| | Register
Who is Bob O'Brien?
Sanity Check Archive
Click Here to see Bob's Old Sanity Check articles.
About our Blogs

Blogs found on this website represent the opinion of the author. For more information please visit our terms of use.
Funny Bunny
Looking for something a little lighter?
Catch Bob's more irreverent and amusing pieces in his Funny Bunny Blog.

What's $192 Billion in Fails to Deliver and Receive Among Friends?

Location: Blogs Bob O'Brien's Sanity Check Blog    
Posted by:   bobo 11/19/2007 11:24 AM

Lest it be lost in future blogs, everyone needs to check out Patrick's amazing presentation on the rhino in the room the system is ignoring, as well as the most damning question imaginable that all the law enforcement agencies, regulators, and media are conveniently ignoring. It can be found at the below link, and is a must view event.

http://www.deepcapturethemovie.com/

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

So the latest SIFMA spreadsheet shows $192 billion in Fails to Deliver and Receive. That's way up from the $60 or so billion it was last quarter. I suppose that closing in on a quarter trillion dollars worth of fraud - taking investor money and failing to deliver the product - isn't really enough to warrant serious attention from our lawmakers and regulators. It's all good. And since we all know that is only a fraction of the fails that are generated internationally and never reported domestically, or any of the other mechanisms that have oft been discussed here and which likely are orders of magnitude greater than what the NYSE member firms report via SIFMA, it is easy to understand how a hundred billion here, a hundred billion there turns into trillions.

View lines 79 and 103. Maybe break out your favorite cocktail, and some popcorn.

But not to worry. Patrick is a loon, and the Easter Bunny is a stock tout and a nut.

Sort of plays better when you don't see the really, really big numbers in black and white, however, hey, if that's all ya got, ya plays the cards you're dealt, right?

Frigging unbelievable. $192.6 billion, but nobody is talking about it, except Carol (who screechingly insists that Reg SHO is working) and a few of her choagie compromised media hacks, who continue to tout whatever party line Wall Street pays for. You won't hear that $192 billion number anywhere else. which merely is confirmation of how tightly controlled the US media is by our friends on Wall Street. It's probably always been this way, but the Internet is making it way easier to see just how badly compromised the system actually is.

To that end, I've also noted that whenever a number is discussed, it's always some percentage rather than hard dollars. This is lawyerly lying, as one can choose whatever large number one likes, omit huge pieces of data, and still insist that one was technically accurate. That's why nobody likes to come out and say, for instance, "$800 billion of investor money has been taken by Wall Street, put into their coffers, and the investors screwed out of every dime of it, as nothing they paid for was ever bought, paid for, and delivered. It just went into their broker's pocket, free money, with no shares delivered - all that has been delivered are IOUs and ledger entries that have nothing to back them up - but the real money is gone." Nobody wants to talk real dollars, as then, the size of the problem can't be hidden. One can't just poo poo it away. No, it's better to just pretend that whatever the problem size is, that it really isn't that big a deal. Keep repeating that lie, and eventually all the sheep will believe that there really is nothing to worry about.

Does everyone appreciate how at this point, there is absolutely no way of knowing just how large this scam has gotten, or what percentage of EVERY company and issue trading is merely desked, or reported long when actually short, or failed ex-clearing, or processed internationally and netted away...that there is no way of knowing how much of the US market system is a con game?

Why does it seem that so many are so hell bent on keeping anyone from figuring this simple idea out? There is no way of knowing how much real money has been paid into the system, in return for which there is nothing but a broker's handshake. No. Way. Of. Knowing. Because there is no central reporting thereof. Deliberately so. None. The entire industry is predicated upon you not knowing how big the scam is.

Which brings us to paper certificates, and the rush to eliminate them. Get rid of paper, and you eliminate the last tenuous thread that could link genuine product ownership, versus a chit in the scam. That's why the industry is working so hard to get rid of them. They have to. Paper is the evidence, just as it was in the 1920's, when con artists would counterfeit actual stock certificates. They need to eliminate any hard evidence of actual ownership, because then the only thing an investor can do is take the industry's word for it. No proof. No way of ever knowing, so the industry keeps all the money - as long as they keep insisting that you got what you paid for, and as long as there is now no proof you didn't, you are hosed. That's dematerialization. No more evidence.

Because if there was ever a run on the stock bank, and everyone wanted their certs, the system would collapse, as there isn't enough money in the system to buy all the genuine shares for which chits have been sold. That money is gone. Long gone. It is no longer here. It was converted into hockey rinks, and media empires, and jets, and yachts, and artwork, and centi-million dollar mansions. It is no longer where there is any recourse, or where it can be recalled. It's as gone as gold gone down in a storm in the middle of the Atlantic. Bye bye. You lose.

Any questions?

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

Harvey Pitt, former SEC Chairman, had a few choice words to say about naked short selling at a recent presentation to a group opposed to the practice. You should check it out. And disseminate it. It's a little funny to me that he continues to repeat the hackneyed silliness that short selling is valuable because it prevents stocks from rising past what they are "worth" (because it isn't what someone is willing to pay for something that should determine that, it is a small group of omniscient short sellers who possess that arcane knowledge), however by and large it is a good summary. Of course, the easy explanation for why Congress decided not to outlaw short selling back in 1934 was because then, as now, Wall Street owns the political apparatus, is ignored. You just can't say some things in public, as otherwise the media will be turned loose on you, and nobody wants that...

Still, mostly good, and worthy of a listen. To that end, I would encourage everyone to open a DIGG account (free) so they can DIGG articles and blogs they think should get wider attention. It is a mechanism that ensures more views with more DIGG recos, so take a minute out to do so, and DIGG the things you feel of value.

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

I've been awfully busy, but it sure seems to me as the credit crisis unfolds, that multi-trillion gotchas are baked into the financial system cake, and are simply ignored by a complicit press operating on strict orders not to panic the rubes. As long as the industry can convince the sheep that everything is OK, then they will continue to be apathetic, and to put their money into a system that is a deception and a sham.

Not being fatalistic, but that's my take on things. Whether you decide to take the blue, or the red pill, is up to you. But once you understand these things, you can't un-know them.

End of rant.
Copyright ©2007 Bob O'Brien
Permalink  |  Trackback
Comments (44)
Re: What's $192 Billion in Fails to Deliver and Receive Among Friends? By Hendy on 11/19/2007 1:56 PM
Bob,

Why has Liz Moyer gone mum lately?

