Sec. Paulson involved in Insider Trading?
The International Institute of Nonviolence
By: Rev. Jermano
Don't ask questions to what is happening, when the Fed will bail out Bear&Stearns, but does not to help 158 year old giant Lehman Bros?
Just what is going on? Sec. Paulson is certainly involved, with his past being one of the top executives to Goldman Sachs. http://www.whitehouse.gov/government/paulson-bio.html
The term going around Wall Street was "buy Goldman Sachs sell Bear Stearns"
Why you ask?
On or prior to March 13, 2008, an additional request
was made of the options exchanges to open more
March and April put series with very low exercise prices.
These new March put options would have just
five days of trading to expiration. The exchanges
accommodated their requests, knowing that the intentions
of the requesters were to buy puts. They indeed bought
massive amounts of puts. For example the March 20 puts
traded nearly 50,000 contracts (i.e. contracts to sell 5
million shares at 20). The March 15s traded 9600, the March
10s traded 13,000 and the March 5s traded 6300 all on
March 14 (the first day of trading of the new March series).
The introduction of those far-out-of-the-money put series
in the April and March months immediately before the crash
provided a vehicle whereby extreme leverage was available
to the insiders. In other words if an insider had $100,000 and
he knew that Morgan would buy Bear Stearns at 2, he
could make 5-10 times more on the $100,000 by buying the
newly introduced March puts. (This is certainly a good reason to why the Government bailed out Bear & Stearns, because they were making money on it. Lehamn Brothers should take note. And who would know about this? Certainly Sec. Paulson.)
This is so because the soon to
expire far out-of-the-money puts were far cheaper than the
July or October out-of-the-money puts. And that is why the
illegal inside traders requested the exchanges to introduce
the far out-of-the-moneys just days before the crash.
But this scenario has serious implications. This means
that the deal was already arranged on March 10 or before.
That contradicts the scenario that is promoted by SEC
Chairman Cox, Fed Boss Bernanke, Bear CEO Schwartz,
Jamie Dimon of J.P. Morgan (who sits on the board of
directors for the New York Federal Reserve Bank) and
others that false rumors undermined the confidence in
Bear Stearns making the company crash, notwithstanding
their adequate liquiduty days before.
I would say that the deal was arranged months before
but the final terms and times were not determined until
maybe March 7-8, 2008.
On March 14, 2008, the April 17.5s, the 15s, the 12.5s and
the 10s traded 15,000 contracts combined. Each put
gives the right to sell 100 shares. So for example,
these 15,000 April puts gave the purchaser(s) the
right to sell 1.5 million shares at prices between 10
and 17.5. Those purchasers expected to make profits
on 1.5 million shares because they knew the deal was
coming at $2.00.
That is the only plausible explanation for anyone
to buy puts with five days of life remaining with strike
prices far below the maket price.
So there were requests, during the period of
March 10-13, to the exchanges to open the March
and April series for buying massive amounts of
extremely out-of-the-money puts, which were
accommodated by the options exchanges. Did the
Exchanges aid and abet the insider trading scheme?
We do not able to have a strong opinion on that idea.
Media statements of adequate liquidity.
However, Reuters, on March 10, 2008 was citing
Bear Stearns sources that there was no liquidity
crisis and that there was no truth to the
speculation of liquidity problems.
And none other than the Chairman of the Securities
and Exchange Commission on March 11, 2008 was
stating that "we have a good deal of comfort with
the capital cushion that these firms have".
We even had the "mad" Jim Cramer proclaiming on
March 11, 2008 that all is well with Bear Stearns and
that the viewers should hold on to their Bear Stearns.
And on March 12, 2008, Alan Schwartz CEO of Bear
Stearns was telling David Faber of CNBC that there
was no problem with liquidity and that "We don't see
any pressure on our liquidity, let alone a liquidity
The fact that the requests were made on March 10
or earlier that those new series be opened and those
requests were accomodated together wth the
subsequent massive open positions in those newly
opened series is conclusive proof that there were
some who knew about the collapse in advance,
while Reuters, Cox, Schwartz and Cramer were telling
the public that there was no liquidity problem.
This was no case of a sudden developement on the
13 or 14th, where things changed dramatically making
it such that they needed a bail-out immediately.
The collape was anticipated and prepared for, even
while the CEO of Bear Stearns and the SEC Chairman
of the SEC were making claims of stability.
What was the reason that Cramer, Cox and Schwartz
were all promoting Bear Stearns immediately before
its collapse. That will be speculated upon for years to come.
Cramer has admitted that "truth" was not his friend
and that he manipulated stocks to influence investors
behavior. Was this one of his acts?
But no apologies from Cramer as he claims now that
he was refering to keeping money in Bear Stearns Bank
not in Bear Stears stock.
To prove Insider Trading:
To prove the case of illegal insider trading, all the
Feds have to do is ask a few questions of the persons
who bought puts on Bear Stearns or shorted stock
during the week before March 17, 2008 and before.
All the records are easily available.
If they bought puts or shorted stock, just ask them why.
What information did they have access to which the
CEO and the SEC did not have? Where did they get the
info? Why aren't Cramer and Cox, Dimon, Bernanke,
Geithner, Paulson, Faber and Schwartz subject to a bit of
prosecutorial pressure to get to the bottom of this.
Maybe the buyers of puts and short sellers of stock
just didn't believe Reuters, Cox, Schwartz, Cramer and
Faber and went massively short anyway, buying puts that
required a 70% drop in a weeK. Maybe they had better
information than Schwartz or Cox. If they did, then that's
a felony, with the profits made subject to forfeiture.
The next on the list is AIG on the Humpty Dumpty Wall St.