Posted on 05/17/2012 7:00:16 AM PDT by The Working Man
Edited on 05/20/2012 3:00:38 PM PDT by Admin Moderator. [history]
It doesn’t happen often, but sometimes God smiles on us. Last week, he smiled on investigative reporters everywhere, when the lawyers for Goldman, Sachs slipped on one whopper of a legal banana peel, inadvertently delivering some of the bank’s darker secrets into the hands of the public.
The lawyers for Goldman and Bank of America/Merrill Lynch have been involved in a legal battle for some time – primarily with the retail giant Overstock.com, but also with Rolling Stone, the Economist, Bloomberg, and the New York Times. The banks have been fighting us to keep sealed certain documents that surfaced in the discovery process of an ultimately unsuccessful lawsuit filed by Overstock against the banks.
Last week, in response to an Overstock.com motion to unseal certain documents, the banks’ lawyers, apparently accidentally, filed an unredacted version of Overstock’s motion as an exhibit in their declaration of opposition to that motion. In doing so, they inadvertently entered into the public record a sort of greatest-hits selection of the very material they’ve been fighting for years to keep sealed.
***Snip***
“**** the compliance area – procedures, schmecedures,” chirps Peter Melz, former president of Merrill Lynch Professional Clearing Corp. (a.k.a. Merrill Pro), when a subordinate worries about the company failing to comply with the rules governing short sales.
We also find out here how Wall Street professionals manipulated public opinion by buying off and/or intimidating experts in their respective fields. In one email made public in this document, a lobbyist for SIFMA, the Securities Industry and Financial Markets Association, tells a Goldman executive how to engage an expert who otherwise would go work for “our more powerful enemies,” i.e. would work with Overstock on the company’s lawsuit.
Also I spelled Mike's name wrong, it's Schneider not Snyder.
The company was Global Links.
Here's the relevant part of the transcript:
SCHNEIDER: In March 2005, the Senate Banking Committee confronted then-SEC Chairman William Donaldson with a story about Frank Dobrucki's company, the Nevada-based real estate holding company, Global Links. An investor named Robert Simpson had set out to prove that small companies were indeed frequent targets of abusive naked short sellers.
Simpson placed an order for $5,000 worth of stock in Global Links. That got Simpson ownership of all 1.1 million Global Link shares in the market. Not some of them, all of them.
UNIDENTIFIED: There were no shares available to be borrowed, and yet in two days, there were over 50 million shares traded. That's clearly something that needs work.
SIMPSON: I was absolutely blown away when I bought 1,282,050 shares, which equated to 111 percent of the issued and outstanding. I just couldn't even fathom that. So, it wasn't just crooked, it was Wild West times 10.
SCHNEIDER: The day all this started, trading in Global Links opened at 10 cents a share. Within a second, the price dropped to a penny. An hour and 16 minutes later, Global Links stock was trading at eight one-hundredths of a penny. Prices dropped 99 percent in less than two hours.
Well to make the distinction between shorting and naked shorting is crucial and to your credit but you also included in the same sentence the word ‘reputable’ which is in the eye of the beholder.
Floor traders follow rules well enough to give the appearance of a well-regulated exchange but floor traders do not know if the sell order originates from a stock holder, a short seller or a naked short seller.
So ‘reputable’ means essentially nothing on the Street. You can follow all the rules and still be complicit in a crime knowingly or not.
That’s the sorriest excuse for a dismissal I have ever seen.
You must be a supporter of naked shorting to respond like that.
Global Links was worth considerably more before the naked short attack.
It doesn’t matter if it’s 5 thousand or 5 gazillion. What matters is irrefutable proof that naked shorting exists and destroys companies that are its targets. That’s what the transcript clearly and irrefutably presents.
At various times over the past 3 years, the shares of Sirius, the satellite radio company, have shown more "short" shares than ever were issued by the company. The recent run-up over $2/share chased a lot of these away, but the naked shorters may be coming back now. They WILL be coming back w/o more money printing by Helicopter Bennie and the Inkjets, aka QE or Twist.
You'll need to go to the pinks to find most of the companies in this situation. Not surprisingly, excessive naked shorting also has the undesirable side effect of driving the share price to pennies, quite artificially.
However, the operative word there is "if". Regulators don't seem to be in ANY sort of hurry to correct these abuses, now do they?
;^)
Either Merrill Lynch is disreputable (perfectly possible) or some reputable dealers/mms do allow/encourage naked shorting.
