Part 8 — Naked Shorts — $75,000 For Cracking the Wall Street Cover-up REDUX

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Part 9 — Naked Shorts — $75,000 For Cracking the Wall Street Cover-up REDUX
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Part 7 — Naked Shorts — $75,000 For Cracking the Wall Street Cover-up REDUX
by RoryKearney | July 29, 2008 at 08:13 pm | 250 views | add comment
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Part 1 — Naked Shorts — $75,000 For Cracking the Wall Street Cover-up
by RoryKearney | July 11, 2008 at 07:13 am | 4239 views | 33 comments
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The battle is heating up as the robbers send in lobbyists to try to protect their thievery. Not only do I think they should throw them out on their collective you know whats, I think they should snatch the money they stole from the people back. 

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David Patch is one of the CHAMPIONS in this fight against the Wall Street crooks who are robbing us of our investment money, as well as, putting good companies out of business to profit off of their demise.

I cannot thank him enough for his dedication to this cause.

When Liquidity and Market Protections Clash July 31, 2008

David Patch

As the SEC mulls over what actions next to take on short sale reforms, hedge fund lobbyists canvas Washington with threats in hand seeking for relief from fee induced rule making associated with a short sale trade.

According to reports, day-trading hedge funds are lobbying for the Commission to scrap all aspects of the pre-borrow rule in a short sale due to the cost increase such rule making will have on the overall short trade. Some of the more well known funds impacted would be a SAC Capital managed by Billionaire Steve Cohen, Citadel Investment Group managed by an equally wealthy Ken Griffin, and Kynikos Associates managed by mere millionaire James Chanos.

At issue is whether these large funds should have access to day-trade short equity stocks without the expense of paying a fee for the rights to sell what they do not possess. To state their case, these funds have hired former US Representative and former Chairman of House Financial Services Committee on Capital Markets Richard Baker now president of Managed Funds Associates.

Under present law, a typical short sale will consist of a locate prior to the trade being executed and only after the trade is executed is the seller obligated to seek out and borrow that share for delivery. In the present T+3 settlement system, this borrow is not required until the T+2 or T+3 trade date allowing several days ‘grey area’ where a sale is executed but what was sold is not in possession of the seller.

Should the SEC proposed rules of a pre-borrow become law, the short seller in this case would not be afforded this grey area and will instead carry the burden of cost to borrow from trade date until such time as the short sale is covered in the market. To the short seller who plans on making this short interest a long term trade investment the added days are trivial to the long term carrying costs of the stock borrow.

To the day trading funds the story is not so cut and dry.

Most recognize SAC Capital as this big elephant in the room that comes in and out of markets in fast trading succession. It is not about the company or the market; it is about the opportunity to trade on created volatility.

SAC Capital will sell short and cover huge volumes of stock in a single day profiting from the difference between the short sale and the covered costs. Trading such as this carries no burden cost of a stock borrow because the rapid trading is concluded, the position closed, well within the normalized trade settlement window.

SAC and others large funds anticipate that their presence in a market, with plenty of capital behind them, can create enough chaos to generate the volatility necessary to turn a profit. The initially short sales, in rapid succession, will create fear and panic as bids are raided and that fear and panic will drive investors out at which point the short sale is covered for a profit. This process is repeated over and over as the market equilibrium slowly falls.

The profit margins on a trade such as these can be huge as even with regards to hard to borrow stock, no borrow is necessary to execute the trade. Funds that trade in this manner have become market makers without the requirement to maintain order.

Funds that trade in this manner have the intent on creating market chaos.

Those that now lobby our members of Congress and Federal Regulators are crying foul on reforms that would have these trades incur the added expense of a stock borrow. The funds firmly believe that in doing so the cut in profit margins would be significant enough to make the trade risky.

Funds like SAC Capital and Kynikos don’t like to trade with risk.

The more basic issue Congress and regulators should be discussing is why such traders are afforded the opportunity to trade in this manner at the possible expense of the health of the capital markets and those who invest in these markets; To trade like market makers without the oversight of market makers.

On point, I do not consider a day trader who flips trades over the course of a few hours an investor. These traders are gamblers and when these gamblers are represented by funds the size of SAC Capital they come in carrying the house odds and not the gamblers.

Market makers are provided an exemption from the locate rule applied to a short sale in order to sell naked short for ‘bona-fide market making’ activities. While these activities are loosely defined, the market makers are intended to flatten out the instabilities in a market by taking on a contrarian trade to that of a sudden burst in one sided market sentiments. If the markets are suddenly being overwhelmed in selling the market makers will step in and create liquidity by buying shares and when buyers come in excess the market makers sell naked short to insure stability is maintained in the markets.

