Part 3 — Naked Shorts — $75,000 For Cracking the Wall Street Cover-up REDUX

As always, all herein is my opinion. I welcome you to prove me wrong.

Part 4 — Naked Shorts — $75,000 For Cracking the Wall Street Cover-up
http://www.nowpublic.com/world/part-4-naked-shorts-75-000-cracking-wall-street-cover-redux

Scroll to bottom (before comment section)  for latest updates
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Naked Shorts — $75,000 For Cracking the Wall Street Cover-up by RoryKearney | July 11, 2008 at 07:13 am | 3681 views | 32 comment3http://www.nowpublic.com/world/naked-shorts-75-000-cracking-wall-street-cover

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Part 2 — Naked Shorts — $75,000 For Cracking the Wall Street Cover-up REDUX by RoryKearney | July 18, 2008 at 08:43 am | 324 views | 1 comment http://www.nowpublic.com/world/part-2-naked-shorts-75-000-cracking-wall-street-cover-redux

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http://www.deepcapture.com/the-story-of-deep-capture-by-mark-mitchell/

To enter our $75,000 "Crack the Wall Street Cover-up!" contest scroll to bottom. First prize, October, $30,000. Vote at bottom of page for your favorite. Help spread the word! tia

Canadian Company Fairfax Financial warned United States SEC on "naked" short selling in 2005

http://www.financialpost.com/story.html?id=663953
Barbara Shecter, Financial Post  Published: Friday, July 18, 2008

A Canadian company warned U. S. regulators about the damage inflicted by "naked" short selling nearly two years before the Securities and Exchange Commission moved this week to curb the practice and shore up the battered share prices of financial services powerhouses such as Freddie Macand Lehman Brothers Holdings Inc.

In a letter to the SEC in September of 2006, Fairfax Financial Holdings Ltd. urged the regulator to look into the abuse of "locate" requirements of short selling, where trades are done even though stock has not been borrowed as is required to cover the trade. On Tuesday, SEC chairman Christopher Cox invoked an "emergency" measure that requires short positions in 19 financial services companies to be covered by stock that is borrowed. The measure could be extended. Short selling is a legitimate trading method that bets a company's share price will decline. But the practice of naked short selling, which hypothetically allows the same block of shares to be spoken for by numerous traders, has been pinpointed as a cause of the relentless sell-off of major U. S. financial services companies this year.

"We had the dubious distinction of being one of the largest companies to be attacked with this method but it now appears that we were just a stepping stone," said Paul Rivett, author of the Fairfax letter, yesterday.

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 Here are some comments on the SEC site
http://sec.gov/comments/s7-19-07/s71907.shtml

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Here is the SEC emergency ruling

http://www.sec.gov/rules/other/2008/34-58190.pdf

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You can comment here

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SEC Trips at Finish Line; Fraud Wins

At the present time the SEC was in the process of engaging in unprecedented steps to insure that naked short selling does not damage the confidence of the banking industry and thus add additional burdens to our already fragile US Economy.  The SEC had created an emergency order that was focused on preventing the abuses of naked short selling in the trading of our banking institutions by enforcing a pre-borrow requirement on all short sales executed.

In an editorial column published in Investors Business Daily SEC Chairman Chris Cox stated:

“Naked short selling can turbocharge these "distort and short" schemes. In a naked short, the usual process of short selling is circumvented, because the seller doesn't actually borrow the stock and simply fails to deliver it. For this reason, naked shorting can occur even when actual shares aren't available in the market. It allows manipulators to force prices down without regard to supply and demand.

Next week, the SEC will implement an emergency order designed to prevent naked short selling in the financial firms that the Federal Reserve Board has designated as eligible for access to its liquidity facilities. “

And for a moment there it appeared that the sleeping regulator had suddenly awoke and was ready to cross that finish line first.

Then we awoke and found that it was just a dream, that the SEC really did not put a stop gap to fraud but instead welcomes it with open arms.

According to reports, the industry market makers and Options Market Makers (OMM) have lobbied the SEC’s Division of Trading and Markets to provide them with exemption from the short sale pre-borrow rule about to be required of 19 publicly trading banks and institutions.  The staff is considering such exemption and will propose it to the Commission.

According to SEC spokesman John Nester the proposed change would exempt market makers in the 19 stocks and their derivatives from needing to borrow shares in advance of short sales "in their market-making and related hedging activities" in the stocks.

Okay, so let me get this straight, naked shorting is bad and can be used by manipulators to drive a market down and yet, in a free falling market the market makers need to be granted authority to naked short for liquidity?  Doesn’t the general principle of a free falling market imply that there is more than sufficient sell side liquidity?

Most likely it will be James Brigagliano, Associate Director for Trading Practices and Processing that will be assessing whether the exemptions should be provided.  Brigagliano, for those who don’t know of him, is the very individual who led the Committee’s in the concept of Regulation SHO, was present in the private meetings where the Securities industry and Financial Markets Association (SIFMA) proposed the ill-fated grandfather clause  that was a last minute addition to the SHO release, was the Committee lead on the team that removed the uptick rule from our markets, and has been the Committee lead on the elimination of the Options market making exemption which is on it’s third year of public comment.

To say that Brigagliano doesn’t get it and has been captured by industry lobbyists would be an understatement and what comes next will prove it.

Consider, in June 2008 the SEC’s Office of Economic Analysis reported on a study they had conducted regarding the rise in settlement failures in our capital markets.  In January 2005 the aggregate level of fails on a daily basis were valued at near $3.4 Billion.  In March of 2008, some three years after regulation SHO was implemented to reduce fails to deliver, the aggregate level of fails to deliver on a daily basis were valued at near $8 Billion.  Unsettled trades (naked shorts) had near tripled during a period when the SEC was focused on eliminating fails altogether.