Thanks

Hendy
Re: What's $192 Billion in Fails to Deliver and Receive Among Friends? By rtway on 11/19/2007 4:18 PM
I would think that at least one reporter would have the gonads to follow up on the case with Gradient and give blow by blow accounts. It would be his or her ticket to a status as good as Woodward or Bernstein. Then again they may be in the bread line with Agguire and death threat.
Re: What's $192 Billion in Fails to Deliver and Receive Among Friends? By rtway on 11/21/2007 6:17 PM
Paul, I think it would safe to assume that Mr. Will did his due dilligence on Milberg before he hit the first key on the board. I would also venture to say that he has full knowledge of Patrick Byrne and his crusade. Mr. Will is a very worldly man that has sources all around him and is extremely intelligent. I kind of like the guy. The obvious that we fail to see and accept is that Mr. Will is a staunch conservative and probably a member of the party that Mr. Bush belongs to, who by the way put Chris Cox in charge of the SEC and managed to f**k up things worse than Lufkin who was also appointed by Mr. Bush. I find it hard to believe that Mr. Will is going to embaras Mr. Bush who is of the same party, kind of like the brotherhood or Herbie Greenberg calling Jim Cramer dishonest. I am certain IMO that Mr. Will has probably read some of Bobo's work or Patrick's. But hey drop him a line it can't hurt. I have sent hundreds out.
Re: What's $192 Billion in Fails to Deliver and Receive Among Friends? By rtway on 11/21/2007 8:09 PM
Bobo, I just read the ideas that Mr. Pitt had as far as stopping the NSS. I will re-iterate what I posted before. If I broke into Mr. Pitt's house and stole his wife's jewelry, all his cash and his kids college money who would Mr. Pitt call to try to rectify this situation and or try to get back his money.Would it be a SRO or the SEC, no he would most likely call a law enforcement agency. I struggle with why he has not called in the DOJ or the FBI or advise the states AG's to issue warrants. He obviously knows the magnitude of the crime or does he believe there is no crime. If he does believe a crime has been committed and who has better knowledge of the situation and the implications than he, then I believe he has a duty to report this to the DOJ unless he is afraid of being swept up in the whole mess. I think he deserves to give us all a reason as to why he has done nothing as well as Mr. Cox. Theft is theft no matter what color shirt you have on.
Re: What's $192 Billion in Fails to Deliver and Receive Among Friends? By Heads of the SEC and their records... on 11/22/2007 7:30 AM
Harvey Pitt was appointed 26th chairman of the U.S. Securities and Exchange Commission (SEC) in 2001. He served as chairman until 2003 when he resigned. He led the SEC in restoring the Nation's securities markets to full operations after the terrorist attacks of September 11, 2001, instituted a policy of "real time enforcement" to make the SEC's enforcement efforts more effective, and led the SEC in the adoption of dozens of rules to implement the Sarbanes-Oxley Act.

He worked to reconcile the demands of accountants, financial services firms, public companies, institutional shareholders, legislators and stockholders with such legislation as the Sarbanes-Oxley Act. Prior to that he was a partner of a global Washington, DC law firm and was widely considered one of the preeminent experts in his field. He coined the phrase 'corporate Darwinism'.


Donaldson was responsible for grandfathering and the OMM exemption..
William Henry Donaldson (born June 2, 1931 in Buffalo, New York, USA) 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][2] 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.

Cox wrote the PSLRA... This was vetoed by Clinton (as referred to in the Geo Will article) and then overridden by Congress. It made it harder to bring frivolous suits against companies.

The PSLRA was enacted into law by the U.S. Congress over a veto by President Bill Clinton. The U.S. House of Representatives approved the bill by a 319-100 margin, and the U.S. Senate approved it 68-30. Every Republican in the House voted in favor of the legislation, and only four Republicans in the Senate voted against it: William Cohen, John McCain, Richard Shelby, and Arlen Specter. Prominent liberals in the Democratic Party like senators Tom Harkin, Ted Kennedy, Claiborne Pell, and Carol Moseley Braun voted in favor of the legislation while many conservative-to-moderate Democrats such as senators John Breaux, Robert Byrd, Fritz Hollings, and Sam Nunn and representatives such as John Murtha and Gene Taylor voted against it. Both the current Senate majority leader, Harry Reid, and the current Speaker of the House, Nancy Pelosi, voted for the bill. This event was one of two times during Bill Clinton's entire two terms in office that Congress successfully overrode one of his 37 presidential vetoes to enact a bill into law.

The PSLRA was originally developed as part of Newt Gingrich's Contract With America. Its principal authors in the House were Representatives Thomas Bliley, Jack Fields and Chris Cox. Senators Chris Dodd and Pete Domenici sponsored the legislation in the Senate.

Cox got rid of grandfathering, but unfortunately axed the uptick rule in the process. For all the good that removing grandfathering did, the removal of the uptick rule negated it to the benefit of the participants who now can do bear raids with impunity. Without the uptick rule, mismarking tickets subjects the brokers to less penalties. The truth of whether the shares are long or short only matters when the illegal ones fail to deliver. The delivery of shares between brokers can be postponed by borrowing from the DTCC Stock Borrow Program that allows up to 60 days to come up with the shares. Not 3 days.. not 13 days, not 35 days... but 60 days....

Cox is also responsible for the delays in getting rid of the OMM exemption. The delays have given time for some transparency into the fraud and may have been necessary to SHO everyone that exemptions will be misused and the public abuseds. Now we have to SHO that the test period for removing the uptick rule was inaccurate. During the test period, there was no reason to abuse it because the participants wanted it. They knew that once it was in place, they could do bear raids. Volatility has increased dramatically since the removal of the uptick rule.




Re: What's $192 Billion in Fails to Deliver and Receive Among Friends? By bobo on 11/22/2007 6:58 AM
Here are Pitt's ten requirements for a level playing field:

http://www.stopphantomshortselling.org/UpcomingEvents.html

http://pointers.audiovideoweb.com/stcasx/avwebnjwin9536/nov16/event_clip.wmv/play.asx


First, SROs and the SEC need actively to pursue ongoing chronic and serial short selling infractions.

Next. Meaningful penalties have to be imposed for violations of existing Reg SHO requirements.

Third, the SEC should define and punish as fraud, abusive naked short selling practices.

Next. The SEC should act quickly and forcefully, otherwise, state regulation is more likely. And as I’ve already said, I don’t think that’s the best way to go. Our capital markets work because they’re governed by uniform rules from Portland, Maine to Portland, Oregon. State regulation means fragmented requirements, practices, and procedures, and could cause loss of our competitive edge.

Next. The SEC should eliminate the option market maker exception. It isn’t demonstrably of any value, and it risks facilitating illegal activity.

