Free Republic
Browse · Search
General/Chat
Topics · Post Article

Skip to comments.

Removing the Immunity of Politicians from Securities Fraud
Vanity | 10/10/2011 | Self

Posted on 10/10/2011 8:51:37 AM PDT by PieterCasparzen

Here in the U.S. we have an SEC rule...

Rule 10b-5 -- Employment of Manipulative and Deceptive Devices

"It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,

1. To employ any device, scheme, or artifice to defraud,

2. To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or

3. To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person,

in connection with the purchase or sale of any security."

Of course, this is not a European rule.

Also, the fraud must be intentional.

Of course, in order to sue, the injured party must have provable damages. Also, the "market as a whole" as an injured party, where every investor can sue, would require a well-organized and efficient market.

IMHO, all of these are satisfied.


TOPICS: Business/Economy; Chit/Chat
KEYWORDS: bailouts
Merkel and Sarkozy continue to make public statements about government plans to provide government assistance to banks to prevent the insolvency of said banks. Many other politicians in America and around the world continue to make public statements regarding the financial soundness of governments, the securities these governments issue and banks.

Yet such statements are not ex post facto; they are made as commentary regarding ongoing negotiations and internal debate. The government plans and government assistance are not a fait accompli, they are anything but as talks continue.

Accordingly, if elected officials sought to avoid an infraction of 10b-5, they would simply provide an honest evaluation of where the talks are, even what their opinion was as to what the outcome would be. They would specifically note, however, that the negotiations are just that, negotiations, and anything could come out of them.

Instead, they, and really, most politicians, out of a desire to retain political influence, seek to promote "confidence" in the securities markets, and they issue optimistic public statements intended to engender confidence in investors. They feel political pressure, that if a number of large banks fail while they are in office it might cost them their political career. And let's not kid ourselves: often public statements are made as trial balloons to gauge public support or resentment of the direction of the negotiations.

Looking at the cold hard facts, a) elected officials can and do authorize special or unique government financial assistance to other governments and to banks, including financing provided to troubled and even involvent firms (these are commonly now called "bailouts"), b) said elected officials, being privy to government deliberation and negotiation which is carried on in secret and not in public, are in possession of material non-public information regarding whether and to what extent and form government assistance will be rendered, c) their stated intent is to inspire confidence, which is an open admission that they make these public statements to influence the market prices of stocks to rise, with financial stocks being the primary target, d) the governments and banks in question are in danger of becoming insolvent, or there would not even need to be a discussion of their bailout and e) public disclosures of governments and all publicly-held banks in Europe and in America reveal debt instruments issued by some and held by others whereby the success or insolvency of the entities in question affects the success or insolvency of banks around the world.

This is clearly market manipulation intended to pump up the market price of the shares of banks. The danger, of course, to the retail investor, is that they purchase at this artificially-inflated price which later then recedes back to a non-manipulated level after the market-pumping statements end.

Elected officials immunize themselves from market manipulation rules by touting their efforts as being aimed at "saving the banking system". However there is yet another cold hard fact: there are thousands of banks that would survive if the few largest failed, so the banking system is not at all in any kind of "doomsday" collapse scenario. The only "doomsday" possible is for the largest yet politically croniest banks that happen to be insolvent.

The market prices of numerous bank stocks in the U.S. have fallen somewhere around 80% from their peaks, turning them into volatile and risky investments. These are hardly stocks that would be recommended to the typical retail investor. If it were not a politician pumping up the market price of these stocks through their public statements, but one of their assistants who was privy to the private negotiations, I think it's fair to say the assistant would be prosecuted right away by the SEC. And let's not forget that the politician making material public statements never makes the required disclosures that stocks analysts are required to make.

Where is the SEC ? The world wonders...

IMHO...

1 posted on 10/10/2011 8:51:45 AM PDT by PieterCasparzen
[ Post Reply | Private Reply | View Replies]

To: PieterCasparzen; Nachum

Interesting information ping.


2 posted on 10/10/2011 8:57:46 AM PDT by Loud Mime (The Obama voters are dumber than you think, meaner than you can imagine)
[ Post Reply | Private Reply | To 1 | View Replies]

To: PieterCasparzen

There’s a reason so many congressmen amass such great wealth inside of a few years.

I would consider myself to be successful if I increase my net wealth by 10% per year. Some of our congressmen are increasing their net wealth by hundreds of percent per year. There’s something wrong there and it ain’t Wall Street.


3 posted on 10/10/2011 9:02:19 AM PDT by cripplecreek (ALCS/NLCS playoff thread http://www.freerepublic.com/focus/f-chat/2789907/posts)
[ Post Reply | Private Reply | To 1 | View Replies]

To: PieterCasparzen

Does this apply to Fannie and Freddie deception. It has Frank written all over it.

As a side note.
What happens when a congresscritter is bribed?

The briber is prosecuted. The critter walks.


4 posted on 10/10/2011 9:03:39 AM PDT by Vinnie
[ Post Reply | Private Reply | To 1 | View Replies]

To: cripplecreek

Can you imagine the political circus if immunities are removed?

Maybe they’ll do less.
Maybe they’ll make businesses, not congress, “more accountable.”

All in all, I think the only people who WANT this are lawyers.


5 posted on 10/10/2011 9:10:54 AM PDT by Loud Mime (The Obama voters are dumber than you think, meaner than you can imagine)
[ Post Reply | Private Reply | To 3 | View Replies]

To: Loud Mime

Must be real nice to be a congressman who can know whether your next vote will cause a stock to inflate or collapse so you can move your money around accordingly.


6 posted on 10/10/2011 9:14:25 AM PDT by cripplecreek (ALCS/NLCS playoff thread http://www.freerepublic.com/focus/f-chat/2789907/posts)
[ Post Reply | Private Reply | To 5 | View Replies]

To: PieterCasparzen

” - - - Elected officials immunize themselves from market manipulation rules by touting their efforts as being aimed at “saving the banking system”.

Thank you. It appears that we have two sets of laws. The question is: “Is it legal to have two sets of laws?”

If not, then former Sheriff of Nottingham Walk-the-plank-Hank Paulson should be thrown in jail for forcing the Major US Banks to sign his “Help-The-Banks Manifesto.”

BTW, since Hank only gave The Banks 45 minutes to sign his Manifesto, then 45 minutes should be the maximum length of his “trial.”


7 posted on 10/10/2011 9:31:43 AM PDT by Graewoulf ( obama"care" violates the 1890 Sherman Anti-Trust Law, AND is illegal by the U.S. Constitution.)
[ Post Reply | Private Reply | To 1 | View Replies]

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
General/Chat
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson