The SEC is charged with investigating potential illegal activities in the securities markets. The SEC is failing to carry out its responsibility when it cones to the collapse of Lehman Brothers last year.
The SEC has in front of them charges of excessively high volumes of "naked" short selling in Lehman shares. A "naked" short sale is one where you sell a stock short without first borrowing the stock from a willing lender.If you do not first borrow the stock you cannot deliver it. This is called a "fail to deliver" trade. Last year 32.8 million shares of Lehman stock were sold but the sellers " failed to deliver" the stock. 32.8 millions shares of "failed to deliver" trades is a staggering amount.
Now let's assume an even more deadly scenario. A bank or institution holds CDSs (credit default swaps) on Lehman. That is a win/win trade. Now you proceed to "short" sell against the CDSs you hold. This is another win/win trade. This kind of practice all but insured the blow up of Lehman with virtually no risk. Rather neat wasn't it? And done without a trace, that is unless the SEC does a thorough investigation.
The SEC has all of this data in front of them. The next step is to go to the Clearing Firms who processed the trades and find out who did the short selling. And this is important, of those who did the "naked" short selling, did they also hold CDSs on Lehman? Those who did the "naked" short selling and "fail to deliver" trades should be prosecuted for conspiracy and securities fraud.
Do you agree with this policy?
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Reader Comments (Page 1 of 1)
3-23-2009 @ 4:12PM
BHarrison said...
This coupled with the Madoff scandal should be the acid tests for the ability of the SEC to effectively perform their responsibilities. If the SEC is not in a position to announce any type of evaluation (and indictments) by this time then the existing management staff and staffers at the SEC should be summarily fired and replaced with competent people who CAN perform their tasks.
It is past time to get tough with these regualtory agencies. If they can't or won't do their jobs then FIRE them! They are the oversight agencies who dropped the ball on all of this (and I'm sure that they were pressured by Congressmen to "relax enforcement" . . . all of this should be revealed to the American public.
3-23-2009 @ 4:27PM
Paladin said...
Great post, Connie! I assume you've seen the exposé of this at DeepCapture ( http://tinyurl.com/cnpsp9 ) and the follow up at Bloomberg ( http://tinyurl.com/crtmln ). Stay on this one... the corrupt walls around the SEC must come tumbling down.
3-24-2009 @ 2:22AM
Bob Irwin said...
No disrespect but did you just arrive from some other planet? What difference does it make if the SEC has ironclad evidence as to more wallstreet fraud? We no longer have our little Orange County fraudster Cox or the witch of wallstreet but we have replacements from the rotten core of wallstreet corruption. The NYSE, the Fed. Res., the DTCC etc, & their owners Goldman Sachs etc. Do you think Mary Schapiro would have been working for that gang if there were any question where her loyalties lie? Geithner is Goldman S. & Fed. Res. Special rules were broken to give him a GS lobbyist to help him. And now we proceed to give these same crooks who caused the problem, Trillions of tax dollars so we may continue down the same path GS etc. & our crooked Politicians are directing. I campaigned for Obama. I like the majority thought he was the long looked for saviour but I no longer think that. The SEC halted short selling to save Morgan S. & GS because J. Mack cried to Bush. The same J. Mack who Cox saved from insider trading by firing Gary Aguirre cause Mack was Bushs buddy. Obama could have app. Aguirre or many others who would have cleaned up the SEC but he didn't & he is smart enough to know the difference. This is my opinion. Hopefully we are still allowed to express one. BI