The analysis published states that “one explanation of these results is that the investors who previously failed to deliver in the equity market have now moved to the options market to establish a synthetic position. Since the option market makers still enjoy an exception to the close-out rule and tend to hedge their positions in the equity markets, the fails may now be coming from the option market makers instead of the equity investors themselves.”

That’s right, short sellers moved their intentions over to the options market and used the options market maker as a third party participant in the naked short of the underlying equity.  All that was required was to overwhelm the Put market and drive the OMM to hedge their book by naked shorting the underlying equity.

The question for Mr. Brigagliano would be, does the equity market and pricing efficiencies in that market know to differentiate between a naked short executed as a hedge on a Put contract from a naked short that previously was dumped directly into that market by the hedge fund?  Should a synthetic position be afforded the luxury of impacting the pricing efficiencies of a real share in the equity market?

Unfortunately the SEC would like us all to think that this June 2008 analysis was new and that they are just coming to studies that expose how and why naked shorts exist.  But we know better and we refer back to 2004 when then SEC Fellow Lesli Boni drafted a white paper called “Strategic Fails to Deliver in the US Equity Markets.”  

This white paper was used as part of the creation of Reg SHO and outlines how short sellers were using the lower cost approach of the options market to strategically obtain short positions without the expense of a borrow fee.  This approach was not only cost effective but created the same equity market pressures that an equity short or naked short would have because the OMM would make that trade for them as a hedge to the Put contract.

Boni writes “We argue that long-lived (“persistent”) fails are more likely the result of strategic fails rather than inadvertent delivery delays. Consistent with the hypothesis that pre-Regulation SHO, equity and options market makers strategically failed to deliver shares that were expensive or impossible to borrow, we find some evidence that these long-lived fails were more likely to occur when stocks were expensive to borrow, as proxied by institutional ownership, book-to-market, and market cap.”

So it is a cost game where, when James Brigagliano backs down to the lobby of the industry and the Commission signs off on this they will have done so not for market stability and safety but for revenues.  When expense and profits are undermined by market safety, expense and profits will win out each and every time.

As I conclude on this disturbing development I ask a few simple questions:

1.      If market makers are provided this exemption to create liquidity in offsetting excessive interests in a singular direction, and the SEC will again be providing market makers with naked shorting allowances in this free falling market for liquidity sake, where were the market makers in providing the buy side liquidity to hold back the free fall?  How was it that the reason for the free fall was due to a lack of buy side interest and apparently market making purchased to keep the stock price stabilized while the sell side was heavily overburdened.

2.      If the SEC allows both market makers and options market makers to use this exemption, won’t that make it difficult to weed out the good from the bad?  Clearly the SEC will not be able to distinguish real time what the fails to deliver are being attributed to when there will continue to be an allowance for unlimited failed trades in these 19 securities?

3.      How does the SEC plan on addressing the hedge funds use of the options market maker to manipulate the equity market?  Were the floodgates not re-opened here?

One thing is for sure, this false start by the SEC and their ability to trip at the finish line has certainly made it easier for the market professional manipulators to win this race.  We can also rest assured that despite the near 1000 comment memo’s already published supporting the full elimination of the OMM exemption under SEC proposed rule 34-58107 the SEC will not be supporting public opinion.  The SEC has tipped their hand here.  If the SEC can’t eliminate this exemption for the 2 week period this emergency order covers how can we ever expect them to eliminate it permanently.

Finally, from the archives of the SEC where we are informed that each of these market makers have alternatives to carte blanche naked shorting but choose to ignore the alternatives comes this memo:

“On December 19, 2006, members from the Division of Market Regulation met with Matthew F. Andersen, John C. Nagel, Daniel Dufresne, Adam C. Cooper, Mathew Hinerfeld of Citadel Investment Group, L.L.C. to discuss the proposed Commission amendments to Regulation SHO. Citadel stated that it rarely uses the grandfather and options market maker exceptions to Regulation SHO because it has implemented procedures to close out fail positions prior to the 13th consecutive settlement day. Therefore, Citadel had no comments on the proposed amendments. “

Citadel just happens to be one of the largest volume options market makers in the marketplace and they don’t need the exemption to operate their business profitably.

Dave Patch   http://www.investigatethesec.com/drupal-5.5/node/338


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Naked Shorts — $75,000 For Cracking the Wall Street Cover-up by RoryKearney | July 11, 2008 at 07:13 am | 3441 views | 32 commentshttp://www.nowpublic.com/world/naked-shorts-75-000-cracking-wall-street-cover

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Part 2 — Naked Shorts — $75,000 For Cracking the Wall Street Cover-up REDUX by RoryKearney | July 18, 2008 at 08:43 am | 235 views | 1 comment http://www.nowpublic.com/world/part-2-naked-shorts-75-000-cracking-wall-street-cover-redux

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http://www.deepcapture.com/the-story-of-deep-capture-by-mark-mitchell/

To enter our $75,000 "Crack the Wall Street Cover-up!" contest read to the bottom of this (very long) story.

The Columbia School of Journalism is our nation’s finest. They grant the Pulitzer Prize, and their journal, The Columbia Journalism Review, is the profession’s gold standard. CJR reporters are high priests of a decaying temple, tending a flame in a land going dark.

In 2006 a CJR editor (a seasoned journalist formerly with Time magazine in Asia, The Wall Street Journal Europe, and The Far Eastern Economic Review) called me to discuss suspicions he was forming about the US financial media. I gave him leads but warned, “Chasing this will take you down a rabbit hole with no bottom.” For months he pursued his story against pressure and threats he once described as, “something out of a Hollywood B movie, but unlike the movies, the evil corporations fighting the journalist are not thugs burying toxic waste, they are Wall Street and the financial media itself.”

His exposé reveals a circle of corruption enclosing venerable Wall Street banks, shady offshore financiers, and suspiciously compliant reporters at The Wall Street Journal, Fortune, CNBC, and The New York Times. If you ever wonder how reporters react when a journalist investigates them (answer: like white-collar crooks they dodge interviews, lie, and hide behind lawyers), or if financial corruption interests you, then this is for you. It makes Grisham read like a book of bedtime stories, and exposes a scandal that may make Enron look like an afternoon tea.

By Patrick M. Byrne, Deep Capture Reporter

The Story of Deep Capture

NEW! Download the Story of Deep Capture in .pdf format.

By Mark Mitchell, with reporting by the Deep Capture Team

Introduction - by Mark Mitchell

I began working on a version of this story. . .

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Deep Capture
The Movie
http://www.deepcapturethemovie.com/

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July 20, 2008  12:00 NOON EST

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Why Is SEC Manipulating The Stock Market

Excerpt

Why is the SEC manipulating the stock market?
Posted Jul 20th 2008 8:38AM by Peter Cohan
Filed under: Federal Natl Mtge (FNM), Wachovia Corp (WB), Washington Mutual (WM)

The Securities and Exchange Commission (SEC) is becoming the very thing it is supposed to be stopping -- a stock market manipulator. The SEC was first established after the Great Depression to protect the general public from the shady stock dealings that caused that catastrophe. But the Wall Street Journal reports that the SEC has now become the epitome of the very thing that it's supposed to prevent.

That's thanks to a temporary rule it created last Tuesday that blocks the short selling of the stock of 19 big banks and financial institutions unless the short sellers can borrow those shares. (As Barron's [subscription required] points out -- it's interesting that the SEC has announced it is enforcing this so-called naked short rule since the practice is already illegal).

I can only imagine the profit opportunities available to those who had early access to this list of 19 -- which according to my calculations have risen an average of 27.5% since Tuesday. Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) -- whose CEO made $20 million last year, according to AP -- are the biggest winners -- up 90% and 74.5% respectively since then. Meanwhile, all the other companies that the SEC did not protect are wondering why they were not on the list.

The SEC's actions raise many questions:

http://www.bloggingstocks.com/http://www.bloggingstocks.com/bloggers/peter-cohan/bloggers/peter-cohan/

http://www.investorvillage.com/smbd.asp?mb=971&mn=206082&pt=msg&mid=5229442


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Here's is more on Faifax Financial Holdings VS (ffh)Hedge Fund Lawsuit from Part 1

http://www.financialsense.com/Experts/2008/Burrell.html
Bud Burrell weighs in on Naked Short Selling — Audio File

James Chanos is also being sued by Fairfax Financial Holding for trying to destroy his company.

Excerpt

Hedge Fund Hit Man Hired by Cohen, Loeb, Sender, Says Insurer
By Anthony Effinger

Aug. 24 (Bloomberg) -- One morning in 2005, an unusual letter arrived for Rev. Barry Parker at St. Paul's Anglican church in Toronto. The news: A member of his flock was out to swindle the parish.

``Dear Father,'' the note begins. ``The attached documents are being sent to you out of my concern for the Church's finances.''

The letter goes on to say that the allegedly wayward parishioner, an insurance executive named Prem Watsa, was bilking shareholders of Toronto-based Fairfax Financial Holdings Ltd.

``I am perplexed by the mystifying, spectacular rise of this insurance medusa,'' the typed letter reads. ``Be aware, Father, be skeptical and ask Mr. Watsa to make a full confession.'' The note was signed P. Fate. The return address was that of St. Patrick's Cathedral in New York.

Stranger still is what Fairfax says is the source of the letter: A cabal of hedge fund managers -- among them James Chanos, Steven Cohen, Daniel Loeb, David Rocker and Adam Sender -- hoping to profit from a slump in Fairfax stock. Fairfax, which has a history of accounting lapses, sued eight hedge fund firms for racketeering in July 2006, demanding $6 billion in damages.

The insurer says the letter to Parker, excerpts of which were included in its complaint, was just one of many dirty tricks the fund managers used to smear the company, which has 8,000 employees and $26.8 billion of assets. The hedge funds deny wrongdoing.

MI4
At the heart of this story is a freelance research analyst named Spyro Contogouris, whose previous -- and often contentious -- dealings have ranged from Houston real estate to Nigerian natural gas. Until recently, Contogouris, 46, ran a firm that sounded more cloak-and-dagger than stocks-and-bonds: MI4 Reconnaissance LLC, based in New Orleans.

Fairfax says the hedge fund firms paid Contogouris and MI4 employee Max Bernstein to send out slanderous reports about the insurer and to harass its executives.

http://www.bloomberg.com/apps/news?pid=20601109&sid=aaza4TiCAtxE&refer=home

Bad Things Happen To Bad Peoplehttp://imustimes.wordpress.com/2008/03/12/bad-things-happen-to-bad-people/
March 12, 2008 by channelXRFR

Jacobs: Spitzer just picked targets of opportunity. He was very selective about it. It’s not the he sprayed the whole area with a shotgun with #7 bird-shot. Spitzer just picked his targets carefully to make sure he made a point.