The market makers are regulated, weak as it may be, in this type of trade activity.

Hedge Funds are afforded no exemption and yet today, without the pre-borrow they trade essentially the same way. The difference however is that order is not the intention of their trade, chaos is.

Without the requirement to borrow that share located immediately after a trade is executed the short seller can re-use those shares multiple times in a single day and multiple times across multiple brokers. Because a short seller is required to locate only the share being used as a locate is nothing more than a bookmark. The fact that laws do not presently demand a stock borrow this allows the short seller to re-use the same share to sell a stock without paying any type of premium for the use of that share.

The intent of the short sale laws, in place for 60 years, is to make sure that what is being sold is being delivered and when selling something you are selling something within your possession to deliver; whether it by through a borrowed share at a fee or an actual share purchased. Never intended was to sell something you will never possess and profit from it.

As former Congressman like Richard Baker lobby for the rights of a short seller to act as a market maker freely and unregulated understand his efforts are not in the interests of the investing public who do invest for the long term [long or short] or for those public companies caught in the firestorm of these hedge funds.

The ability to day trade in and out of these markets through the use of computers has aided hedge funds in destroying confidence in public companies. Their actions are not transparent to the markets but their actions are the very actions that move them to where they go. These funds seek out an ounce of possible negativity in a market and make those in the market fear that it is something much worse through rapid naked shorts executed as day trades. By the time the investors realize what is happening their investments have collapsed and panic selling ensues. In the end it was the day trader that profited and the long investor who booked the loss.

Prior to the collapse of Bear Stearns and the near collapse of several other financial institutions this was an accepted behavior amongst regulators. Hedge Funds created liquidity, even if it was simply intra-day day trading, and liquidity was king. Now it is being recognized for what this liquidity really is, a means to manipulate markets.

In 2004 former Chairman William Donaldson spoke before Congress and asked “How much fraud are you willing to accept for liquidity”; Congress blinked. Today that very same question is being asked of Congress again and the jury is still out on whether they will again blink in the face of the investing public.

Fearing that the SEC is not capable of making the right decision on their own, it is imperative that Congress draft legislation that ties the hands of the agency and forces short sellers to have in their possession the very article for which they plan to sell. Nothing short of a pre-borrow will protect these markets from the predators of Wall Street; the billionaire hedge fund managers and their wealthy clients who simply need more.

For more on this issue please visit the Host site at

www.investigatethesec.com

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New Deep Capture Expose by Mark Mitchell

http://www.deepcapture.com/the-bonkers-journalism-of-barrons-magazine/

The Bonkers Journalism of Barron’s Magazine

July 31st, 2008 by Mark Mitchell

If it seems odd to you that respected and influential news publications would urge the government to provide get-out-of-jail-free cards to criminal stock manipulators…well, welcome to the Deep Capture team. We’ve witnessed a lot of freakish journalism during the past few years, but it never ceases to amaze.

A nice example can be found in the latest Barron’s magazine, where the lead editorial chides the SEC for issuing an emergency order to “stop unlawful manipulation” that threatens to crash the American financial system.

According to Barron’s, the SEC “waved a newspaper and swatted the imaginary fly of naked short-selling. It made a big noise, but there’s no dead bug.”

That word “imaginary” has a ring of familiarity. “Seeing shadows on the wall,” is how Bethany McLean of Fortune magazine once described concerns about naked short sellers. “Seeing UFOs” was the phrase employed by CNBC’s Herb Greenberg, then writing for MarketWatch. But in the face of all the evidence, those journalists have been silent on the issue for months, and now everybody from the Secretary of the Treasury on down says that illegal naked short-selling is an abomination.

Certainly, there is nothing “imaginary” about the SEC data showing that as of March 31, $8.7 billion worth of stock had “failed to deliver.” Most of those failures were the result of illegal naked short selling – hedge funds and their brokers offloading stock that they had not, and never intended, to borrow. Experts agree that there is at least ten times more of this phantom stock in parts of the system – such as “ex-clearing” – for which the SEC provides no public data.

Barron’s is right, there’s “no dead bug” – naked shorting is alive and well. But that doesn’t mean it shouldn’t be swatted. Maybe the SEC just needs a better newspaper – something other than the limpid Barron’s.

But wait. Here’s a newsflash: Naked short selling is good clean fun – nothing illegal about it. “Aggressive short-selling isn’t a crime,” Barron’s writes. “Even naked short-selling – selling shares before borrowing them – hasn’t been against the rules. Until last week, a short-seller could enter a naked trade in almost any stock if his broker had reasonable grounds to expect that an adequate number of shares could be borrowed by the day of settlement.”

