The Madoff Exception - Market Mystery Revealed

Of Cox, Cannons, Crooks, Cotillions and Captures, The New Math, A trillion here, a trillion there, pretty soon you're talking about counterfeits. Is a trillion, the new billion?

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DeepCapture My Friends

Excerpt

Bernard Madoff, the Mafia, and Naked Short Selling

January 19th, 2009 by Mark Mitchell

Bernard L. Madoff was once the chairman of the NASDAQ stock exchange. He was one of the most important market makers on Wall Street. And he managed what was, by some estimates, the largest hedge fund on the planet.

Yes, Bernard Madoff was an impressive man. That much was clear even before we learned that his $50 billion Ponzi scheme may have been orchestrated in cahoots with the most powerful, sophisticated, and indiscriminately murderous organized crime syndicate the world has ever known.

Charles Gasparino (citing “speculation” from investigators) reported last week on CNBC that the Russian Mafia might have been partners in Madoff’s larcenous fund business. Or perhaps the Mob had an even greater interest in Madoff’s market making operation, as some of our sources have told us in recent weeks.

Either way, there is a certain cachet.

But it wasn’t just pierogies and pistol-packing wiseguys in purple suits. Mr. Madoff was also a dedicated public servant, volunteering countless hours at the Securities and Exchange Commission.

...

At any rate, I don’t think Madoff had an office at the SEC. He certainly was not employed there. But the SEC was glad to have Madoff write a rule exempting Madoff from the rules. The formal name of the rule is, “the option market maker exception to Rule 203(b)1,” but the SEC was so thankful that it named the rule after the great man himself.

It was called, “The Madoff Exception.”

After Madoff wrote that rule, market makers (e.g., Madoff) proceeded to “rent” their exemption to hedge funds (i.e. friends-of-Madoff).

It remained against the law for hedge funds to sell phantom stock to manipulate the markets. It was also against the law for market makers to help hedge funds orchestrate such schemes. But under the Madoff regulatory regime, unscrupulous short sellers (i.e. friends-of-Madoff) could engage in this illegal activity so long as they did so with the illegal connivance of a law-breaking market maker (i.e. Madoff).

Continue Reading At >> http://www.deepcapture.com/

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You can shoot off a cannon in the bank's vault, from one end to the other, and you wouldn't hit a plug nickel. (Ford)

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SAN FRANCISCO (MarketWatch) -- Bank of America Corp. needs more than $80 billion in new common equity capital to support the huge amount of assets on its balance sheet, an analyst said Tuesday.

Friedman, Billings, Ramsey's Paul Miller also said Wells Fargo & Co. probably will have to cut its dividend soon as that bank tries to boost capital.

http://www.marketwatch.com/news/story/Bank-America-needs-more-80/story.aspx?guid={FAA01409-AE6B-418D-84A7-88C97F7C8AA5}

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Cox Resigns As SEC Chief
1/20/2009 9:23 PM ET
http://www.rttnews.com/Content/TopStories.aspx?Node=B1&Id=829493&Category=Top%20Stories

Excerpt

On the day Barack Obama officially became the 44th President of the United States, transition at the top of the nation's Securities and Exchange Commission moved forward with the resignation of SEC Chairman Christopher Cox.

The expected resignation was not publicly announced, but was confirmed by an SEC spokesman.

The 56-year-old Cox, who served as Chairman for 3-and-a half-years, also gave up his position as a member of the SEC. The resignations became effective at noon on Tuesday.

The former California congressman was appointed to his post by President George W. Bush in 2005 after the resignation of William Donaldson.

President Obama has nominated Mary Shapiro to head the commission. While Shapiro awaits confirmation, Obama is expected to appoint an acting chair.

 

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Is Easter early this year?

Helloooo. Yoo Hoo! Govmint.

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No Pardon for Mike Milken. Thanks George and Halleluljah! Imagine spending 7 figures trying to get a pardon. Better usage would have been to take out a billboard advocating for Provenge®.  It's almost 2 years since the FDA delayed approval. Come on Mike. Silence = Death. Get Busy!

http://www.CareToLive.com

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Good Luck to the new President and First Family.

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Twitter this. We'll be shooting a few scenes for our prostate cancer awareness movie, in Philly this weekend.