From Part  1

http://www.nowpublic.com/world/naked-shorts-75-000-cracking-wall-street-cover

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July 20, 2008 5:00 PM

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http://www.nowpublic.com/health/just-say-yes-fda-ties-bind-saturday-morning-rant

Just Say Yes. The FDA Ties That Bind. A Saturday Morning Rant. by RoryKearney | July 12, 2008 at 08:24 am | 201 views | add comment by RoryKearney Here is a good video of the FDA Bonuses.
http://www.pharmalot.com/2008/07/big-very-big-fda-bonuses-redux/

Right - FDA Commissioner Andy Von Eschenbach
Center - Richard Pazdur FDA CDER Division
Left - Michael Milken  Prostate Cancer Foundation (Convicted Felon aka The Junk Bond King)

What is going on at the FDA?

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WELL L@@KIE HERE!

A picture of George Bush shaking hands with Michael Milken

Even Clinton wouldn't pardon Milken. Clinton did pardon Marc Rich, (is he the Sith lord?) allegedly a major market manipulator. He has never returned to the United States after his pardon. Is there an issue of billions in unpaid taxes.

http://www.investorvillage.com/smbd.asp?mb=971&mn=206023&pt=msg&mid=5227357

Provenge Players:  http://caretolive.com/wp-content/uploads/2008/05/players_provenge_v3.gif    
Fact Sheet:
http://caretolive.com/wp-content/uploads/2008/05/handout-2-page-sided-combo.pdf
  Let's take advantage of the latest news hot topics:  SEC, NSS, and felons seeking pardons.  Copy and send these pictures and links to all the media outlets.

http://www.nytimes.com/2008/07/19/us/19pardon.html?_r=1&oref=slogin&ref=todayspaper&pagewanted=print

New York Times
July 19, 2008 Felons Seeking Bush Pardon Near a Record
By CHARLIE SAVAGE

WASHINGTON — Felons are asking President Bush for pardons and commutations at historic levels as he nears his final months in office, a time when many other presidents have granted a flurry of clemency requests.

Among the petitioners is Michael Milken, the billionaire former junk bond king turned philanthropist, who is seeking a pardon for his 1990 conviction for securities fraud, the Justice Department said. Mr. Milken sought a pardon eight years ago from President Bill Clinton, and submitted a new petition in June.

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http://www.nytimes.com/2008/07/19/us/19pardon.html?_r=1&ref=todayspaper&oref=slogin
Michael Milken, convicted felon, the Junk Bond King is seeking a pardon from President Bush. He has reinvented himself and he he now in charge of the largest prostate cancer foundation in the world, but never utters a word in favor of Provenge, an immunotherapy ready to take its rightful place at the head of the table for end stage prostate cancer. Instead, it has been delayed for over a year, and Milken is touting GVAX, an immunotherapy further away from approval, but one we believe he is invested in.  Something is not just rotten in the United States, the corpses of the men with late stage prostate cancer who can't get access to Provenge while Milken's Prostate Cancer Foundation remains mumm.

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Here is a prior CareToLive Blog on the subject.

http://caretolive.com/2007-11-18/michael-milken-and-the-prostate-cancer-foundations-foul-balls/

Excerpt

While Michael Milken and the Prostate Cancer Foundation are whooping it up at the ballgame, some men are sneaking off to have their testicles removed in hopes that it will stop their PSA from rising, and their lives from ending prematurely from late stage prostate cancer. 1 in 6 men will be diagnosed with prostate cancer in their lifetimes. Over 30,000 American men will die from prostate cancer this year. Only 1 very toxic drug has been approved for late stage pc in over 42 years.

Along came Dendreon’s Provenge, an Immunotherapy voted overwhelmingly safe and effective by the FDA’s panel of experts convened to review Provenge. Was there foul play afoot when the FDA decided to delay approval. Perhaps if our men put some extra pine tar on their bats, we could get some coverage of this story. You would think that the deaths of 15,000 men since the delay would be enough.

Note the Picture on the bottom — David Solit, Tommy Lasorda, Dr. Howard Soule, Dr. Howard Scher and Mike Milken join together in support of the PCF’s Home Run Challenge at the New York Mets vs. Anaheim Angels game on June 10th, 2005 (click link)

Michael Milken and the Prostate Cancer Foundation’s Foul Balls* * * * *

A few great videos for the $75,000 For Cracking the Wall Street Cover-up?!

Keep 'Em Coming Folks!!!!

DeepCapture on youtube  An enterprising fellow has it up.  Three segments so far.  
DeepCapture pt. 1:  "Naked Shorts Exposed" http://youtube.com/watch?v=zB40pZ4JaC4&feature=related  


DeepCapture pt. 2:  "Getting Deep" http://youtube.com/watch?v=PI1dmdkDOCo&feature=related  
DeepCapture pt. 3:   "Continued (Mid-2002's) Naked Short Selling" http://youtube.com/watch?v=iesq7FOTsRI&feature=related

Don't miss Video pt. 3 with the Crazy Eddie commercial.  For those who aren't familiar with the bashfest that is the yahoo Overstock (OSTK) message board, Sam Antar, convicted felon, posts there all day long (I think, I stay out of there, he was kicked off of InvestorVillage Ostk board), any way he trash talks the company, as his insane way of saying how much he hates it.

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Tell the Federal Reserve Board what you really think.

http://www.federalreserve.gov/feedback.cfm

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June 20, 2008 6:30 PM EDT

Patrick Byrne, CEO Overstock.com, publishes a new Deep Capture Blog

Excerpt

http://www.deepcapture.com/

Historical Worldwide Catastrophe

Did Someone Say, “World-Historic”? July 20th, 2008 by Patrick Byrne

In the spring of 2006 I met with the very bright editor of the editorial page of a major American newspaper (I do not name the paper only because I do not wish to embarrass the individual involved). After several hours of discussion, he said gently, “I know my paper has not been so fair to you.” He proceed to invite me to submit an editorial on the subject of naked short selling, suggesting a length of 1,200 words. I predicted that he would not be permitted to publish it. He replied, “I run the editorial page. I determine what gets published on it.”