That is technically true, but its is plainly disingenuous for Barron’s to suggest that the SEC is cracking down on legal behavior. The problem, as Barron’s editors surely know (they do cover Wall Street, don’t they?), is that short-sellers and their brokers routinely offload stock without having “reasonable grounds” that they can borrow it. That is why more than $8 billion of stock “fails to deliver” on a typical “day of settlement.” Moreover, the data shows that most of this phantom stock is targeted at specific companies, and that much of it remains undelivered for months, even years, at a time.

In an earlier issue, Barron’s itself described the case of Cal-Maine Foods, the country’s largest egg producer, noting that, “Of the 55% of Cal-Maine’s stock that’s available to the public, more than 100% is sold short. That suggests short sellers…are executing sales before taking the normal step of securing shares to borrow.”

There is no legal gray area where hedge funds are allowed to sell more of a company’s stock than actually exists. This sort of naked short selling is not some technical glitch. It is illegal market manipulation. It is clear-cut fraud. And it is happening on a massive scale.

That is why the SEC seems to want to crack down. Its emergency order protects only 19 big financial firms, but hopes are high that the Commission will extend its protection to the many companies, such as Cal-Maine, that are far more seriously affected. The hedge fund lobby and Barron’s will whine loudly, but it seems like common sense that short-sellers market-wide should be required to pre-borrow (i.e. have real stock) before they dump it on unsuspecting investors.

Really, I challenge Barron’s, or anybody else, to name just one expert (people working for hedge funds don’t count) who has published a study casting doubt on the thesis that naked short selling is routinely used to illegally manipulate markets – with potentially catastrophic consequences. I have yet to come across any such expert, and there is no evidence that Barron’s has either. Indeed it’s editorial contains no facts or data – just platitudes.

It’s only real-world example is the much-discussed demise of Bear Stearns. Short-sellers, we are told, had nothing to do with the bank’s collapse. All the rumors were true. The only falsehoods were told by Bear Stearns spokesmen, “who declared that everything was hunky-dory.” That’s how it happened – take Barron’s word for it.

Ugh. This “debate” is like arguing over how many Froot Loops are in the box. It’s absurd – let’s just take them out and count. We did that, and the number we got was 1.2 million. That’s the number of Bear Stearns shares that were sold on March 12, but remained undelivered after the 3 days allotted for settlement. The shares were undelivered because they were as fake as the Froot in your Loops.

And note that the increase in phantom shares on March 12 was at least ten times the increase in the total volume of trading in Bear Stearns stock, suggesting that selling of real shares was comparatively light. In other words, there was no panic among investors until after those 1.2 million phantom shares (and probably a lot more in ex-clearing) flooded the marketplace, creating the illusion that somebody was panicking. .

That afternoon, CNBC, working from information provided by a hedge fund, reported (as if it were fact) the bombshell that Goldman Sachs had cut off Bear’s credit. This was the first time the media had reported anything so drastic about the bank. And the report was completely false. Message to Barron’s editors: the rumors were not true. May I humbly suggest that you investigate this.

The truth is that on the morning of March 12, Bear Stearns was an unhealthy company, but it had $17 billion in cash, and few people believed that it was on the brink of collapse. Nobody had cut off its credit. No major clients had pulled out their money.

The next day, everybody pulled out their money. Bear Stearns was gone. What was the trigger? I’m open to other suggestions (Barron’s provides none), but it seems quite obvious there is only one explanation: A whole lot of phantom stock (the illusion of panicked selling) on March 12, combined with a well-timed media atrocity that afternoon, precipitated a real panic the following day.

We can assume that the SEC agrees with this version of events. That is why it believed that rumor-mongering naked short sellers had the potential to destroy 19 big financial firms. Maybe those 19 institutions are all bad companies. Maybe they should all be out of business. If so, let them fail naturally and gradually. Don’t allow law-breaking hedge funds to manufacture mass hysterias that could crash the financial system.

It’s hard to say why Barron’s doesn’t grasp this, but perhaps it is significant that it felt compelled to include in its editorial a little disclaimer about the magazine’s relationships with short-sellers. The editorial notes with apparent pleasure that Barron’s is “sometimes known on the Street as ‘Bear-ons’….[and] it prides itself on offering accurate negative news about companies as much as it does about passing on accurate good news. Good news is plentiful, and therefore cheap. Bad news has to be dug up….Short-sellers read Barron’s with special interest, and they also make good sources of information that our reporters can check and publish if true.”