Next. Reg SHO should impose firm locate requirements as a condition precedent to all short sales.

Next. Reg SHO should cover securities that are also traded in the pink sheets. Naked shorts occur in the shares of small, thinly traded issuers, and those are likely to trade in the pink sheets.

Next. Chronic and unjustified violations of T+3 settlement rules should be punished.

Next. Before brokers are allowed to borrow margin shares, they should make clear disclosure and give investors the opportunity to opt out.

Next. Securities lending should occur openly and transparently at arm’s-length prices, enhancing returns, increasing efficiency, promotion valid short selling, and curbing abuses.

Next. The NSCC should allow members to settle borrowing and lending activity through these facilities that I’ve just mentioned so accurate accounting and data is available to market participants and regulators.

Next. Shady activities thrive in shadowy market corners. Exchanges in other markets should be required to report the securities on daily threshold lists and aggregate daily volume of fails for each such security.

And, finally, Form 13F institutional investor reports should disclose both short and long positions. That would provide issuers and investors with a better understanding of trading activity.
Re: What's $192 Billion in Fails to Deliver and Receive Among Friends? By rtway on 11/22/2007 7:59 AM
I think that Mr. Pitt is a true American dediicated to the integrity of the markets and a brave soul for coming forth with his speeches and offering excellent remedies for the problems that Cox and Lufkin and Donaldson created. He should be commended as well as sought out by the government to help oversee what needs to be done. However there has been a crime committed of greater magnitude than Scooter Libby or Martha Stewart which made headlines for months and occupied my TV screen for hours a day. Millions of people are going to be or have been affected by this series of crimes that have been hidden or swept under the rug and for whatever reason been ignored by the media. Never is there a mention of Reg. Sho. or FTD's mentioned on CNBC. I am grateful for all the info provided about Mr.Pitt, I am more impressed than I was before of his legacy. However he could add to his legacy by demanding or even suggesting that this whole mess should be turned over to the proper authorities, not a congressional hearing, and let them start to issue warrants and find the real perpetrators, the American people deserve nothing less. A congressional hearing would only allow the guilty to re-group and create a new game plan or stall tactic. We have bled enough and to many people have been destroyed as well as companies that could make this a greater country. The time to start cleaning house is now and again I thank the Heads of the SEC for their info.
Re: What's $192 Billion in Fails to Deliver and Receive Among Friends? By Pest Patrol on 11/22/2007 9:04 PM
"They practically mint money" (counterfeit shares?)

The ol' boys network of politicians, investment banks and regulators is pretty incestuous. It's time to drain the pond and get rid of the vermin.

As John A. Thain prepares to take the reins of Merrill Lynch, he is only the latest example of a tradition borne out across Wall Street, in Washington and around the world. He is a Goldman Sachs alumnus who has reached the top elsewhere.

For decades, one investment bank in Lower Manhattan has churned out a golden list of corporate executives and statesmen, wealthy financiers and nonprofit managers.

In many ways, Goldman Sachs is seen as the financial world’s equivalent of General Electric, the corporate powerhouse, or McKinsey & Company, the management consulting firm. It is a training ground — and finishing school —from which other companies, along with quite a few governments, have frequently plucked their own top leaders.

And it has seeded some of the most successful private investment funds, many of them extending Goldman’s shadow from Greenwich, Conn., to London and beyond.

Goldman claims among its alumni Henry M. Paulson Jr., the current Treasury secretary; Robert E. Rubin, a Treasury secretary under President Bill Clinton and now Citigroup’s chairman; and Mario Draghi, the Bank of Italy’s governor. Jon S. Corzine, New Jersey’s governor, led Goldman for several years. Joshua B. Bolten, the current White House chief of staff, is a Goldman alum.

Mr. Thain, who left Goldman as president and chief operating officer to take over the troubled New York Stock Exchange and now Merrill, falls squarely in that tradition.

To insiders, all this is a result of Goldman’s elite culture, a sense of close-knit partnership that has endured despite the firm’s decision in 1999 to turn itself into a publicly owned corporation. To detractors, the firm is alternately a cult or a secretive fraternity like Skull and Bones at Yale, one focused on profits and power.

The bottom line on Goldman is that it is stocked with bright people who practically mint money. Even as the implosion of the subprime mortgage market forced many of its rivals to take multibillion-dollar write-downs this summer, to cite just the most recent example, Goldman reported a 79 percent increase in profit.
Re: What's $192 Billion in Fails to Deliver and Receive Among Friends? By blackbart on 11/22/2007 9:26 PM
If only Pitt had practised what he preaches now. Naked shorting was rampant during Pitt's reign as Chairman of the SEC (2001-2003). Is he willing to give paid speeches now proclaiming NSS is bad because he needs the money or is he finally coming clean about the fraud that he let pass on his watch. I say who ever hired Pitt should hire Sammy Antar next. After all he appears always willing to say anything as in evidence on Yahoo. At least he is honest about being a crook. Next they can hire Arthur Leavitt SEC Chair (1993-2001) who appears happy to complain about the state of the financial markets as long he can pretend it did not happen on his watch (which it did).

Is this an effort to keep a lid on the exposure to the civil arena instead of criminal where it belongs now that Pandora's Box has been opened? Something stinks here when skunks across the US lose their stripes. Hey maybe Rocker will fund an anti-naked shorting philanthropic foundation next?

Ask Pitt how many times he actually picked up the phone and told the perps to stop their behavior or he would stop it for them. I bet it never happened.
Re: What's $192 Billion in Fails to Deliver and Receive Among Friends? By No More Fiat on 11/22/2007 9:28 PM
They raid the manufacturer of gold and silver medallions because real and gold and silver competes with private money.

The SEC tries to ban paper certificate ownership because real share ownership competes with counterfeit claims ownership.

http://blog.washingtonpost.com/the-trail/2007/11/19/if_its_good_enough_for_mickey.