Some time thereafter I sent him the editorial that appears below. The next day he called and said, “I’m terribly embarrassed to have to say this, but it appears I will not be able to publish this or anything by you.”

He sounded surprised. I wasn’t.

That said, it seems it a shame not to let it see the light of day, even at this late date. So again, the following is an editorial prepared for a major US newspaper which ostensibly is concerned with the operation of our capital market. The months referred to are 2006 months. Since then, the numbers involved have increased 30-100%.

http://www.deepcapture.com/did-someone-say-world-historic/

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They Drank Your Milkshake
In a Nutshell
http://www.investorvillage.com/smbd.asp?mb=3532&mn=21507&pt=msg&mid=5230943

More Wisdom From Overstock CEO Patrick Byrne (aka Hannibal)

Re: Can we agree on one term?I am going to give my take on a few questions I see bandied about.

1) How many shares can people believe they own, if all is legitimate? It is the sum of the issued and outstanding, plus however many shares have been lent and sold (perhaps multiple times, let's say).

How many shares do people think they own, based on the statements from their brokers?

The difference is the slop that the system has let accumulate.

Now take it one step farther. We gloss over an important fact: very few of you actually own shares. What you possess are "share entitlements". In fact, Cede & Co. owns the shares. your broker has entitlements to those shares, and then you possess share entitlements to your broker's level of share entitlements.

[As an aside, what that means is that it can happen (as I once showed at a JP Morgan conference) that a broker has, say, 300,000 shares, but clients who think they own 1.2 million. What happens if that broker fails? Does everyone get told, "OK, you turn out to own 25% of what you thought you owned"? No, there is federal insurance for a small amount of this. If it happened all over the place at once, however, my guess is that this is exactly what is going to happen. Of course, you can sue your defunct broker when it does....]

Going back to your question.... The slop might be calculated by taking the sum of all share entitlements (i.e., that represents the sum of all shares that people think they own), and subtract the issued and outstanding and the legitimately borrowed & shorted stock. The difference between those numbers is the total slop.

2) The market maker exemption is key. Think of it this way: we pass a law that says, "No one can drive over 55 miles per hour (except for police cars, of course)." Now some hedge fund rents a police car and drives 100. He may claim he is not breaking the law, but what is happening is that an exemption tot he law was created to serve on social end, and it is being rented out to some yuck-yuck to serve an entirely different end.

     That is exactly what happens with the market maker exemption. The naked shorting is moved off the books of the hedge fund and onto the books of a guy who is exempted from the law about naked shorting. The hedge fund pays him a fee. So the option market maker is basically renting his exemption from the law to the hedge fund.
    If you followed that much, you can stop there. If you want to know the mechanics of how it is accomplished, it is that the option market maker sells puts to the hedge fund; the OMM is now net long, so he hedges it by selling an equal number of shares. How does he do that? As a market maker he can sell without having borrowed (that is his exemption, created in the interests of making markets).To whom does he sell the shares? The same hedge fund that bought the puts. The OMM is now neutral + his gain is however much he charged for the puts. The hedge fund now has puts, and an equal number of "bullets" to fire into the stock, hoping to fire the last one just before the puts expire. Hence, the big block trades in Chicago with the matching put activity.

3) The newest FOIA numbers show $8.5 billion of FTD's at the DTCC. That understates the problem in two ways.

a) The brokers pre-net, so there are failures at their level, on the periphery of the circle, so to speak. Then they are submitted to CNS, where some failures are cleaned up by the SBP. Of what remains, some is eventually taken ex-clearing. And failures originating from overseas are not Failures to Deliver, but are called Failures to receive. So how much is the total failures, if the FTD's at DTCC are $8.5 billion? No idea. Could be $30 billion, could be $192 billion (as the Bunny says). I don't know.

b) If a participant is naked short 10 million shares of a company that has been driven to $.20, he carries that on his books as a $2 million exposure. Now imagine someone makes him clean up his position.  Sedona  trades 50,000 shares/day. The first 1,000 shares the guy buys are at 20 cents, then 21 cents, etc. It does not cost him $2 million to buy 10 million shares. it costs him.... $10 million? $20 million? $50 million?

Put these two facts together. If in all their glorious variety there are, in fact, $100 billion of failures in the system (all types: pre-netted at brokers, SBP, offshore, ex-clearing, plus the plain old $8.5 billion the DTCC already cops to), then cleaning up the whole mess could take.... far more liquidity than there is in the system.

These Wall street firms turn out not to be such good businesses. They just drained a lot of money out of the system, and paid themselves big bonuses for doing so. Your retirement savings has been turned into their mansions in the Hamptons. They drank your milkshake.

Patrick

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Congress Wiped Out Usury Laws in 1980 All else from that has flowed.
http://www.investorvillage.com/smbd.asp?mb=971&mn=206125&pt=msg&mid=5230877

Excerpts

How do you think we got into mafia "juice" rates currently being charged by "legitimate" banks with rates as high as 28+?% based on falsely manipulated credit scores etc.? How indeed? Especially even as going mortgage rates are below 6%?
. . .
They are turning all of America into "Potter's Town" (Remember the Jimmy Stewart Christmas movie?) They must be stopped in their tracks!