I’d be hard pressed to provide a better description of what plagues certain segments of our financial media. Start with the appalling notion that “good news” is “cheap.” The way I see it, all news is equally valuable – so long as it’s true and interesting. It’s a bit rich to suggest that good news is more “plentiful” when short-sellers have become such “good sources of information.” In any case, interesting, nuanced truths usually contain some good news, some bad. And they tend to be discovered by independent thinkers who do their own research, not by some ping-pong headed note-taker who bounces between the conniving short and the corporate VP of Puff until deadline comes and confusion reigns, but one thing is certain – the editor has decreed that good news is “cheap.”

Even worse than the bias for bad news is Bear-on’s implicit assumption that because short-sellers are “good sources of information,” the government (and the media?) should leave them alone, even if they’re committing crimes. There is nothing wrong with journalists talking to short-sellers. But while they’re at it, they might ask some short-sellers why their target companies are buried under heaping piles of phantom stock.

Barron’s has worked closely with some pretty dastardly shorts while obligingly keeping its nose out of their shady business dealings. Short-seller David Rocker, for example, was a popular source and Barron’s columnist while he was conspiring with a disreputable outfit called Gradient Analytics. Gradient advertised itself as providing “independent” research, but former employees say its falsehood-laden hatchet jobs were often dictated by Rocker, who illegally traded ahead of them, while one of Gradient’s managers was accumulating phony social security numbers and fake IDs to hide his activities.

Most of Rocker’s short targets appeared on the SEC’s list of companies victimized by excessive levels of phantom stock – purely coincidence, no doubt, but Barron’s might have asked him about it.

For a long time, Barron’s editor Cheryl Straus Einhorn published a steady stream of biased stories that generated financial rewards for associates of her husband, a hedge fund manager and master of distortion named David Einhorn. Meanwhile, Barron’s couldn’t get enough of the “good information” provided by short-seller Anthony Elgindy, a gun-toting, Mafia-connected goon who was well-known for selling phantom stock, bribing FBI officials, extortion, blackmail – you name it.

Barron’s has since fired Ms. Einhorn, Elgindy is now doing 11 years in a federal penitentiary, and Rocker slunk into retirement in Florida (and got a “homestead exemption” protecting his assets from seizure) after the government issued him with a subpoena.

Fortunately, Barron’s still has some “good sources of information” and no doubt they are all model citizens. But the latest editorial shows that the magazine is as reluctant as ever to publish the bad news about short-sellers’ crimes.

Funny that – with good news being so “cheap” and all.

Mark Mitchell is the former editor of the Columbia Journalism Review’s on-line review of business journalism. He has also worked as an editorial writer for the Wall Street Journal in Europe, and as a correspondent for Time magazine in Asia, and the Far Eastern Economic Review.

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The Crooks are sending lobbyists to try to persuade the government to allow them to continue running their scam as they snatch the money out of the market without ever locating the shares.

Excerpt

SHORTS ARE IN A BIND
SEC RULE EXTENDED
By KAJA WHITEHOUSE
Last updated: 7:37 am
July 31, 2008

If the Securities and Exchange Commission expands its clampdown on short-selling, it is widely expected to slam hedge funds like Stephen Cohen's SAC Capital and James Simon's Renaissance Technologies, which profit from fast-and-furious trading, experts predicted.

That's because under the long-accepted rules of the short-selling game, these hedge funds, which often trade through sophisticated computer programs, have been able to skip the process of borrowing the shares needed to cap off their short positions.

But that luxury is now being challenged by the SEC's mandate requiring investors who short 19 financial stocks, including Fannie Mae and Freddie Mac, to borrow the shares they short before they bet against the stock whose price they predict will fall.

Previously, short sellers could rely on a broker's promise that the shares could be delivered, if need be, within a few days.

"The guys who do the rapid trading stuff, they're shorting without having to borrow because they know they're going to close out by the end of the day," said one hedge fund manager. "Those are the people who are going to be most impacted by this."

Under the new rules, "if a prime broker does not have it physically pre-borrowed, those trading opportunities may be gone," said well-known short trader Jim Chanos, speaking on behalf of his organization, which is lobbying against the SEC's rules.

Among those most likely to be affected are day-trading shops like SAC, Renaissance and Ken Griffin's Citadel Investment Group, which trade shares so quickly they rarely need the shares to be delivered.

http://www.nypost.com/seven/07312008/business/shorts_are_in_a_bind_122388.htm 

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Great reply to Richard Baker

A reply to Richard BakerHere's his comment:

“We are deeply concerned that the extension of the emergency order will further constrain normal market operations, extract beneficial liquidity from the markets and create inefficiencies that will distort shareholder value,” MFA president Richard Baker said in a statement.