If you are fortunate enough to be one of my clients, writing a $2,300 check should not be a problem. As I have likely made you tons of money over the years, here is an opportunity to donate some of it to a worthy cause. We have made our money by betting against the U.S and betting against the dollar. Giving $2,300 of our winnings to Ron Paul gives us the opportunity to bet ON America for a change.
Re: What's $192 Billion in Fails to Deliver and Receive Among Friends? By n-tres-ted on 11/22/2007 2:09 PM
I think the resignations of the three commissioners of the SEC is probably what is delaying action on the OMM exception, and were probably intended for that purpose as well as due to the Senate report. I'm not sure whether two commissioners can take action to adopt the amended regs, and I'm sure they're under pressure to wait.
Re: What's $192 Billion in Fails to Deliver and Receive Among Friends? By rtway on 11/22/2007 4:47 PM
I would venture to say that if Bono, Al Gore, Susan Sarandon, Rosie O'Donnel, Oprah or Sean Penn were to call for the feds to investigate this and they knew the severity and how it would help their careers by being the savior for the masses and how the Bush baddies were to blame we would see some chaanges and I am frankly suprised that not one of the afore mentioned including David Letterman has not picked up on this. None of them are east coast hob nobbers or are they also captured by the media.
Re: What's $192 Billion in Fails to Deliver and Receive Among Friends? By mhelburn on 11/24/2007 9:13 AM
Well, I guess Roddy did the research into the questions I asked the other day. Thanks, Roddy. His article in the NYP should have been titled " Overstock Lobbies againt Illegal Short-selling." Illegal short-selling is beneficial to short-sellers if they happen to pick targeted stocks, but it harms companies, shareholders and the market. The necessity of creating a lobbying group to get enforcement of the laws and oversight of the regulators is a reflection of the pitiful state of affairs in our country. The squeaky wheel gets the grease and here is a prime example. Why should anyone have to lobby Congress and the Regulators? The criminals like Larach lobby to make their illicit activities easier and more profitable. PSLRA was passed over Clinton's veto. If you don't want special interests to decide every issue, you have to stand up and make people aware. Look at the rules that the SEC has passed in the recent past and recognize that not only are some of them detrimental to the country, they are unconstitutional. Grandfathering fails! Allowing market makers to counterfeit securities! Delaying the rescission of these horrendous mistakes!
Congress and the SEC need to do something about this before the juries in America get a waft of this stench. Every day these rules are in force, the greater the problems. The reverse conversions by the options market makers and the counterfeiting of securities goes unabated. The delay is creating a backlog of enforcement actions that may or may not be taken. OSTK's presentation to the SEC documented the illegal activities by the OMM manufacturing counterfeit shares. Read pages 59 and 60 of their presentation...
http://sec.gov/comments/s7-19-07/s71907-336.pdf
If ever there was a smoking gun, this is it. How prevalent is this type of fraud? Why is the SEC creating more work for themselves by delaying the elimination of the OMM exemption. Are they crazy? Why were only two traders singled out for this? The statute of limitations should be lengthened to reflect the inability of the SEC to process the backlog. Perhaps it should be suspended if they are so overwhelmed. Perhaps they should offer a type of lessened prosecution if the criminals turn themselves in. Since the reverse conversions involve multiple players, harm vast numbers of individuals and qualifies for RICO prosecutions, those who turn themselves in, make complete restitution and admit criminal activities, and are banned for life from the securities industry, could avoid jail.... nah... cuff 'em Danno!
Re: What's $192 Billion in Fails to Deliver and Receive Among Friends? By Jeremiah 9:24 on 11/24/2007 9:14 AM
Today's (11-24-07) Editorial in the Wall Street Journal bemoans the fact that the US securities markets lost another potential public listing, and blames this and other losses to European and other public exchanges on Sarbannes-Oxley and other over-regulation of the US markets. While the WSJ is correct in asserting that S-O is a factor in losing potential US listings and in public companies going private to escape the high costs and burdensome requirements, the Editorial Board conveniently continues to ignore the fact that there is NO integrity in the US clearing and settlement process, and the rest of the world knows it. Who will list here knowing their capital structure will be illegally diluted--with the knowledge and de-facto consent of the chief federal regulator and the SRO's that control the markets?

The WSJ can continue to deny the cancer exists, but the body will continue to get weaker and eventually will become comatose, then will die.

Oh, and watch for the soon coming reverse-split and recapitalization of the US fiat currency. It will have a new name, too, likely, the "Amero."
Re: What's $192 Billion in Fails to Deliver and Receive Among Friends? By bbhindyou on 11/26/2007 12:44 PM
The uninted states government has 'put off' the devaluation of the property of the american people and the collapse of the monetary system in place in america by counterfieting EVERYTHING.
Stocks ,bonds,morgages,everything has been sold in excess of the real number of assets available.
There is nothing left that has not had its VALUE promised to someone [ many times over] in exchange for more I.O.U.'s to keep the country running.
We OWN nothing.
As Rome fell so do we.
Goodbye freedom hello hunger and slavery.
AGAIN the darkness falls.
Who's serf are you?
How many slaves will be needed?
What will become of the rest?
Sleep well dreamers of the american dream the best way to die is in your sleep, then you never know what hit you.
Re: What's $192 Billion in Fails to Deliver and Receive Among Friends? By gregcable2002 on 11/27/2007 7:27 AM
And I saw a beast coming out of the sea. He had ten horns and seven heads, with ten crowns on his horns, and on each head a blasphemous name. 2The beast I saw resembled a leopard, but had feet like those of a bear and a mouth like that of a lion. The dragon gave the beast his power and his throne and great authority. 3One of the heads of the beast seemed to have had a fatal wound, but the fatal wound had been healed. The whole world was astonished and followed the beast. 4Men worshiped the dragon because he had given authority to the beast, and they also worshiped the beast and asked, "Who is like the beast? Who can make war against him?"
5The beast was given a mouth to utter proud words and blasphemies and to exercise his authority for forty-two months. 6He opened his mouth to blaspheme God, and to slander his name and his dwelling place and those who live in heaven. 7He was given power to make war against the saints and to conquer them. And he was given authority over every tribe, people, language and nation. 8All inhabitants of the earth will worship the beast—all whose names have not been written in the book of life belonging to the Lamb that was slain from the creation of the world.[b]

9He who has an ear, let him hear.
10If anyone is to go into captivity,
into captivity he will go.
If anyone is to be killed[c] with the sword,
with the sword he will be killed. This calls for patient endurance and faithfulness on the part of the saints.

The Beast out of the Earth
11Then I saw another beast, coming out of the earth. He had two horns like a lamb, but he spoke like a dragon. 12He exercised all the authority of the first beast on his behalf, and made the earth and its inhabitants worship the first beast, whose fatal wound had been healed. 13And he performed great and miraculous signs, even causing fire to come down from heaven to earth in full view of men. 14Because of the signs he was given power to do on behalf of the first beast, he deceived the inhabitants of the earth. He ordered them to set up an image in honor of the beast who was wounded by the sword and yet lived. 15He was given power to give breath to the image of the first beast, so that it could speak and cause all who refused to worship the image to be killed. 16He also forced everyone, small and great, rich and poor, free and slave, to receive a mark on his right hand or on his forehead, 17so that no one could buy or sell unless he had the mark, which is the name of the beast or the number of his name.
18This calls for wisdom. If anyone has insight, let him calculate the number of the beast, for it is man's number. His number is 666.

