2,500. The fines are to finance road projects. As a result more than 100,000 people have signed a petition calling for the laws repeal. The 140 members of the legislature have been deluged with calls and e-mails from constituents threatening to vote them out of office if they do not ask the Governor to call a special session to reconsider the law. Criminal and civil penalties shouldn’t be created for raising money. This is nothing less than a tax increase and a bonus for insurance companies, who will raise rates on the speeders. Naturally the poor will get hit hardest.

As the dollar weakens foreigners are scooping up American assets. The Chinese and others are diversifying their reserves away from the dollar. Foreigners are not buying US assets because of a robust economy; they are buying to dump dollars, which are shrinking in value daily.

This is going to go on for years unless the US declares bankruptcy. In 2006 foreigners bought $147.8 billion of US businesses, up 77% from 2005. The Europeans dumped $109.9 billion, twice what they got rid of in 2005. Germany was the largest buyer at $22.7 billion. Middle Easterners spent $12.4 billion and the Japanese $8.7 billion. Have no fear the Chinese are on the way. Selling will turn into a tidal wave over the next few years as the dollar drops 35% to 50%.

Fitch Ratings’ global credit derivatives survey of 65 banks and insurers found that the total amount of credit derivatives bought and sold reached nearly $50 trillion at year-end 2006, an increase of 113% over the $23.4 trillion reported for year-end 2005. It also represents a 1,326% boost from the volumes of credit derivatives bought and sold in 2003, when Fitch first started the survey. Credit derivatives include credit default swaps, which allow investors to bet that a company can’t pay back its debt. They also include collateralized debt obligations, or CDOs, which bundle together bonds, loans or other kinds of debt securities and sell notes that represent different levels of risk in the group. The levels of risk range from large triple A-rated tranches, which pay modest returns, to small-unrated equity tranches, which are most likely to be among the first defaults. Banks and broker-dealers dominate credit derivatives volumes, according to Fitch. Around 44 banks held about $24.6 trillion of the securities at the end of 2006, more than double the $11.3 trillion of volume at the end of 2005. 



However, a rising proportion of last year’s debt derivatives have low credit ratings, which means the banks are often holding securities that have a higher risk of defaults and difficulty in paying them back. At the end of 2006, 38% of the credit derivatives were speculative grade, meaning junk status, or unrated. That’s more than double the proportion of unrated credit derivatives in 2003, when they made up only 18% of the market. The banks primarily use credit-default swaps as a way to hedge their risks. However, banks increasingly said they use credit derivatives in general to aid their trading operations, Fitch said. The study also found that most of the respondents have concerns about a credit crisis, but put the greatest risk beyond a year from now. Among the top 20 traders of credit derivatives, only five increased their use of the securities last year: Morgan Stanley, ABN Amro, Dresdner, Bear Stearns and Royal Bank of Scotland. Nine others reduced their volumes, including Goldman Sachs, Deutsche Bank, Merrill Lynch, Credit Suisse and Citigroup. 
Earlier this week, a report from Phoenix Partners Group found that the top investment banks, including Bear Stearns, Lehman Brothers, Goldman Sachs, Merrill Lynch, Morgan Stanley, Bank of America, Citi and JPMorgan, have seen significant increases in the cost of protecting their debt against default. Bank of America saw its cost of protection jump 48%, while Citi’s cost rose 45%. The independent banks, including Bear, Goldman, Lehman, Morgan Stanley and Merrill, have seen their cost of protection grow in the range of 20%.

http://www.theinternationalforecaster.com/trainwreck.php?Id=181


Re: Remarkable Speech By Senator Bennett By tommytoyz on 7/24/2007 8:06 AM
My letter to Senator Bennett

Dear Senator:

I appreciate your efforts on the naked short selling problem in our capital markets.

If I may, I'd like to offer some critical analysis on your presentation that you made to the Senate on July 20, 2007:

First of all, the issue is far simpler and can be explained in far simpler terms than most people present.

The issue is simply about falsely and deliberately crediting securities to investor accounts which do not exist, credited by the brokers. This is known as the issuance and sale of unregistered securities, and is already prohibited by the Securities Acts - just not enforced by the SEC.

Fix this, and the entire problem is solved, no matter why, how or by whom these fake securities are issued. But fail to solve this key issue and delivery failures and the multiple re-lending of each share multiple times will not be fixed. It's just that simple and basic.

Your example of 4 Million shares in investor accounts when the issuer only issued 3 million will still be possible if brokers can still issue and sell unregistered securities to investor accounts.