Our response should include a glossary of terms

"normal market operations"? You mean the pillaging of investors by price manipulation?

"extract beneficial liquidity"? You mean my savings?

"create inefficiencies"? You mean keep you guys from selling what isn't available? Awww poor baby

"distort shareholder value"? Right...actually having to locate, borrow and deliver distorts the value of
a legitimate share of stock..

I can't believe that I am actually hearing Baker say this stuff..... 

http://www.investorvillage.com/smbd.asp?mb=3532&mn=22359&pt=msg&mid=5315108 

 

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Hedge Funds send in another lobbyist 

Ban on ‘naked short selling’ worries firms By Sara Hansard
July 31, 2008   Excerpt   The Managed Funds Association and the Coalition of Private Investment Companies, both of Washington, yesterday expressed concern about the Securities and Exchange Commission's extension of a ban on “naked short selling.”

“We are deeply concerned that the extension of the emergency order will further constrain normal market operations, extract beneficial liquidity from the markets and create inefficiencies that will distort shareholder value,” MFA president Richard Baker said in a statement.

http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20080731/REG/537749143&template=printart
  * * * * *   http://www.tradersmagazine.com/news/101757-1.html

 Excerpts

SEC Naked Short Sale Plans Could Transform Stock Loan Game

By Peter Chapman

July 30, 2008

Last night's announcement by the Securities and Exchange Commission that it would extend the emergency order and consider a permanent ruling targeting naked short selling could lead to dramatic changes in the way the stock loan business is conducted and prove a boon for at least one technology provider.

LocateStock.com is one of a few organizations positioned to cash in on a likely move to more automation in the matching of borrowers and lenders in the stock loan business. Last week, it says it demonstrated its system of matching borrowers with lenders to the SEC, which said it was unaware of any other comparable system.

That's according to John Tabacco, LocateStock.com's president. "We are not part of any solution," Tabacco told Traders Magazine. "We are the solution." The SEC declined to comment.

  * * * * *  
Please help spread the word whether you enter the contest or not. tia
  Excerpts   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 in January 2006, while serving as an editor for the Columbia Journalism Review, a publication tasked with upholding the standards of the American media. In November 2006, a hedge fund that was at the center of the scandal I was investigating offered the Columbia Journalism Review a great deal of money. Shortly before CJR accepted the money, I left my job, so I do not know if my editors, whom I believe to be honest people, would have allowed me to persevere. But I have no doubt that the hedge fund’s “beneficence” was aimed at preventing the publication of stories like this one.

And it might well have succeeded if Patrick Byrne had not approached me with an idea. Why not combine forces and spearhead a whole new approach to investigative journalism? Most media content is produced by rumpled journalists (i.e., people like me), working alone under tight constraints. Deep Capture could be something different - a power team circumventing the traditional media and pushing limits to uncover the truth.

When I entered the picture, this team had already established that a small number of law-breaking hedge funds had put the American financial system at risk of collapse. Indeed, the hedge funds are employing the same tactics that contributed to the stock market crash of 1929 and the Great Depression that followed. If you want to understand the current turmoil in our financial markets, you could do no better than to read the material in Deep Capture: The Analysis.

The lengthy (40,000 word) story that follows should help you to understand how - and why — Patrick came to embark on this project. I am the author of the story, and attest to its accuracy, but it benefits substantially from the work of the Deep Capture team: freelance researchers, bloggers, gonzo computer hackers, economists, and even a one-time foreign intelligence agent.

Some mainstream journalists will not like this story. They will perhaps disapprove of our methods or decry the advent of vigilante journalism. But most of all, they will not like this story because it is largely about them - a tale of reporters who seek to be players, but instead become pawns - a tale of prominent journalists who help cover up a massive financial crime while toadying to some of Wall Street’s slimiest operators.

* * * * * * * *

And it all starts when Patrick Byrne gets a phone call from the Easter Bunny. Really, that’s what the guy calls himself - the Easter Bunny - and he talks like the Bee Gees on fast forward, a nasally frantic falsetto, on and on about some kind of conspiracy involving big time Wall Street operators, the Mafia, and a bunch of famous journalists. Somebody’s got to stop these people, the Bunny says, or the American financial system is going to come crashing to its knees. Also, the bad guys might put a bullet between the Easter Bunny’s ears.

