Patrick M. Byrne, Ph.D., Chairman and CEO of Overstock.com, discussed "Naked Shorts, Bust-Outs, and the Once and Future Cataclysm: Economic Warfare as an Instrument of Transnational Organized Crime."
John Lenczowski, Founder and President of IWP, offered a brief welcome, and Frank Gaffney, Founder and President of Center for Security Policy, introduced Dr. Bryne.
This presentation is long an boring unless you actually care about how our world is being destroyed.
Legislators will correctly perceive that either raising taxes or cutting expenditures will threaten their re-election. To avoid this fate, they can opt for high rates of inflation, which never require a recorded vote and cannot be attributed to a specific action that any elected official takes. In fact, John Maynard Keynes long ago laid out a road map for political survival amid an economic disaster of just this sort: “By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens.... The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”
Naked short selling - redefining systemic risk from Judd Bagley on Vimeo.
Given that, one may then ask of those journalists who defend the right of hedge funds to destroy firms they wish to destroy, that is to say, of DowJones’ Carol Remond and Karen Richardson, of Fortune Magazine’s Roddy Boyd and Bethany McLean (now at Vanity Fair), of New York Times’ Floyd Norris and Joe Nocera, of Herb Greenberg hiding behind vapid emails and Dave Kansas hiding under his desk, of NY Post/Portfolio Magazine’s Dan “Crusher” Colarusso and CNBC’s Jim Cramer the Crook: Do you get it now? Do you understand why illegal stock manipulation is wrong, and can impose costs on society it was your duty as journalists to explore? You purveyors of reportorial Velveeta, you lazy and captured, half-educated and dim-witted, snarky, insufferable, conformist and indolent pseudo-intellectual lickspittles, do you get it now? You are sell-out journalists who grovelled to your sources, missed the story of your careers, and in the eyes of an increasing fraction of the public, rank just below pedophile priests.
Joseph Cassano the head of a tiny 400-person unit within AIG called AIG Financial Products was selling so-called "naked" CDS deals. In a "naked" CDS, neither party actually holds the underlying loan. In other words, Bank B not only sells CDS protection to Bank A for its mortgage on the Pope — it turns around and sells protection to Bank C for the very same mortgage. This could go on ad nauseam: You could have Banks D through Z also betting on Bank A's mortgage. Unlike traditional insurance, Cassano was offering investors an opportunity to bet that someone else's house would burn down, or take out a term life policy on the guy with AIDS down the street. It was no different from gambling, the Wall Street version of a bunch of frat brothers betting on Jay Feely to make a field goal. Cassano was taking book for every bank that bet short on the housing market, but he didn't have the cash to pay off if the kick went wide.
AIGFP's returns went from $737 million in 1999 to $3.2 billion in 2005. Over the past seven years, the subsidiary's 400 employees were paid a total of $3.5 billion
In the 10-year period beginning in 1998, financial companies spent $1.7 billion on federal campaign contributions and another $3.4 billion on lobbyists. They quickly got what they paid for. In 1999, Gramm co-sponsored a bill that repealed key aspects of the Glass-Steagall Act, smoothing the way for the creation of financial megafirms like Citigroup.
Gramm compounded the problem by writing a sweeping new law called the Commodity Futures Modernization Act that made it impossible to regulate credit swaps as either gambling or securities.
For six months before its meltdown, according to insiders, the company had been searching for a full-time chief financial officer and a chief risk-assessment officer, but never got around to hiring either. That meant that the 18th-largest company in the world had no one checking to make sure its balance sheet was safe and no one keeping track of how much cash and assets the firm had on hand.
When the growing credit crunch prompted senior AIG executives to re-examine its liabilities, a company accountant named Joseph St. Denis became "gravely concerned" about the CDS deals and their potential for mass destruction. Cassano responded by personally forcing the poor sap out of the firm, telling him he was "deliberately excluded" from the financial review for fear that he might "pollute the process."
European Union was threatening to more strictly regulate the foreign operations of America's big investment banks if the U.S. didn't strengthen its own oversight. So the top five investment banks got together ... They named a commission of seven people to oversee the five companies ... and ended up being regulated by no one.