This entire house of cards needs a patsy and victims to function, in order to absorb the fake shares for real cash. Without investor accounts absorbing these, the fraud doesn't work.

One can argue all day whether it is the DTCC, the broker-dealers, specialist and/or many other players who are to blame or how these fake securities are created. The main point is that they have to wind up in investor accounts in exchange for real cash for this all to function and for the perpetrators to profit.

So the real focus belongs on what is credited to investor accounts by brokers.

I repeat, the focus belongs on what securities are credited to investor accounts in exchange for investor cash.

Correct this, and the entire problem corrects itself, all by itself.

The SEC, DTCC and other market participants will try and confuse the attention to anywhere else and filibuster and waste time with meaningless side issues and statements that all is OK.

But if this is not fixed, nothing else will really help either. It will be like whacking at the leaves, rather than cutting the root.

The Securities Act of 1933 already prohibits the issuance and sale of unregistered securities to investors, except in minor exceptions, which do not apply in this situation we're talking about.

The SEC is also smarter than most think, in that they have never explicitly contradicted this prohibition contained in the Acts in their rule making nor do they explicitly permit the sale of unregistered securities in any formal rule.

The SEC is simply not enforcing the provisions in the Securities Acts which they are obliged to enforce, which strongly prohibit the issuance and sale of unregistered securities to the general public.

The SEC is also ignoring its obligation to link clearing and settlement and to ensure the transfer of beneficial ownership of the securities traded occurs. These are not being enforced, in order to accommodate delivery failures and multiple borrows for the profit of Wall Street Firms.

So the framers of the Securities Acts clearly envisioned and tried to avoid what is now taking place. We do not need new regulations, like short sale rules (REG SHO) - just enforcement of the existing provisions in the statutes by the SEC.

Unfortunately, the SEC has chosen for quite some time now not to enforce existing provisions in the statutes and frames new rules as if these provisions didn't exist.

So how should this specifically look like?

1. On purchases, the trade symbol of the registered security should only be credited to investor accounts in the form of "Securities Entitlements" for 3 days. If after 3 days there is a delivery failure, the account needs to reflect this. The original trade symbol of the registered security purchased can not continue being credited with delivery failures of the registered securities.

2. In securities lending, when registered securities are removed from investor accounts by brokers to lend out to short sellers, the accounts from which they are removed from must reflect the removal. Removed borrowed securities must be debited from accounts.

Currently, number 2 is done in secrecy, simply because the securities are not debited when removed and lent, thus creating in reality, accounts full of fake and unregistered securities.

So it all comes back to making sure that only the registered securities are credited to investor accounts, whether via crediting on purchases or through debiting during lending activity, to bring order to this insanity of having more securities in the market than the issuers have issued.

Sales commissions are an ever diminishing income source for the broker-dealers on a percentage basis, so taking that away is not as big an issue as one would imagine. Much more money is made through stock lending fees, by taking securities from investor accounts for this purpose.

Questions for the DTCC,
would be how they can operate by ignoring Section 17a of the Securities Exchange Act of 1934 that requires the linking of settlement and clearance and Section 9 of the same act that prohibits even the appearance of trades where there is no change in beneficial ownership of securities.

Questions for the SEC,
would be to ask why they are not enforcing an entire series of provisions contained in the Securities Acts :

1. The prohibition on the issuance and sale of unregistered securities (FTDs and Securities Entitlements are securities too!)
2. The linking of settlement and clearance
3. The requirement to the change of beneficial ownership of securities when traded
4. Or alternatively, why the SEC has not promulgated rules to contravene these provisions, as they can under their exemptive authority (The reason is because they would never get such rules past a court challenge in a rule petition).

Please feel free to have any of your staff contact me at...............
Re: Remarkable Speech By Senator Bennett By rtway on 7/24/2007 8:53 PM
Tommy, I wish you would run for president instead of these dimwits that we have to choose from. You make such good sense. Maybe Dave Patch or Bobo for VP.
Re: Remarkable Speech By Senator Bennett By InTheKnow on 7/24/2007 8:54 PM
By: AlanC
24 Jul 2007, 03:52 PM EDT
Msg. 85172 of 85173
(This msg. is a reply to 85168 by braggamuffin.)
Jump to msg. #
This afternoon I called the SEC at 202-551-2100 to inquire as to why the revocation of Regulation SHO with the unconstitutional "grandfather clause" had not yet appeared on the SEC website let alone been published in the Federal Register. Since a unanimous vote was made on June 13th and since other regulations voted on that same day had not only appeared on the SEC website but been published in the Federal Register on June 28th and went into effect immediatly it seemed strange. The Department of Market Regulation told me the delay was due to the fact that the Commissioners wanted to add some additional wording and the changes had to be rewritten. I asked if that meant that the 95 day period allowed for covering would be reduced by the number of days publication had been delayed. I was told no, that would not be the case. I let them know that I was not a happy camper that the SEC was once again protecting those short rather than the ordinary investor.
I encourage others to call and demand action. Enough is enough!