See Bloomberg: `Phantom Shares,' Failed Trades and Naked Shorts. Scroll down to the example of a company named Global Links. An investor set out to prove naked shorting. He had bought ALL 1.1 million of the shares of Global Links. Yet there was subsequently 50 million shares worth of trading activity. He wound up owning 111% of the company.
-Burma Shave
An important difference is that Peter doesn't get to keep the proceeds of the sale until he buys the shares back.
Unlike the Federal Reserve that can print and print and never has to buy anything back.
Overstock has been after Wall St. and the Naked Shorting issue for a long time
Mostly because the Overstock CEO is a nutbag. It's easier for him to attack naked short selling than to actually get his company to make a profit.
In other words certain bankster gangsters on Wall St. have launched short attacks on Overstock.com.
That's funny! They need to do a better job of forcing firms to cover these naked short positions, but the only gangsters attacking Overstock are the ones in Patrick Byrne's imagination.
The origin of the saying is unknown, but by 1898 it was attributed to financier Daniel Drew (1797-1879).
Sadly, with naked short selling, such criminal fraud is rampant on Wall Street.
Where did you read that nonsense?
Could you be more specific? Exactly what part is not true?
You don’t understand the basics of what the Fed does and your post is a mess of misinformation. The Fed gets its income from its holdings of Treasury paper, not by means of your mythical “interest payments” from lending to member banks.
The interest payments that the Fed receives are the same as what you get on your T-bills, the sole difference being that you get to keep all of the money that you receive in interest and the Fed has to turn over to the Treasury all income exceeding payroll and basic expenses.
The “lending” to banks that you imagine you see is the Fed exchanging dollar credits for debt paper held by banks. This is the Fed adding high-powered money to the banking system in place of illiquid debt instruments, so that banks will have money that they can lend instead of having their funds tied up in T-bills or old loans.
In reverse manner the Fed also drains high-powered money out of the banking system to curb inflation. It sells its holdings of T-bills to banks to convert high-powered money into illiquid T-bills. In your scenario this would end up being some kind of “reverse interest” since it amounts to the Fed “borrowing” from its member banks.
Of course there is no real borrowing or lending in either case, it’s just the Fed adjusting the level of high-powered money in the banking system.
And as for the “2 1/2 TIMES” multiplier that banks can lend on the money they get from the Fed; the multiplier is actually good deal greater than that. That’s why loanable funds in the banking system are high-powered money.
Likely true, on both counts.
However, do we borrow 'money' from the FRB , do we have a large outstanding balance, and do we pay interest and have an outstanding balance on it?
It sounds like you are familiar with the intricate weavings of the paper money system, but it still boils down to the fact that we have to borrow money as a nation, and that we pay interest on it. The interest is income to globalists, and the 'amount' loaned is an investment.
“However, do we borrow ‘money’ from the FRB , do we have a large outstanding balance, and do we pay interest and have an outstanding balance on it?”
No, we borrow nothing from the FRB. The only interest the FRB receives is from their holdings of Treasury paper, the same as anyone else that owns T-bills; but in the Fed’s case they have to turn over the majority of the interest that they receive to the Treasury, they only get to keep enough to cover expenses. Their T-bill holdings aren’t for investment purposes, it is a tool that the Fed uses to adjust the money supply, determining how much of the money in the banking system will be high powered money and how much will be tied up in illiquid paper.
People get led to believe that we are somehow paying interest on the money we use, and since that money is in the form of Federal Reserve Notes that the Fed must be receiving this interest. This is a confused idea based upon the fact that the Fed monetizes debt when it creates high-powered money in the banking system; it creates dollar credits to exchange for debt held by banks. But this system operated when we still had the gold standard and Silver Certificates circulated, there is no special significance to FRNs being the current national currency.
The only interest that you pay in any conceivable way related to the monetary system is interest on the national debt; that debt is in the form of Treasury paper: T-bills, savings bonds and so forth. And you are obligated to pay that interest because of Congress, not the Fed. Congress authorizes the national debt. And every time Congress raises the debt ceiling they are obligating you to pay interest on more and more debt.
” The interest is income to globalists, and the ‘amount’ loaned is an investment.”
It’s hardly only globalists. Treasury interest payments are income to anyone owning Treasury paper. Major holders of Treasury paper include insurance companies, pension funds, retail banks, mutual funds, investment houses, corporations. You probably are the indirect owner of far more of this debt than you know. But as for the total amount of this debt, only Congress has the power to do something about it.
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