Footnotes:

WASHINGTON (CNN) - A Palm Beach, Florida-based telecommunications company has developed a miniature digital monitoring device that can be implanted in people, intended to assist in locating missing children or for monitoring the heart rate of at-risk patients.

But electronic freedom activists are concerned about exploitation of the technology, which would use global positioning system (GPS) technology to track implantees.

"It sounds dreadful. That's about as bad as it gets," Marc Rotenberg, director of the Electronic Privacy Information Center in Washington, said Monday.

Making good on its promise to "achieve a global presence," Digital Angel Corporation – manufacturer and marketer of high-tech, implantable devices for tracking human beings – has opened a research and development facility in Shen Zhen, a special economic zone near Hong Kong, hoping to cash in on vast markets in China and the Far East.

This was seen coming 2000 years ago,looks like we are coming to the end of the timeline.
Re: What's $192 Billion in Fails to Deliver and Receive Among Friends? By gregcable2002 on 11/27/2007 8:03 AM
The dollar is worthless now,time for a reverse split and name change.

Billionaire to Canada: Time for amero is now
Wants euro-style currency to avoid exchange problems

--------------------------------------------------------------------------------
Posted: November 27, 2007
1:00 a.m. Eastern


By Jerome R. Corsi
© 2007 WorldNetDaily.com


Stephen Jarislowsky, a billionaire money manager and investor the Canadian newspaper Globe and Mail bills as the Canadian Warren Buffet, has told a parliamentary committee Canada and the United States both should abandon their national dollar currencies and move to a regional North American currency as soon as possible.

"I think we have to really seriously start thinking of the model of a continental currency just like Europe," Jarislowsky told the Canadian House of Commons' finance committee, according to the Globe and Mail in Toronto.

Jarislowsky's call for immediate action belied an article published in the Boston Globe on Sunday that said the call for the amero to become the new North American regional currency was "purely theoretical."

In an exclusive telephone interview with WND, Jarislowsky repeated his call for a European Union-style currency to be created between Canada and the United States.

"The idea would be a European Union-type set-up," Jarislowsky said, "with a North American Central Bank that would issue the new currency and sit over the Bank of Canada and the Federal Reserve Bank in the United States."

(Story continues below)


"An alternative would be to create a peg on the U.S. dollar which would allow the Bank of Canada to adjust the Canadian dollar in a 5 percent plus or minus range, based on the fluctuation in value of the U.S. dollar," he explained.

Still, Jarislowsky was less confident the U.S. dollar peg would work.

"The Bank of Canada only pinpoints inflation," he told WND. "My idea would be to have the Bank of Canada manage the Canadian dollar with a view both to inflation and the U.S. dollar. The Bank of Canada has never been very receptive to this idea."

Jarislowsky insisted Canada was going to be forced to do something because the increased value of the Canadian dollar vis-à-vis the U.S. dollar was likely to depress business activity in Canada and cause a recession.

"Two-thirds of the Canadian economy is tied to the U.S. economy," Jarislowsky pointed out. "Some 85 percent of our exports are headed for the U.S. market. Our economy is tied to the U.S. dollar, whether we like it or not."

In an interview published with the Globe and Mail, Jarislowsky emphasized the likely adverse impact on the Canadian economy triggered by the rise in the value of the Canadian dollar.

"We don't have a single mill in Canada which isn't losing cash at the current exchange rate despite the fact we invested hundreds of millions in dollars into new equipment when we had the money," Jarislowsky said.

"I believe that if we stay at the present levels, the entire forest products industry practically is going to be in liquidation-bankruptcy and there's going to be an enormous loss of employment," he continued.

Jarislowsky told the House of Commons finance committee that a regional North American currency would reduce the adverse currency exchange risk being experienced in Canada since the Canadian dollar has risen more than 20 percent against the U.S. dollar this year.

Jarislowsky brushed aside stated opposition from the Canadian Finance Department, including a negative recommendation to Finance Minister Jim Flaherty because of concerns a common North American currency would mean an erosion of sovereignty for Canada.

"I know Finance Minister Flaherty quite well," Jarislowsky told WND. "Sure, first he will have to deny he is taking seriously the idea of a new currency, then later he will come out and say he was forced to create one anyway."

Jarislowsky insisted he made very seriously the suggestion to create a euro-style currency for North America.

"Pretty soon, the Finance Ministry will have no choice but to create a new currency," Jarislowsky argued, "unless the Canadian dollar all of a sudden changes course and reverses against the U.S. dollar all on its own."

"In the provinces we are already seeing economic activity slowdown because of the rise in value of the Canadian dollar," he insisted. "If our automobile and lumber industries begin to decline, we will have a serious recession as a result."

"The Finance Ministry knows how closely our economy in Canada is tied to the U.S. market," he continued. "A common currency would avoid the problems we are now facing with currency exchange risk added to the normal risks of doing business."

Jarislowsky currently heads the Canadian investment firm Jarislowsky Fraser Limited, headquartered in Montreal.

According to Canadian Business, Jarislowsky has amassed a personal fortune of $12 billion, ranking him as the 25th richest person in Canada.

Canadian Business also claims the average private client at Jarislowsky Fraser typically has more than $10 million in liquid assets to invest.

Forbes put Jarislowsky's net worth at $1.5 billion, ranking him No. 512 in the list of the world's richest people in 2006.

Forbes estimates that Jarislowsky Fraser currently manages $50 billion for a select list of institutional clients and high-net-worth individuals.

Jarislowsky's 2005 book, "The Investment Zoo: Taming the Bulls and the Bears," was a business best-seller in Canada.

The Canadian dollar reached parity with the U.S. dollar at the end of September. Since then, the Canadian dollar has been trading above the U.S. dollar, at values not seen since the 1960s.

The Canadian dollar closed yesterday at $1.01 to the U.S. dollar on major currency exchanges.

Canada's Finance Department did not respond to WND requests for a comment.



--------------------------------------------------------------------------------
Re: What's $192 Billion in Fails to Deliver and Receive Among Friends? By certs on 11/27/2007 9:21 PM
Imagine if this happened to you.

http://nomoregames.net/index.php?page=economics&subpage1=bright_shiny

With no legal authority, the government comes in and steals your gold and silver.

They are desperately trying to get rid of legal alternatives (silver, gold, paper certificates, oil) that serve as stores of value. They can't let us have an alternative to their fiat shares and fiat currencies.