Re: Remarkable Speech By Senator Bennett By davidn on 7/24/2007 8:55 PM
Tommy, what about this situation.

If a DTC participant loans a share to another participant, taking cash as collateral, then returning the cash when the shares are returned, it is a stock loan and subject to rules about loans.

If a DTC participant sells a share to another participant, taking cash as payment, then returning the cash when the shares are returned, it is a repo agreement and not subject to those rules.

The repo has all the flavor of a loan, except without the rules. The lender is long as he has agreed to repurchase and is effectively long via a future contract to buy. The borrower is also long because he has purchased the shares.

This is not at the level of the investor's account. This is at the level of the prime brokerages who treat IOU's and shares as being equivalent, then net their obligations so they won't have to put up real money. The parties they hold assets on behalf of are none the wiser whether they have claims or real shares.

In addition to your proposal, I suggest requiring brokerages to hold their assets directly at the DTC or preferably at the company transfer agent. These levels upon levels of ownership which cross borders and jurisdictions are too difficult to audit. Why is there such a thing as a clearing brokerage. Why can't the DTCC (or a new government regulated non profit entity) handle clearing and settlement directly for the brokerage. Then the buck would definitely stop with them.
Re: Remarkable Speech By Senator Bennett By Patchie on 7/24/2007 8:56 PM
Reads to me like Gradient is nothing short of a criminal enterprise

http://investigatethesec.com/20070530X.pdf
Re: Remarkable Speech By Senator Bennett By Sean on 7/24/2007 8:57 PM

Read'em and smile folks

Here's a RED FLAG - Prime Broker Shares :

Being quite familiar with the activities of Prime Brokers, Sparky finds it far more than just odd that virtually all the shares of these supposed market participants are seriously lagging the major equity indexes, including the DJIA.

As a for instance, please ponder these little statistics for a moment: Based on today’s close of 13,717, the DJIA was off 226.47 points for the session, a 1.62% slide; and in broader sense, it closed 2.86% below its recent all-time high of 14,121.

In contrast, check out the relative performances of the half dozen biggest Prime Brokers:

1) Bank of America - BAC shares closed today @ $ 47.15, off $ 1.00, or 2.08%; and presently sit 14.40% below the recent high of $ 55.08. BAC shares sport a Beta of 0.55 and a Yield of 4.64%.

2) Bear Sterns – BSC shares closed today @ $ 129.85, off $ 4.4, or 3.28%; and are now priced 24.77% below their 12-month high of $ 172.61. BSC shares have a Beta of 0.89, but an anemic Yield of only 0.96%.

3) Citigroup – Tuesday’s close saw C shares @ 49.31, off $ 1.55, a 3.05% slide; and they are now off 13.49% from their 12-month high of $ 57. C shares have a beta of 1.23 and currently Yield 4.26%.

4) Goldman Sachs – GS shares closed today @ 198.15, off $ 6.89, or 3.36%; and now sit 15.31% below their 12-month high. The Beta on GS shares is 1.84 and they Yield 3.2%.

5) JP Morgan Chase – JPM shares closed Tuesday @ $ 45.34, off $ 1.81, or 3.84%, for the session; and are now off 14.85% from their 12-month high. JPM shares sport a Beta of 1.84 and a Yield of 3.2%

6) Morgan Stanley – MS shares closed today @ 65.55, off $ 2.16, or 3.19%, for the day; and are now priced 13.18% below their 12-month high. The Beta on MS shares stands at 1.57, and the Yield is 1.6%.

For those not familiar with Beta, it is a statistical tool that computes the Slope of a least squares regression line that measures a specific stock’s historical trading performance relative to an Index. A Beta of 1.0 indicates that a stock moves perfectly in concert with the Index; a Beta of 0.50 would suggest that a stock under-performs (Up and Down) the Index by 50%; and if a stock’s Beta is 1.5, one would expect it to over-react to Index changes by a margin of 1.5 to one.