By early 2009, a whole series of new government operations had been invented [by the FED] to inject cash into the economy, most all of them completely secretive and with names you've never heard of. ...[see article]... pumping not billions but trillions of dollars into the hands of private companies ... this new, secretive activity by the Fed completely eclipses the TARP program in terms of its influence on the economy.
When one considers the comparatively extensive system of congressional checks and balances that goes into the spending of every dollar in the budget via the normal appropriations process, what's happening in the Fed amounts to something truly revolutionary — a kind of shadow government with a budget many times the size of the normal federal outlay, administered dictatorially by one man, Fed chairman Ben Bernanke. "We spend hours and hours and hours arguing over $10 million amendments on the floor of the Senate, but there has been no discussion about who has been receiving this $3 trillion," says Sen. Bernie Sanders. "It is beyond comprehension."
Nonetheless, the lion's share of the bailout money has gone to the larger, so-called "systemically important" banks. "It's like Treasury is picking winners and losers," says one state banking official who asked not to be identified.
This itself is a hugely important political development. In essence, the bailout accelerated the decline of regional community lenders by boosting the political power of their giant national competitors.
Which, when you think about it, is insane: What had brought us to the brink of collapse in the first place was this relentless instinct for building ever-larger megacompanies, passing deregulatory measures to gradually feed all the little fish in the sea to an ever-shrinking pool of Bigger Fish. To fix this problem, the government should have slowly liquidated these monster, too-big-to-fail firms and broken them down to smaller, more manageable companies. Instead, federal regulators closed ranks and used an almost completely secret bailout process to double down on the same faulty, merger-happy thinking that got us here in the first place, creating a constellation of megafirms under government control that are even bigger, more unwieldy and more crammed to the gills with systemic risk.
The reality is that the worldwide economic meltdown and the bailout that followed were together a kind of revolution, a coup d'état. They cemented and formalized a political trend that has been snowballing for decades: the gradual takeover of the government by a small class of connected insiders, who used money to control elections, buy influence and systematically weaken financial regulations.
"Mismanagement and greed became the operating standard while regulators were asleep at the switch. The primary regulator of Wall Street, the Securities and Exchange Commission (SEC) kept in place trading rules that let speculators and hedge funds turn our markets into a casino. They allowed 'naked short selling' -- which simply means that you can sell stock without ever owning it. They eliminated last year the uptick rule that has protected investors for 70 years. Speculators pounded the shares of even good companies into the ground. The chairman of the SEC serves at the appointment of the President and has betrayed the public's trust. If I were President today, I would fire him."
In comments to the U.S. Securities and Exchange Commission, C. Austin Burrell said that "Illegal Naked Short Selling has stripped hundreds of billions, if not TRILLIONS, of dollars from American investors," and have resulted in over 7,000 public companies having been "shorted out of existence over the past six years." Burrell said some experts believe as much as $3.5 trillion to $4 trillion has been lost to this practice.
"Bear Stearns also was rocked that week by failed trades, a problem associated with naked short selling. Failed trades in Bear Stearns soared more than 10,800 percent during the week of March 10, according to data released by the SEC." (Article)
"Bluntly, the SEC behaved as any crooked cop would, which is to put on a show of trying to effect change, while studiously avoiding the only and obvious way to do so." (Article)
"traitorous federal government crime cartel"
"Economically, a CDS buyer is tantamount to a short seller of the bond underlying the CDS. Whereas a person who owns a bond profits when its issuer is in a position to repay the bond, a short seller profits when, among other things, the bond goes into default. Importantly, CDS buyers do not have to own the bond or other debt instrument upon which a CDS contract is based. This means CDS buyers can 'naked short' the debt of companies without restriction."
"In 2007, the notional value of all outstanding derivatives contracts rose above 516 trillion U.S. dollars, which is about eight times global GDP."
http://english.people.com.cn/90001/90778/90858/90864/6544652.html
Investment banks targeted by "naked" shorting complained that the practice dilutes their shares and their market values evaporated.
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