Meanwhile, we all watch Paris and Brittany on the news.
Re: What's $192 Billion in Fails to Deliver and Receive Among Friends? By oldfeller on 11/28/2007 8:50 AM
They delayed this Manning rule for OTC stocks again. I`ve had some gtc buy orders in for months on a few low float, thinly traded pink sheet stocks that are at historic lows. In some cases my bids are 300-500% above many of the posted trades but they won`t sell me any. Makes a feller wonder why it`s so hard to buy a few shares of an utterly "worthless" stock.

http://www.pinksheets.com/pink/pinkNews.jsp?id=77
Re: What's $192 Billion in Fails to Deliver and Receive Among Friends? By bbhindyou on 11/28/2007 8:51 AM
Bud Burrel's blog has a new entry that I would like to comment on ,but the ability to leave comments there seem to have been removed so I leave my comment here.
The interview with Rockafeller begs the question what freedom will we americans soon recieve?
The freedom Janice Joplin sang about, nothing left to lose?
Or perhaps a more permanate freedom ,the final freedom,the fatal freedom.
American dreamers time to wake up or die 'peacefully in your sleep'.
Bud I sure hope you are well rested because the time has come to be awake and alert.
As always I will bbhindyou.
Re: What's $192 Billion in Fails to Deliver and Receive Among Friends? By embraceyourinnerhillbilly on 11/19/2007 6:14 PM
The wealth transfer from the middle class to the ruling class is almost complete.
Good thing they passed out billions of dollars in bonus money last year. Too bad those bonus's were predicated on all the bad paper that's now hitting the market and will continue to hit the market over the next 9 months.

Down is heading to sub-11,000.
Oil heading to over $100. (Remember when Hugo Chavez siad oil was going to $100 a barrel and everyone laughed at him? The little tinhorn is now saying $200. I don't hear any laughter this time around.)
We are screwed. $4.00 per gal gasoline is around the corner and yet, Detroit is still churning out crappy MPG vehicles and idiots are still buying them. Tax SUV and pick-ups heavily for their over-consumption and excess pollution is a good place to start.
Re: What's $192 Billion in Fails to Deliver and Receive Among Friends? By bobo on 11/19/2007 6:18 PM
Liz is still writing, but just not about this topic. I haven't communicated with her much, so couldn't speculate.

My question is much more direct. Why hasn't any reporter anywhere asked how Milberg knew what stocks were going to go down (thus defining what plaintiffs to set up)? And as a follow-on, why hasn't any reporter discussed the $192 billion in fails that the latest SIFMA report shows?

Answer: Because it is a dirty little secret that if you start asking the wrong questions about the power structure that runs the money, and the country, you are out of a gig. Not necessarily directly, but you are downsized, or your work environment suddenly goes to hell, or you simply get pay cuts. Or more directly, you have to sit in your SABEW meeting, rubbing shoulders with the other paid shills, and are shunned by your peers as the word goes out that you aren't long for this career.

And if that fails, there's always threatening to kill your 4 year old. "Hey, it's a dangerous world out there, be a shame if the tyke was hit and run. Happens every day. Maybe spend more time giving thanks for your good fortune, and less turning over rocks, know what I mean? Bad things happen every day. Every day...."

Come up with whatever explanation you like, however there is no other answer that fits. Why has no reporter asked this very stilulating and obvious question? Because you don't want to know the answer.
Re: What's $192 Billion in Fails to Deliver and Receive Among Friends? By Sean on 11/20/2007 7:30 AM
Hendy, I think the answer to your question is that the problem has become so large that all the controllable media have been put on notice, other than Dr. Patrick Byrne and our Favorite Easter person no one else dear approach this topic without the harshest of consequences!!! Even our own Bud Burrell has disappeared I think!!!
Re: What's $192 Billion in Fails to Deliver and Receive Among Friends? By kevin on 11/19/2007 9:46 PM
Shareholders in the securities industry are having their worst year since 2002, losing $74 billion of their equity. That won't prevent Wall Street from paying record bonuses, totaling almost $38 billion.

http://www.bloomberg.com/apps/news?pid=20601087&sid=ahE8xVisWsbE&refer=worldwide
Re: What's $192 Billion in Fails to Deliver and Receive Among Friends? By Sean on 11/19/2007 9:47 PM
Bobo I wrote my response to Hendy before I read yours. I like your explaination a whole lot better!!LOL!! After seeing what they have done to NFI (bankruptcy looming) Etrade (did not aquiesce(sp) to the demands of SAC and merge with TDAmeritrade) and Now Citigroup (don't know what they did to piss off the powers that be yet but I am sure we will find out sooner or later) The equation is simple do what powerful Hedge funds tell you to do and all will be well. Countrywide is next folks, just a matter of time!! My Mom has a saying"Nite can only run for 12hrs before day catches it" and the day light is almost here folks. Pun intended on the NITE part!!
Re: What's $192 Billion in Fails to Deliver and Receive Among Friends? By Paul on 11/19/2007 9:50 PM
George Will touched on the Milberg issue briefly in a very recent article - his take was that Milberg must have paid people to buy shares in lots of stocks in the hope that they would own shares when something bad happened. - article was just a few days ago.

Anyone have a line on George Will?

Paul
Re: What's $192 Billion in Fails to Deliver and Receive Among Friends? By bobo on 11/19/2007 10:19 PM
Paul - that's one possible explanation. Another, from personal experience, is that crooked hedge funds had set up their target companies for massive attacks, and MW suits were just a part of that tactic to manipulate the price of a company's stock. I look at cases where certain hedge funds now being sued for corrupt activities made tens of millions off put positions they acquired just weeks before a major media article trashed a company, and then MW was ready to sue within 24 hours, further damaging the company's shareholders, and I just sort of go, hmmmm. Which is more likely? Crooks worked with other crooks to make bank, or the crooks just bought a universe of stock using their straw man plaintiffs, hoping that something bad would happen to one of them? Please. I mean really. Please.

As I've spent more time studying this whole thing, I've come to the conclusion that many conspiracy theories are hogwash, however that doesn't mean they all are. For instance, believing that indicted fraudsters would participate in a wider fraud with other scumbags, is actually very much what the Pecora hearings proved conclusively was the operating standard for much of Wall Street in the late 1920's. Why anyone would believe that changed, when the last decade saw the steady dismantling of the few real reforms emanating from that period, and a return of anonymous pools of money running the market, is beyond me. You have all the same elements. An economy dizzy with easy credit and low interest, increased risk taking by banks and brokers, speculative frenzies driven by anonymous pools of cash (hedge funds), and toothless/captured cops in the pocket of those they are supposed to police.