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July 22, 2008 7:30 AM Updated

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From the Business Spectator in Australia.....
http://www.businessspectator.com.au/bs.nsf/Article/Confederacy-of-liars-GQSV2?OpenDocument
 
Commentary
7:29 AM, 21 Jul 2008
 
Alan Kohler
Confederacy of liars
 
The thing that is often misunderstood about short selling is that it is really just another form of leverage, with two advantages: it requires no capital at all, and it is easier to manipulate a stock down than up, just as it’s easier to lose a race on purpose than to win it.

The problem in the stockmarket is figuring out which part is manipulation. Is it the tales told by executives to bolster their stock prices, or the rumours spread by hedge funds to knock them down?

Friedrich Nietzsche’s essay On truth and lies in a nonmoral sense (1873) is not a required text in securities courses, but perhaps it should be. Nietzsche might have been describing corporate profit guidance when he wrote: “Truths are illusions which we have forgotten are illusions.”

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http://www.nytimes.com/2008/07/20/business/20debt.html?_r=2&hp=&adxnnl=1&oref=slogin&adxnnlx=1216638417-JdmCur8yxyIeBKj88A5MQQ

New York Times
By GRETCHEN MORGENSON
Published: July 20, 2008

The collection agencies call at least 20 times a day. For a little quiet, Diane McLeod stashes her phone in the dishwasher.

Work Out Problems With Lenders? Try to Find Them (July 20, 2008)
Fair Game: Borrowers and Bankers: A Great Divide (July 20, 2008)
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But right up until she hit the wall financially, Ms. McLeod was a dream customer for lenders. She juggled not one but two mortgages, both with interest rates that rose over time, and a car loan and high-cost credit card debt. Separated and living with her 20-year-old son, she worked two jobs so she could afford her small, two-bedroom ranch house in suburban Philadelphia, the Kia she drove to work, and the handbags and knickknacks she liked.

Then last year, back-to-back medical emergencies helped push her over the edge. She could no longer afford either her home payments or her credit card bills. Then she lost her job. Now her home is in foreclosure and her credit profile in ruins.

Ms. McLeod, who is 47, readily admits her money problems are largely of her own making. But as surely as it takes two to tango, she had partners in her financial demise. In recent years, those partners, including the financial giants Citigroup, Capital One and GE Capital, were collecting interest payments totaling more than 40 percent of her pretax income and thousands more in fees

* * * * *

Here is another great Deep Capture pt. 4 video done by somebody helping to spread the word. See Part 1, 2 and 3 above.

youtube link

http://www.youtube.com/watch?v=ifg3-Q6QLgo

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July 21, 2008 2:45

* * * * *
I wish I said that.

http://www.investorvillage.com/smbd.asp?mb=3532&mn=21524&pt=msg&mid=5231495


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SEC says Naked Shorting is ILLEGAL but gives protection to 19 Select Firms handpicked by the SEC, who are given a 30 day window to continue "illegally naked shorting." These are the same firms that took billions in bonuses while they wrote off hundreds of billions, preferring to schluff off their unconscionable losses onto the backs of the taxpayers.

Settle the Trades. The SEC needs to be DISBANDED. The Crooks at the top need to be prosecuted.

http://www.cnbc.com/id/15840232?video=798983541&play=1

* * * * *

July 21, 2008  3:30 PM

* * * * *

Overstock CEO Patrick Byrne's Philanthropy should not go unnoticed.

http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=104&STORY=/www/story/07-21-2008/0004852558&EDATE=

INDIANAPOLIS, July 21 /PRNewswire/ -- In a move that sends a clear signal to opponents of real and systemic education reform, the Friedman Foundation for Educational choice today announced that Dr. Patrick M. Byrne has been unanimously elected co-chairman of the board.

"I think he is the right choice," said Dr. Rose D. Friedman, economist and co-founder of the Friedman Foundation for Educational Choice. "Patrick will be loyal to the Friedman philosophy of school choice for all children, and I know he is anxious to get going."

"I am deeply humbled to be appointed co-chairman of the Friedman Foundation for Educational Choice," said Dr. Byrne who joined the board in 2006. "The Friedmans are heroes of individual liberty and I have been blessed to be both their fan and their friend. Working with them and carrying on their vision of educational freedom for all children is one of highest honors I could receive."

A noted, well-recognized and passionate education reformer, Dr. Byrne has been involved in countless efforts to improve the quality of education that children in America and across the world receive. Internationally, Byrne has founded 19 schools around the world that have served over 7,000 boys and girls since 2005. Moreover, Worldstock, an innovative division of Overstock.com that fosters micro-demand in developing countries, has given families from across the globe the power and opportunity to access better education for themselves and their children through the profits they earn from Worldstock.

In the United States, Dr. Byrne's giving for education is well-known and respected. He has funded private school scholarships for low-income families in Utah and was the primary supporter of Utah's Referendum One, a campaign that pushed for Utah to become the first state in the nation to enact a universal school voucher program. In addition, he is the Founder of First Class Education, a unique effort to empower teachers by driving more dollars directly into the classroom.

"With all he has done to improve education he is a natural fit with our Foundation and I am really excited about his involvement," said Robert C. Enlow, Executive Director and COO of the Friedman Foundation. "I can't wait to see what happens when you mix a reform aimed at radically restructuring American education with a reformer as dedicated and passionate as Dr. Byrne. It's going to be great ride."

"This isn't your father's brand of school reform; we have an eight-track school system in a digital world," added Dr. Byrne. "As with so many things, Milton and Rose Friedman's ideas are right on target. The only way to improve K-12 education in America is to separate the government financing of education from the government administration of schools. Unless we restructure education in favor of children who attend schools instead of the adults who run schools, we will lose what remains of our competitive edge in the global economy."

