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wall street's naked swindle
Posted by: fk (IP Logged)
Date: October 22, 2009 07:38PM

Good article on the naked shorting that helped bring down Bear Stearns, Lehman, as well as the structural integrity problems of the whole financial system. What do you guys think? is the journalist correct in his views? There were little bits and pieces that bloomberg reported over the past year that match what the author was saying, but for the most part there was mostly a deafening silence from the SEC on things of very high priority they are supposed to be investigating.

[www.rollingstone.com]



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Re: wall street's naked swindle
Posted by: Sivaram (IP Logged)
Date: October 22, 2009 07:59PM

Thanks for the article... looks interesting... Matt Taibbi is a controversial author but it's hard to say how true any of this is. I haven't read all of the article yet--will read it on my commute tomorrow--but the whole naked short-selling controversy just keeps getting weirder by the minute.

The problem with the collapse of the investment banks is that they were actually impaired and were going to take massive losses. Whether the short-sellers pushed them over the edge, which would be legal if no law was broken, is hard to say. For instance, Bear Stears and Lehman Brothers, as the two big mortgage bond players on the Street, were going to suffer massive losses. It was inevitable given the housing bust. But will they have survived without the short-sellers coming into the mix? Tough to say.

I think this situation would be easier to analyze if these were NOT financial firms. If these were industrial companies or technology companies, or whatever, then we can be certain to a large degree. But the problem wtih financial firms is that they are built on trust and they finance most of their debt using short-term (often overnight) debt and if bondholders flee, the firms are toast. Even a firm wtih no exposure to bad assets can instantly go bankrupt if creditors refuse to roll over their debt.

I may have more to say after reading the full article...

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Check out my investing blog - contrarian with a macro focus and a value investing tilt: Can Turtles Fly? A Contrarian Investing Blog.


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Re: wall street's naked swindle
Posted by: commodity (IP Logged)
Date: October 23, 2009 08:05AM

He got it 100% right.

Why will the SEC do nothing about it?



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Re: wall street's naked swindle
Posted by: commodity (IP Logged)
Date: October 23, 2009 08:12AM

Did you see how the SEC ignored the warnings about Bernie Madoff.

Ever heard of Fisk and Gould ?


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Re: wall street's naked swindle
Posted by: fk (IP Logged)
Date: October 23, 2009 10:32AM

I never heard of Fisk and Gould, but looked it up in wikipedia: [en.wikipedia.org]

I remember the whistle blower in the Madoff case also warning about what the author described as abuses by the financial powers that if exposed would make Madoff look really small time. It's really fascinating what wall street can get away with because of the complexity of their operation. Because of the complexity, they're able to bully the gov't into bailing them out with the threat that not following their advice exactly would lead to disaster. It's situations like this that make me seriously wonder whether China (present day) and Russia (Lenin days) have a better policy to deter this kind of crime. You know how they handle this? Madoff would get the death penalty.



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Re: wall street's naked swindle
Posted by: commodity (IP Logged)
Date: October 23, 2009 10:51AM

The Wall St big boys own congress and congress controls the SEC.

There is nothing complex about it.

Madoff was a big boy and the SEC was told not to bother big boys.

Read ,Take on The Street .

Jim Cramer says it would be easy for the SEC to find out who made

the killing on the Bear puts.

The SEC does nothing.


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Re: wall street's naked swindle
Posted by: Sivaram (IP Logged)
Date: October 23, 2009 11:08AM

fk Wrote: ------------------------------------------------------- > It's situations like this that make > me seriously wonder whether China (present day) > and Russia (Lenin days) have a better policy to > deter this kind of crime. You know how they handle > this? Madoff would get the death penalty. > >

Let's not get carried away and you aren't serious but the government can't solve these problems. It's not up to the government. Consider present-day China. Do you honestly think that the criminals get punished in China? What makes it to the media is for show--similar to how Kings in Europe used to execute peasents for stealing stuff while taxing the landless peasents into starvation, raping women at will, conscripting men to death, and starting wars just because they wanted more land--while there are just as many criminals actions sanctioned and ignored by the Chinese government. I'm not comparing present-day China or Lenin's Russia to the days when monarchs ruled Europe (or Asia or elsewhere.) But let's not lose sight of what is put out for "show" versus what is "real."

Sorry for the rant but coming back to Wall Street... My dissapointment is with how the capitalists don't seem to be pricing assets and rewarding management properly. The beauty of capitalism, at least in my eyes, is that the capitalist who risks his/her capital loses it if they make a mistake. How come all the capitalists who were funding the banks, for example, are eerily silent? I think there was more outrage over a single company like Enron than all the wealth destroyed by AIG, Citigroup, Royal Bank of Scotland, UBS, et al. The damage done by Enron is miniscule compared to what happened in the last few years...



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Check out my investing blog - contrarian with a macro focus and a value investing tilt: Can Turtles Fly? A Contrarian Investing Blog.


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