Illegal Naked Short Selling

John McCain said:

"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."

Snip from May 11, 2004 news report:

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.

That was back then. The practice has grown from attacks on small companies to now companies like Fannie May & Bear Stearns and is a major component to the current financial crisis.

What is it?:

. Legal short selling is a bet on stock price declines. The short seller borrows stock, and then sells that borrowed stock, hoping to buy it back at a lower price later, when he returns it to the lender.

. Illegal "naked short selling" involves placing a sales transaction, but not borrowing the stock, and simply failing to deliver it on delivery day. It is also called "failing to deliver" or FTD - or delivery failure.

. Delivery failure is a significant problem nowadays, as it can be used to run stock prices down in a manipulative manner. Delivery failure in any other industry is called fraud.

"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"

Side point: I don't want to give the impression that I think McCain has his head on straight in regard to the economy. After all, he gets his advice from Phil Gramm, the man who sponsored the Commodity Futures Modernization Act of 2000 that created the "Enron loophole", and the Gramm-Leach-Bliley Act of 1999, which led to the 2008 mortgage crises.

Anyone favor putting Phil Gramm & Christopher Cox up for treason?