Dubbed "the nation's leading voucher advocates" by the Wall Street Journal, the Friedman Foundation is a non-profit organization established in 1996. The origins of the foundation lie in the Friedmans' long-standing concern about the serious deficiencies in America's elementary and secondary public schools. The best way to improve the quality of education is to enable all parents to have a truly free choice of the schools that their children attend. The Friedman Foundation works to build upon this vision, clarify its meaning to the general public and amplify the national call for true education reform through school choice. "When the Friedman Foundation started in 1996 there were five school voucher and tax credit programs operating in five states," noted Gordon St. Angelo, President and CEO of the Friedman Foundation for Educational Choice. "Today, after 12 y

With Patrick on board I expect this number to skyrocket," added St. Angelo


* * * * *

July 21, 2008 4:30 PM

* * * * *

Mark Mitchell, prolific Deep Capture writer, treats us to another episode, as he continues to capture the essence

Read it here
http://www.deepcapture.com/how-naked-short-sellers-and-cnbc-bamboozled-the-sec/

Excerpts

For years, arrogant journalists brushed off the crusaders, while a pack of dishonest, but influential reporters with close ties to hedge funds harassed and ridiculed them (see, “The Story of Deep Capture”). Meanwhile, government agencies denied that phantom stock was a problem. SEC Director of Trading and Markets James Brigagliano once referred to the crusaders as “bozos.”

But on Tuesday…well, here was something altogether different. The SEC said that phantom stock was not just a problem; it was an “emergency” that had the potential to crash the nation’s financial system.

...

Well, we cheered, and then we closed our eyes to take in that warm glow of vindication. My eyes were closed a bit too long, I’m afraid, because I missed the curtain opening on Cirque du CNBC and its amazing spectacles – great feats of flimflammery, upside down speechifying, all manner of contortionism and illusion.

...

The day after the SEC’s declaration, the circus was already well under way, with the hedge funds spinning furiously and their media marionettes singing the party line: short sellers are “vital” to free markets; everybody loves free markets; only bad companies and bad CEOs complain about short sellers – go investigate the CEOs, hands off the “vital” hedge fund managers.

As for billions of dollars of phantom stock threatening to topple the American financial system – don’t even mention it. If somebody does, repeat, over and over, “Only bad companies complain about shorts…shorts are vital”

I sketch out the hedge fund party line only for those who are new to the so-called “debate” over naked short-selling. If you’re a long-time crusader, you’ve heard it all before. You’ve heard it on CNBC so often that you’re probably now banging your head against a wall and saying something like, “oogly oogly oogly,” half-mad with incomprehension – still unable to come to terms with the utterly surreal spectacle of an important television news network, in the United States of America, completely whitewashing a massive crime.

* * * * *

Bear Market Advice by Ben Stein
by Ben Stein
"The aggregate losses in the U.S. stock market since the peak last
October have totaled roughly $3.5 trillion dollars. Not billion.
TRILLION. That is, the speculators and traders have knocked roughly
$3.5 trillion off of the value of all publicly-traded stocks in this
country."

* * * * *

Don't Forget Wrong Way Cramer, "There's always a bull market out there somewhere", here to help part you from that 3.5 Trillion Dollars. Is it time to trash Dendreon again Jimmy for your buddies? How many times did you trash it now. 5 or 6. I have to put that Jim Cramer post in. It got cut off in the middle. Are you against all immunotherapies for prostate cancer, or do you support GVAX, the one Milken touted on the outside of the Prostate Cancer Foundation enveloope fund raiser. Unconscionable.

Jim is an analyst, unless you give him a subpoena, then he is an er...journalist.

WOW! Jim has finally started talking about "naked shorts" after he wouldn't even mention the word for years. Now he acts like he invented the uptick rule, but then again, Jim likes to take credit for things he didn't say, as he reinvents himself yet again.


* * * * *

Compare these 2 lists. Biggest lobbyists

http://www.opensecrets.org/industries/contrib.php?ind=F&goButt2.x=9&goButt2.y=10&goButt2=Submit



1 Goldman Sachs $4,034,751 73% 27%
2 Citigroup Inc $3,353,822 60% 40%
3 JPMorgan Chase & Co $2,859,616 61% 39%
4 Morgan Stanley $2,646,002 58% 42%
5 National Assn of Realtors $2,514,750 59% 41%
6 UBS AG $2,210,010 56% 44%
7 American Bankers Assn $2,008,488 40% 60%
8 Lehman Brothers $1,853,298 64% 36%
9 Bank of America $1,746,042 58% 42%
10 Credit Union National Assn $1,740,799 54% 46%
11 Credit Suisse Group $1,701,377 50% 50%
12 Merrill Lynch $1,694,961 47% 53%
13 PricewaterhouseCoopers $1,573,632 49% 50%
14 Ernst & Young $1,522,177 46% 54%
15 AFLAC Inc $1,476,250 51% 49%
16 Deloitte Touche Tohmatsu $1,416,716 46% 54%
17 New York Life Insurance $1,267,132 58% 42%
18 Wachovia Corp $1,229,661 36% 64%
19 KPMG LLP $1,091,095 48% 52%
20 Wells Fargo $1,089,769 51% 49%



AND


19 firms Christopher Cox, the Secruity and Exchange(SEC) Commissioner, with the blessing of the SEC and Congress, exempted from "naked shorting", in other words, nobody is allowed to naked short the 19, but everybody is still allowed to sell counterfeit shares of every other stock in the market, as in, they can sell shares short without locating them first or sell them "naked short". Cramer is now acting like he was against "naked short" selling all along. NONSENSE! Nothing could be further from the truth. Just another one of his fabrications.

The more things change, the more they stay the same.


Here are the chosen ones, the "naked nineteen".