What is different, really? Not much. That ended when the country was plunged into depression, which also transferred much of the farming wealth of the country to banks and like minded creditors. Post SEC inception, we saw the unbelievably brutal crashes of the late 30's, that drove the SEC to put in the same curbs on unbridled short selling that the current set of SEC captured choagies have spent so much time eradicating, to the harm of many investors.

It took two generations to get the majority of Americans to believe that putting their money into the stock market was anything other than handing your wallet to some syndicates in NY. But it was worth the wait. Most of those who were around, and understood what the 1920's were all about, have died, or are so old as to be easily dismissed by younger know it alls. So the accounts from the Pecora hearings have been long forgotten, and instead we have slick ads and folksy wisdom espoused by a bought and paid for media acting as the PR apparatus for Wall Street. Never mind that the dollar lost 16% this year due to rampant overprinting of the currency. You are a big winner if you averaged 11% over the last few years in an S&P fund. Oh, but wait, the dollar lost more than all that just due to inflation. Never mind, go lease a gas guzzler and pay a mil for a stucco shack, and tell yourself you da man.

It's taken a while, but if you can just dumb down the average person, create a culture that celebrates illiteracy and pop wisdom, pretty soon all the lessons of history are forgotten as Britney's foibles consume the psyche of the country. A few decades to wind up running the joint isn't such a bad trade-off, I suppose. It was well under way by the 70's, and really hit on all cylinders in the 80's, as BCCI and the S&L debacle illustrate. The media played along then, as members of the administration - many the same characters who are running wall street today - ran interference for the crooks of that time, so that Wall Street, and international criminal syndicates, could clean up bigtime at the expense of the US taxpayer.

Nothing has changed, but after the dot com transference of wealth, it would take a totally different casino to lure in the rubes with any remaining cash. Real Estate was a good play, as Wall Street invented ever more complicated ways to make garbage seem like gold in order to earn big fees. What is the difference between junk bonds, where garbage debt was sold to the taxpayer via the middle man of S&Ls by Wall Street in order for it to make fat fees from creating the paper and selling it, and today, where garbage mortgage paper is sold to the taxpayer (who will ultimately pay the bill, mark my words, of the banks "too big and important to fail") via the middle man of the banking system, all so Wall Street can make fat fees creating and selling the paper?

I've seen this trick before. It's the same scam. Greed drives the sophisticated and unscrupulous to create new ways to make outsized money by peddling dangerous crap, with the safety net of the US taxpayer waiting in the wings to subsidize the inevitable failures when the music stops. That's where we now are. The music stopped, but the ship takes a while to come to a halt. Everyone is just arranging the chairs now, posturing while they wait for the inevitable federal bailouts.

Did everyone catch the little snippet where Goldman Sachs happens to "mention" that the fallout from the credit meltdown could be $2 trillion? On Bloomberg? And that is just the initial desensitizing warmup. Wait until the punchline. It will be a whopper, trust me on that.

Scary times, folks.
Re: What's $192 Billion in Fails to Deliver and Receive Among Friends? By Hendy on 11/20/2007 7:23 AM
Bob

Have you joined any of the class action law suits against NFI?

Could be a good way to get some of the money you lost in the NFI stock fraud

Hendy
Re: What's $192 Billion in Fails to Deliver and Receive Among Friends? By Monksdream on 11/20/2007 7:20 AM
In my own small way, I have started writing snail mail letters to NC newspaper editors about Reg SHO and market reform. Also, I will contact the county Democratic party about my interest in market reform. It's a start.
Re: What's $192 Billion in Fails to Deliver and Receive Among Friends? By bobo on 11/20/2007 7:31 AM
Hendy: I'm sorry, are you referring to the famous case brought by now indicted Milberg Weiss against NFI, 24 hours after the WSJ ran a hit and run piece, and Rocker serendipitously bought many millions of dollars of put options that would have expired worthless had these two events not taken place? Is that the fraud you are thinking of, where most of the retirees lost it all? Oh, that's right, you can't be, that was settled out to make it go away. Of course, if you review Patrick's presentation, you will see how Rocker is coincidentally involved in 90% or so of the MW actions he cites. Wow. If only there was a pattern, huh?

Is that the fraud you are talking about? The fraud that decimated thousands of investors, so a few hedge funds could take their money during the hottest mortgage market in history, on a bet gone horribly wrong for the hedge funds? That fraud? Or are you insinuating that now that the market turned and the paper is out of favor, that there was a fraud committed in the stock because of that change in sentiment? If that is what you are referring to, you'll be well advised to get in line for the $2 trillion in hits the financial sector is going to take, per GS, from dealing in this "fraud."

Post hoc reasoning is always fun, especially when one selectively omits huge chunks of relevant data, and starts out with a "When did you stop beating your wife" type of interrogative.

You wouldn;t happen to work for the NY financial press, or the SEC, would you?
Re: What's $192 Billion in Fails to Deliver and Receive Among Friends? By mhelburn on 11/20/2007 11:43 AM
Read Geo Will and the link to Peter Elkind's article from Last Nov in Fortune. The story gives you how the scam was done. Then take into account that Bill stopped any reform after Larach visited. Sleep in the Lincoln Room and then get permanenet reservations in Club Fed unless you get a pardon. Hillary is beholding to Weiss and Larach.. She forgave Bill for Monica and his wayward ways. I'm certain that she will see these stinking criminals as just pathetic old men whose incarceration too severe. If she gets elected, half of the creeps will be back on "The Street". Some people have had the courage to ask her about NAFTA, why don't they ask her about Marc Rich? She keeps claiming that she has experience to lead this country. When did anyone think that being First Lady and a single term Senator give someone the judgment to run a country. She has the connections to get elected and knows how to pay back contributors.

When someone asks for a pardon or a veto, Hillary, just smile and hand him a cigar.

These investigations take time and dedicated DOJ good guys. This is why you can't let puppets like Gonzalez fire attorneys because someone at the White House made a list of attorneys who were doing their jobs. Doesn't it make you wonder what those attorneys were working on when they got let go? Can you believe Gonzalez ever got appointed to AG? With corrupt people in posiitons of power, a simple phonecall can stop prosecutions.. "Hi Linda, John doesn't like Gary." and Linda said, "I'm on it... he's gone. Do you have any openings for someone with my resume?
Re: What's $192 Billion in Fails to Deliver and Receive Among Friends? By Hendly on 11/20/2007 11:42 AM
Bob,

Bet your proud that you allowed your NFI shares to be lent out to the short sellers.