So in Perfect World, if the Index is only off 2.86% from its 12-month high, even the shares of the Prime Brokers with the highest Betas, like JPM @ 1.84 and MS @ 1.57, shouldn’t be off more 5.25% (1.84 Beta x 2.86% Index change) or 4.49% (1.84 Beta x 2.86% Index change), respectively.

Similarly, if one were to apply the same Beta-based volatility logic to the shares of the Prime Brokers with the lowest Betas, Like BAC at 0.55 and BSC at 0.89; one would expect that their shares would be closer to their recent highs than the Index is. In fact, in that proverbial Perfect World, BAC shares should be at $ 54.21 (1-[Beta of 0.55 x Index change of - 2.86%] x 12-month high of $ 55.08), not $ 47.15! And, BSC shares should be at $ 168.22 (1-[Beta of 0.89 x Index change of - 2.86%] x 12-month high of $ 172.61), not $ 129.85!

Conclusion: Under ordinary circumstances, the Prime Brokers should be positioned to profit handsomely from virtually any equity-market activity, whether the related direction is up, down, or sideways. Along the same lines, Prime Brokers should make money from the implementation of any investment strategy imaginable. And for these reasons, one would expect their shares to not only participate in a true Bull Market, but also to lead such a Rally.

But as one can readily see from the above relativity summary, this is simply not the case at present.

Sparky's Advice: Don’t get sucked into what’s about to happen foks!! The recent sub-standard performance of Prime Broker shares is telling us something. IMHO, it’s telling us that those in the know see the handwriting on the wall, just as they did in the summer of 1929; and that the shares of most of these Prime Brokers are about to crash, and crash significantly.

Those with healthy and sustainable dividends and yields, like BAC, Citi, and JPM, may enjoy some down-side yield-related price protection in the months ahead, and as long as they continue paying dividends. But for the rest of the Prime Brokers, Sparky thinks those who are able should be seriously loading up on their out of the money Put options that expire in the final quarter of this year.

Some Put Examples: In the case of Bear Sterns, consider the October $ 120 Puts @ around $ 5.10 (BSCVD). With Goldman Sachs, consider the October $ 185 Puts @ around $ 6.90 (GPYVQ). And with the infamous John J. Mack’s Morgan Stanley, which is Sparky’s favorite Put candidate, check out the October $ 60 Puts @ around $ 2.30 (MSVL).

Aren't statistics wonderful? And isn't it a shame our trusted regulators don't trust statistics a little more - They're so telling!!

Stay Tuned ~

Sparky
Re: Remarkable Speech By Senator Bennett By subprime on 7/27/2007 4:45 PM
bailout

http://efinancedirectory.com/articles/$500_Million_Dollar_Bailout_Extended_to_US_Mortgage_Borrowers.html
Re: Remarkable Speech By Senator Bennett By tommytoyz on 7/27/2007 4:46 PM
davidn,

"This is not at the level of the investor's account. This is at the level of the prime brokerages who treat IOU's and shares as being equivalent, then net their obligations so they won't have to put up real money. The parties they hold assets on behalf of are none the wiser whether they have claims or real shares."

These shares are held on behalf of investors at the DTCC. So if the shares are lent out or sold or in any way removed from the beneficiaries (investor's) account and moved to another party's account - then the investor does not hold beneficial ownership anymore to the real security - and is none the wiser as you point out.

So what is this "place holder security" in the investor account in this case? It certainly is not a registered security nor has a trade symbol.

It all begins and ends with investor accounts. Treat accounts transparently, accurately and correctly and there will cease to be more securities in the market than the issuers issue.
Re: Remarkable Speech By Senator Bennett By oldfeller on 7/28/2007 7:44 PM
The SEC said many times there will be no short squeezes or market volatility. Everyone knows there are some otc companies that never diluted their share structure in spite of bear raids with massive volume and downside manipulation. So now we wait. After announcing the end of the "grandfather clause" (for which there is no rational explanation other than, oops, we stole too much too fast and need time to cover our asses by taking the price of the stock you own even lower) the end is still not in sight. They have not done what they said they would do. The grandfather clause is alive and well. The fake shares sitting in your account are still fake.
Re: Remarkable Speech By Senator Bennett By What's up? on 7/28/2007 7:45 PM
Ask Bennett to investigate the trading accounts of SEC employees and their families. Let's see if they balk about that.

All in the sake of transparency for I'm sure there is nothing to hide.

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