BNP Paribas Securities Corp. BNPQF or BNPQY
Bank of America Corporation BAC
Barclays PLC BCS
Citigroup Inc. C
Credit Suisse Group CS
Daiwa Securities Group Inc. DSECY
Deutsche Bank Group AG DB
Allianz SE AZ
Goldman, Sachs Group Inc GS
Royal Bank ADS RBS
HSBC Holdings PLC ADS HBC and HSI
J. P. Morgan Chase & Co. JPM
Lehman Brothers Holdings Inc. LEH
Merrill Lynch & Co., Inc. MER
Mizuho Financial Group, Inc. MFG
Morgan Stanley MS
UBS AG UBS
Freddie Mac FRE
Fannie Mae FNM


Notice the similarities between the two lists.

It looks like pay to play if you asked me.



* * * * *


July 22, 2008 4 AM Updated

* * * * *


Alexis Glick Jumps In the Rabbit Hole

July 21, 2008 1:08PM The SEC’s Battle By Alexis Glick
http://glickreport.blogs.foxbusiness.com/2008/07/21/the-secs-battle/

This situation is not going away. Particularly now that the American Bankers Association, Financial Roundtable and banks themselves like Washington Mutual and Wachovia, who are not on the list, are stepping up and saying why not us. If one of those institutions has a run in the way Bear did, all hell would break loose because some would suggest the SEC could have stopped it. How will they answer to that?

* * * * *

WHY NOT US!

* * * * *

Here is the Reg Sho List

http://buyins.net/tools/short_list.php?dys=%3E12


Why are certain stocks protected, ie: "the naked nineteen" and why not OSTK & DNDN & TASR & CALM & and the rest of the hundreds of stocks on the Reg Sho "Grandfathered" Counterfeited "Naked Shorted" Stocks LIST, along with hundreds of companies whose names do not show up on the Reg Sho list, more phantom shares that are being juggled up in the air as we speak, with the equivalent of the kiss of death stamped on them, and they can sell you as many shares as you want, and all you have really purchased are entitlements to own shares, if the company ever issues more shares, since there are none available at present, so they just sold you air. Your money goes in their pocket, and they sold you invisible shares. No limits, no waiting, that is unless you are part of the  "naked nineteen", in that case others will have to locate shares to short, prior to shorting you 19 privledged companies, you get special treatment, unlike every other stock which is also supposed to be prelocated by law, a law which is not enforced unless you are "special" friends with Christopher Cox, the SEC and Congress.

NAKED SHORT SELLING IS ILLEGAL. ENFORCE THE LAWS SEC! SETTLE THE TRADES! GIVE THE MONEY YOU HELPED STEAL BACK! THE DEPARTMENT OF JUSTICE NEEDS TO PROSECUTE THE THIEVES.

Mike Holland quoted from the 1930's Wall Street Archives,

"He who sells what isn't hisn't

Must give it back or go to prison."


* * * * *

More Excerpts From Mark Mitchell's latest blog on Deep Capture

http://www.deepcapture.com/

The next day, CNBC had yet to televise any of the CEOs, economists, and many other experts who agree that the phantom stock problem is, indeed, an “emergency.” Instead, the network brought on hedge fund cronies to say that their hedge fund cronies are “vital.”

Predictably, CNBC did a long interview with the dreaded Michael Steinhardt, a mentor and incubator of some of the most notorious short-and-distort hedge funds in the land. Steinhardt, for example, once employed David Rocker, who has regularly used the media (most notably, CNBC’s Herb Greenberg) and a dubious financial research shop called Gradient Analytics to disseminate misleading information about target companies, most of which are also victimized by massive levels of phantom stock. Jim Cramer, CNBC’s top-rated “journalist,” once ran a hedge fund out of Steinhardt’s offices, and CNBC’s “Money Honey,” Maria Bartiromo is married to the top partner in Steinhardt’s newest fund.

These are the sorts of relationships that prevail at CNBC. Our critics say it is too “conspiratorial” to point out these relationships, but we believe otherwise. Watch CNBC. Observe the lubrications that are lathered on favored hedge funds. Then judge for yourself.

Steinhardt didn’t have much to say about hedge funds that destroy public companies by selling billions of dollars of phantom stock while publishing false financial information, colluding with crooked law firms to file class action lawsuits, orchestrating dead-end government investigations, hiring convicted criminals and thugs to harass CEOs, and feeding false information to compliant journalists. Indeed, he didn’t have much to say at all, except the predictable mantra that all the “moaning and groaning” about short-sellers comes from bad companies and silly people who are angry about falling stock prices.

Participating in this interview was Paul Roth, another hedge fund manager who was mentored by Steinhardt. When asked whether it would be a problem if, say, a hedge fund were to sell ten times as many shares as actually exist in a company, Roth said, “That’s not illegal…the problem is sometimes you located the shares [and sold them] but somebody scooped them up [before you could deliver them to their rightful owners].”

CNBC’s Joe Kernen, who conducted the interview, characteristically let this statement go unchallenged. So let us state, for the record, that it would be a crime of monumental proportions to sell, say, 1,000 shares in a company that had only 100 shares outstanding. It is a crime because you cannot possibly “locate” or “scoop up” 900 shares that do not exist. It is a crime because there is only one possible reason why a hedge fund would sell ten-times a company’s public float, and that’s to manipulate the stock price.

But understand how these people think: If you can get away with it, it’s not illegal.

Around the same time that CNBC was massaging Steinhardt and Roth, members of the Securities Industry and Financial Markets Association, the leading Wall Street lobbying outfit, were on a conference call with some high-level SEC officials.

As it were, none of the hundreds of companies victimized by phantom stock got to be on any conference calls. But they’re used to that.

They