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Opinion

Hell Hath No Fury Like a Woman Ponzied
by RoryKearney | January 19, 2009 at 07:50 am 481 views | 2 Recommendations | 1 comment

http://my.nowpublic.com/tech-biz/hell-hath-no-fury-woman-ponzied

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http://news.muckety.com/

Latham & Watkins is feeder firm for Justice Department By Carol Eisenberg January 21, 2009 at 9:12am

Administrations come and go, but Latham & Watkins remains a constant - a white-shoe law firm that serves as a de-facto farm team for the U.S. Justice Department, regardless of a president’s political leanings.

“We’ve said it once and we’ll say it again: Young law dogs with Department of Justice aspirations should consider Latham & Watkins,” advised the Wall Street Journal’s Law Blog. “The firm seems to be the DOJ’s home away from home.”

Hint: Click in map to explore connectionsStory continues below interactive map 

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The latest defection is partner Kathryn Ruemmler, who has just been tapped as principal associate deputy attorney general in President Barack Obama’s Justice Department. Reummler is a superstar litigator who had previously been part of the government’s Enron prosecution team.

The revolving door is also swinging in the other direction. While Ruemler heeds the call of government service in a Democratic administration, Alice S. Fisher, the Justice Department’s criminal division chief who oversaw high-profile prosecutions in counterterrorism and corporate fraud under George W. Bush, recently returned to the firm’s ranks.

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J. Ezra Merkin This map of J. Ezra Merkin relationships is interactive.
Click to activate, then click on names to explore and expand. (Requires Java.) Click to activate interactive map
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http://www.muckety.com/J-Ezra-Merkin/22527.muckety

Related stories on Muckety

• David Gregory in line to succeed Tim Russert on ‘Meet the Press’ - December 3, 2008
• Muck tracker - President-elect Barack Obama holds first meeting of national security team - December 15, 2008
• Ashcroft profits from years at Justice - January 10, 2008
• Top Madoff players hire lawyers with ties to SEC, Justice department - December 18, 2008
• Muck tracker - Hillary announced as secretary - December 1, 2008
• McCain backed by conservative law profs - February 4, 2008
• Michael Chertoff takes high profile in response to Hurricane Gustav - September 1, 2008
• Jami Miscik comes in from the cold - November 19, 2008
• Brent Scowcroft is back in the tent - November 25, 2008
• Former FBI chief Louis Freeh sells his services to corporate elite - May 26, 2008

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And don't miss this muckety chart on

Cohmad Securities, Robert Jaffe face tough questions about Madoff ties By Carol Eisenberg  |  January 15, 2009

Investigators probing Bernard Madoff’s alleged $50-billion scheme are looking at the role played by an investment firm that he co-founded with an old friend from Long Island that recruited hundreds of investors from New York, Boston and Florida.

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Here's a muckety chart on Marc RIch!!

http://news.muckety.com/2009/01/16/marc-rich-the-sequel/10191

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New Dave Patch Comment Letter re: Amendments to Regulation SHO (Interim final temporary rule)

http://www.sec.gov/comments/s7-30-08/s73008-66.pdf

"“Ms. Schapiro said that she met with Mr. Cox last August and told him that there had been “a migration” of professionals out of more tightly regulated brokerages to less-policed investment- advisory firms.

“The SEC has not shared our view that this is something to be concerned about,” she said."

It is clear by the history of recent reforms that the Commission has similarly not shared the views of a Shapiro led NASD relative to the requirements for settlement in the short sale process. 

As the Commission continues to seek input from the firms engaged in short selling, leniency is placed on ‘prompt and accurate’ settlement of securities in order to protect the sellers from what they claim to be cost or pricing burdens.

“It would be very costly and operationally burdensome for such a fund to reconcile its trades and update its books and records, among other things, if its clearing broker closes out a large number of the trades placed with it.

”Costly and operationally burdensome to be forced to close out positions in which the short sale process was not conducted under the general guidelines of regulatory rulemaking?  Why should the costs of the short seller be placed higher in the pecking order to the cost burdens of the investor who met the
standards of trade by making the capital available on-time for receipt of settlement? 

Under similar logic, the MFA admits that settlement failures carry a burden in themselves to hedge funds.

“MFA members have strong incentives to prevent failures to deliver from occurring. Securities that fail to deliver are disruptive to a fund’s trading program because they interfere with a fund’s risk management calculation and introduce anotherlayer of uncertainty—the risk of being closed-out.” 

Continue reading>> http://www.sec.gov/comments/s7-30-08/s73008-66.pdf

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