Now, Patrick Byrne is just a CEO in Utah — he sells toasters. He doesn’t see what this has to do with him, and the Easter Bunny seems pretty weird, so he says, uh-huh, uh-huh, okey-dokey, and thinks maybe he’ll hang up the phone and go for a pastrami sandwich.

But the Easter Bunny persists. He says it’s a conspiracy, the biggest financial heist in history…look, he says, don’t believe it, but he’s going to make some predictions–and Patrick can see for himself whether they come true…

* * * * * * * *

August 12, 2005…the proudest day of Patrick Byrne’s life. Some months have past since the Easter Bunny got in touch, and now Patrick is on a conference call with 500 blue chip investors and a few journalists. He tells his telephone audience that he’s been talking to this fellow named Bob (which is another Easter Bunny alias), and Bob seems like he lines his hat with tinfoil, he really does, but he’s laid out this scheme, he’s made some predictions…so everybody please download Patrick’s computer generated slide show and follow along from home.

The first slide reads, “The Miscreants’ Ball.” Patrick says the miscreants are selling billions of dollars of stock that simply does not exist - phantom stock. They have destroyed hundreds of public companies for profit. Some journalists, meanwhile, are “crooked.” They’re “lickspittles.” They are famous journalists and they cover up the miscreants’ crimes. They attack all who oppose them. One reporter has been terrorizing a little old lady in Vegas, purported to be the Easter Bunny’s mother. Another reporter, she’s French — she’s been telling people that Patrick is running some kind of criminal cabal out of a gay bathhouse in San Francisco.

And that’s not all, follow along please with the slides — they show how the miscreants and the journalists have ties to government agencies and private investigators, maybe the Mafia, and also an arms dealer, an undercover mole, a corrupt law firm, and Eliot Spitzer. There’s mention, too, of a “master criminal from the 1980s” — call him “the Sith Lord,” like in Star Wars - he might be orchestrating all this, and Patrick can’t just sit on his hands, he’s not cut out for it, it’s his black Irish temper, so he’s going to say to the Sith Lord, to the miscreants, to the journalists: “Did I stutter? Did I stutter, or did I say I was going to take this fight to you?

“Well, now you know what I mean.”

* * * * *

I would go so far as to suggest he say, "Protection for the little companies first. They are the ones most at risk and have been for years. Now that it is hitting the financial companies that Capitol Hill is invested in, they want to protect their money from disappearing. What about the rest of us.

DO YOUR JOB GOVERNMENT. MAKE THEM SETTLE THE TRADES. ALL OF THEM! YOU ARE ENTRUSTED WITH PROTECTING THE PUBLIC AND DESPITE THOUSANDS OF LETTERS YOU IGNORE US! UNCONSCIONABLE!

http://www.forbes.com/opinions/2008/07/31/naked-short-selling-oped-cx_rc_0731regulation.html

Commentary
Protection For All
Roel Campos, 07.31.08, 5:25 PM ET

Excerpts

Naked short-selling is a major contributor to market turmoil.

After years of arguing to the contrary, the Securities and Exchange Commission has finally acknowledged that the practice of short-selling without pre-borrowing or locating shares can be harmful to large public companies. It is time that it acknowledges the harm it does to small ones as well.

The SEC's July 15 emergency order, now extended through Aug. 12, aims to halt the naked shorting of mortgage giants Fannie Mae (nyse: FNM - news - people ), Freddie Mac (nyse: FRE - news - people ) and 17 of the largest Wall Street and global financial institutions.

In the broadest sense, this is commendable. The move gives the perception that the SEC is the cop on the beat. It has instilled a renewed vigor that is providing world markets with much-needed confidence.

Still, by extending the emergency order of protection to only the largest and most powerful banks, the SEC is left in an awkward position.

Chairman Cox has hinted several times that the SEC may propose new rules very soon to extend protections against naked short-selling to all companies. This move cannot happen soon enough. Small ''Main Street'' companies have complained for years to the SEC that they too are often the victims of naked short-trading aimed at driving their share prices down.

In the current market environment, the failure of many small companies on America's Main Streets can just as easily threaten the U.S. economy as the fall of one or two large companies on Wall Street.

In the current market environment, the failure of many small companies on America's Main Streets can just as easily threaten the U.S. economy as the fall of one or two large companies on Wall Street.

* * * * *

Here is the REG SHO List

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

As you can see Dendreon (DNDN) has been on the list for 92 days (they were on previously for months on end), meaning that people are buying and selling shares and pulling money out from these sales, without ever having located real shares. They received real money for selling hypothetical shares. The long term investors are the ones who were unable to realize any appreciation in share price as a result, as the investor's money is constantly being drained out of the share price for the last 5 years.