Was it worth the 10% per month so the short sellers could drive down Novastars stock?

Hypocrite



Hendly

(Disclosure: Does not work for SEC, Hedge Funds, Sith Lords or is a reporter)
Re: What's $192 Billion in Fails to Deliver and Receive Among Friends? By bobo on 11/20/2007 11:50 AM
Hendly: You obviously know very little about my writing or my philosophy, and yet you are clearly trying to be as annoying as possible, which makes me wonder why you are here. If you were familiar with my work, you would remember that I always took a stance that giving your enemies ammo, as in lending them your shares, was a bad idea, as they tend to require ammo to shoot you in the head, for no other reason.

Then again, none of this is about legal short selling, so that is a tangent. The reason they are delivery failures is because nobody lent anything to anyone. They failed to borrow the shares, thus stock lending or not lending is again, off point and meaningless to the discussion. Some felt that lending shares was a perfect way to supplement their income. Some, like me, felt that I didn't want anyone borrowing my shares, thus the 10% wasn't of interest.

Get your facts straight, and you will be welcome here. Keep up the inaccurate insulting rhetoric and you will be banned from the site.

Any part of that seem unclear or confusing to you? Hope it is crystal clear. Thanks for your time.
Re: What's $192 Billion in Fails to Deliver and Receive Among Friends? By theTurtle on 11/20/2007 6:21 PM
Bob

I think the GS call of 2 trillion is not speaking to direct losses, but instead, in their own convoluted way, they are pointing out the multiplier effect of money through the banking system. That is, 200 to 400 billion in losses would have as a result a contraction on money of about 2 trillion dollars in GS's estimates. A ten times multiplier thereabouts.

Or put another way, 200 billion in losses is money that will not be available to be lent and relent in the future. The act of lending and re-lending this 200 billion would have created about 2 trillion in economic activity that will not come to fruition in the future. Why? Because it is not there anymore. It's a loss in the form of bad loans of the past to the tune of about 200 to 400 billion dollars today.

theTurtle
Re: What's $192 Billion in Fails to Deliver and Receive Among Friends? By bobo on 11/20/2007 6:26 PM
Turtle: Could be. I hope you are right. My take is that nobody really understands the true hit the economy will take, as nobody actually knows the level of contingent liabilities and bad paper floating about. Consider the amount of assets out there for which there simply is no liquid market, and yet which is valued as though it was of high caliber - the level 3 and 2 stuff. That is trillions, I think. What's it actually worth in a sale? Nobody knows, which is why they have to use models to value it.

I'll still stick with the idea that when the smoke clears, this will be a massive blow. Then again, given the number of cover-ups we've seen so far, why not another big one? Hey, if we can look at $192 billion in fails and sort of get media blackout, how many hundreds of billions or trillions will it take to move the needle of the US media? My hunch is there is no number big enough, as that media is bought and paid for.
Re: What's $192 Billion in Fails to Deliver and Receive Among Friends? By Paul on 11/21/2007 12:48 PM
Bob

My post about George Will was not an effort to counter your focus - it was really meant to share the name of a well known columnist who glanced off an historic issue without understanding the fact that his article was not truly the main story - rather a diversion.

At this point I would credit G Will with not being a part of a diversion. Some of you seem to be pretty well connected people. A well written email to G Will illuminating this fact might cause another editorial from a Guy like G Will who may not be a part of the bought and paid for financial press.

If you would truly like your central question asked by a main line columnist this might be the opportunity.

Paul
Re: What's $192 Billion in Fails to Deliver and Receive Among Friends? By Fails to deliver, failure to enforce pg 52-66 on 11/21/2007 1:44 PM
Scroll down and read the presentation made to the SEC. Charts, analysis, and the perfect correlation between SRO's data leading to the fines and bans of option trader and recorded trading in company's stock.
http://sec.gov/comments/s7-19-07/s71907-336.pdf
Re: What's $192 Billion in Fails to Deliver and Receive Among Friends? By Paladin.... on 11/21/2007 1:45 PM
A great op-ed from today's Washington Times:


Phantom shares

November 21, 2007

Jonathan E. Johnson III - In the late 1800s, American financier Daniel Drew refined the art of selling counterfeit shares. Drew's biographer wrote, "There is no limit to the amount of blank shares a printing press can turn out. White paper is cheap... printer's ink is also cheap." Today, it is possible to counterfeit shares electronically — and it happens with such frightening regularity and impunity that Drew would be proud.

In modern stock markets, stock ownership has been separated from stock certificates through a process known as "dematerialization." As a result, when investors buy or sell stock, they are actually trading "security entitlements" — not actual stock certificates.

The Securities and Exchange Commission's Division of Market Regulation Director Erik Sirri explains: "The beneficial owner's [i.e., the investor's] ownership cannot be tracked to a specific share... [T]hey own a bundle of rights defined by federal and state law and by their contract with the broker. ... That's news to a lot of people." News indeed.

Brokers in U.S. equity markets receive commissions when buyers pay for shares, not when sellers deliver those shares. Thus, incentives to deliver share are so weakened that some brokers and large institutional customers (e.g., hedge funds) regularly use loopholes to avoid delivering shares at all. The result is a "failure-to-deliver" (FTD).

FTDs can be caused in several ways, but they commonly result from short sales in which the seller does not borrow or even locate the stock he sells (the infamous "naked" short sales). Regardless of how an FTD occurs, for each share not delivered the system creates a "phantom" entitlement the market treats as a real share. These "phantom shares" are supposed to be temporary in duration and few in number. Loopholes, however, are exploited on such a scale, and phantom shares are so persistent, they are corrupting the U.S. equity markets in three ways.

(1) Phantom shares warp corporate governance by inflating the number of voting shares. Bob Drummond (Bloomberg Markets) reported in April 2006, "The results of high-stakes company decisions may hinge on the invisible influence of millions of votes [i.e., phantom shares] that shouldn't be counted." In an analysis of 341 corporate votes in 2005 by the Securities Transfer Association, there was evidence of overvoting in all 341 cases.

(2) Phantom shares distort share prices by flooding the market with excess supply. In July 2006, SEC Chairman Christopher Cox said "abusive naked short sales ... can be used as a tool to drive down a company's stock price to the detriment of all of its investors." The creation and sale of phantom shares has become a common means to manipulate share prices in U.S. equity markets.

(3) Phantom shares create systemic risk. According to the Depository Trust and Clearing Corp. (DTCC), on any given day "fails to deliver and receive amount to about $6 billion daily ... or about 1½ per