Here are my questions. 

What the heck is the REG SHO list for? Is it there just to rub it in our faces that people are continually scalping millions of dollars in dimes and quarters as they raise and lower the share price so they can drain the money out?

Why haven't they bought in the naked shorts at T + 13 days as they were supposed to do for stocks on the REG SHO list?

When is the government going to disband the SEC and DTCC for allowing this sham to continue, and put in a regulatory body that will enforce the laws on the books?

Why are these funds and hedge funds continually being allowed to realize gains on shares by buying and selling them when there were never any shares located.

http://www.nasdaq.com/asp/holdings.asp?symbol=ELN&symbol=DNDN&selected=DNDN&FormType=Institutional

What happens to the little investors 401K retirement money as the funds are constantly pulling the money in and out for their own personal wealth and the little guy is left with a few crumbs to eat.

The government has mandated that you now have to opt out of your 401K plan at work. Was it the hedge funds who lobbied for this action, to replenish the money supply in the market so they could skim it off?

Why do so many hedge fund honchos have huge art collection? I hear Picasso's are very expensive.

Why don't hedge funds have to reveal their positions, claiming it is their secret trading strategy. If it is secret, why do they keep coming on TV and sending articles to "journalists" to report what they want you to buy and sell?

Why don't all gains from long sales and short sales have to have taxes paid on them, regardless of whether they bankrupt the company, or what part of the world their scam is located in?

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http://www.ft.com/cms/s/0/1b447e24-5f10-11dd-91c0-000077b07658.html?nclick_check=1

Excerpts

Tackle false rumours about insurance companies
By Eric Dinallo

Published: July 31 2008 15:52 | Last updated: July 31 2008 15:52

Rumours that can destroy the stock price of banks and investment banks have been the focus of the media and have now attracted the attention of regulators. But what about rumours that cast doubt on the solvency of insurance companies that are equally important to the New York economy and global capital markets? All financial services companies – banks, investment banks and insurance companies – rely on market confidence. Just as a depository institution’s continued existence depends on the confidence of depositors, so an insurance company’s existence depends on the confidence of policyholders.

This is why New York State enacted a law in the 1930’s providing for civil and criminal sanctions for spreading false rumours or making statements “untrue in fact” about an insurance company’s solvency.

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http://www.sltrib.com/ci_10079510

Wall Street war: A win for UtahnByrne's battle helps bring curbs on naked short-selling practicesBy Steven Oberbeck
The Salt Lake TribuneArticle Last Updated: 08/02/2008 03:00:20 PM MDT

Excerpts

Over the past several years, Patrick Byrne's campaign to clean up Wall Street and end a practice that has destroyed companies and cost unwary investors billions of dollars, generated plenty of publicity for him, mostly the wrong kind.
 Critics labeled him nuts, a conspiracy theorist, a complete wack job.
  Byrne, the chief executive of the Utah-based discount online retailer Overstock.com, even found himself tagged a member of the "tin-foil hat" brigade, a reference to the flying saucer fanatics of the 1950s who adorned their heads with aluminium to ward off, or enhance, thoughts from aliens in outer space.
    These days, when people talk of Byrne, the word "vindication" comes up a lot.

"As we sat down he said, 'Patrick, I want you to know that you have become the most hated man I've ever known in all my life here in New York. Wall Street used to think so highly of you. You were kind of a golden boy. Now, you are despised more intensely than anyone I have ever known. You could kill people, and not be hated like they hate you in this town.' "
    Byrne understands the ill will. He believes correcting the problem would cost billions and likely lead to the demise of many of the hedge funds he believes are actively engaged in naked shorting.
    "When I think of what might happen to the financial system as a result of all of this, it just makes me sick. There is no joy in being right," he said. "It's going to be ugly."
    But then there have been those who offered him encouragement when he needed it the most, he said.
    Byrne said one man jumped onto an empty elevator as he was entering. "He said, 'Mr. Byrne, you don't know me, but I just want to tell you I support your fight. What you are talking about goes on every day around me. Don't quit. I can't be seen with you. Goodbye.' "
    And he hopped off the elevator, Byrne said.
    steve@sltrib.com
   
   Patrick Byrne
   
    * AGE: 45
    * POSITION: Chief executive officer, Overstock.com
    * PERSONAL: Ex-pro boxer who holds black belt in tae kwan do; cancer survivor who has bicycled four times across the United States, once to raise awareness for cancer research; speaks Mandarin Chinese, French and a bit of Thai.
    * EDUCATION: Master's degree from Cambridge University; Marshall Scholar and doctorate in political philosophy from Stanford University.
    * MENTOR: Billionaire investor Warren Buffett, who tutored teenaged Byrne in his principles of value investing.

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If regulators fail to act.....

Public Interest Group Vows 19-State Campaign If Regulators Fail To Act   LOS ANGELES, Aug 06, 2008 /PRNewswire-USNewswire via COMTEX/ -- A national organization dedicated to bringing attention to fraudulent financial practices today called on Securities and Exchange Commission (SEC) Chairman Chris Cox to make permanent his recent ruling prohibiting a corrupt practice of stock market "short-selling."   American Entrepreneurs for Securities Reform (ASR) applauded the SEC and Cox's temporary rules, but pointed out that the emergency order has only been extended until August 12, and protects just 19 companies. The group pledged that if the rules are not made permanent in 2008, they will organize campaigns in 19 states via the initiative process to achieve this fundamental reform.   "The SEC did the right thing when it voted for the second time to extend temporary rules and restrict short-selling. Now, it must finish the job," said Jonathan Wilcox, spokesman for Americans for Securities Reform. "While we commend this courageous action in the face of opposition from greedy hedge funds and shady Wall Street players, it is only a band-aid on the serious corruption soiling our capital markets."   Chairman Cox's emergency order stated: "False rumors can lead to a loss of confidence in our markets. Such loss of confidence can lead to panic selling, which may be further exacerbated by 'naked' short selling." The order further requires that to sell short the shares of 19 specifically named financial institutions, traders are compelled to arrange to borrow the shares. This would prevent the shorting being "naked."   ASR also detailed that unless the SEC permanently extends these restrictions to all traded stocks, the group plans to qualify ballot initiatives in 19 states - the same total of companies specially protected by the SEC now. Ballot language has already been written banning naked shorting and establishing severe penalties on those who undertake this fraud.   "What's right and fair for these 19 financial firms should apply across- the-board," said Wilcox. "There is no reason these consumer protections should not apply to all traded stocks."     http://www.marketwatch.com/news/story/american-entrepreneurs-securities-reform-calls/story.aspx?guid=%7BA296B970-5182-40F1-A605-36B2FD37DAEA%7D&dist=hppr

* * * * *

Part 1 — Naked Shorts — $75,000 For Cracking the Wall Street Cover-up
by RoryKearney | July 11, 2008 at 07:13 am | 4239 views | 33 comments
http://www.nowpublic.com/world/naked-shorts-75-000-cracking-wall-street-cover

Part 2 — Naked Shorts — $75,000 For Cracking the Wall Street Cover-up
by RoryKearney | July 18, 2008 at 08:43 am | 412 views | 1 comment
http://www.nowpublic.com/world/part-2-naked-shorts-75-000-cracking-wall-street-cover-redux

Part 3 — Naked Shorts — $75,000 For Cracking the Wall Street Cover-up REDUX
by by RoryKearney | July 19, 2008 at 06:32 am | 559 views | 3 comments
http://www.nowpublic.com/world/part-3-naked-shorts-75-000-cracking-wall-street-cover-redux

Part 4 — Naked Shorts — $75,000 For Cracking the Wall Street Cover-up REDUX
by RoryKearney | July 23, 2008 at 10:05 am | 380 views | add comment
http://www.nowpublic.com/world/part-4-naked-shorts-75-000-cracking-wall-street-cover-redux

Part 5 — Naked Shorts — $75,000 For Cracking the Wall Street Cover-up REDUX
by RoryKearney | July 23, 2008 at 10:05 am | 371 views | add comment
http://www.nowpublic.com/world/part-5-naked-shorts-75-000-cracking-wall-street-cover-redux

Part 6— Naked Shorts — $75,000 For Cracking the Wall Street Cover-up REDUX
by RoryKearney | July 26, 2008 at 08:03 am | 433 views | 2 comments
http://www.nowpublic.com/world/part-6-naked-shorts-75-000-cracking-wall-street-cover-redux

Part 7— Naked Shorts — $75,000 For Cracking the Wall Street Cover-up REDUX
by RoryKearney | July 29, 2008 at 08:13 pm | 250 views | add comment
 http://www.nowpublic.com/world/part-7-naked-shorts-75-000-cracking-wall-street-cover-redux

Part 9 — Naked Shorts — $75,000 For Cracking the Wall Street Cover-up REDUX
http://www.nowpublic.com/world/part-9-naked-shorts-75-000-cracking-wall-street-cover-redux

As always, everything I write is my opinion. If I have made any factual errors, please notify me, and I will correct them.