Sunday, December 27, 2009
WASHINGTON (The Borowitz Report) - Responding to the botched terrorism attempt on board Delta flight 253 from Amsterdam to Detroit, the Department of Homeland Security announced today that it was considering a new rule that would force passengers to fly naked.
"They won't be able to hide any powders or liquids, and they'll speed right through security," said Homeland Security Secretary Janet Napolitano. "This is a win-win."
Anticipating complaints from chilly travelers, she said that the Homeland Security Dept. would force the airlines to institute a "Snugglies for Purchase" plan once the aircraft doors are closed.
Ms. Napolitano expressed no embarrassment at having ignored a warning from the Delta terror suspect's dad made weeks before the terror attempt: "Our official policy is that we have to be warned by both the mom and dad before taking it seriously." More here.
I have in the past been a skeptic of Sarah Palin. Not of her political talent, which is considerable, but of her grasp of – and even interest in – substantive policy issues.
When she abruptly resigned the governorship of Alaska on July 3rd, I wondered if she simply hadn’t the stomach for national politics. And the rambling, disjointed speech she gave that day left me wondering if she even knew why she was making such a momentous and potentially career-crippling decision.
But then a funny thing happened: In November, Mrs. Palin debuted her memoir “Going Rogue” with great sales, which was not a surprise, but also with a luminous and successful press tour, which was. The interviews she gave in promotion for her book (at least the ones that I saw) were much improved from those given during the 2008 presidential campaign. Palin seemed to speak about both herself and national issues with greater verve and confidence.
Other stars are aligning for Palin:
Several of her potential rivals for the 2012 Republican nomination find themselves suddenly, perhaps fatally, compromised by recent events.
Mitt Romney, for example, is watching the national health care debate work against his presidential ambitions, as the tortured and torturous Senate bill resembles more and more the regime he helped institute in Massachusetts – not something that will endear him to conservative primary voters enraged at Democrats’ health care offensive.
And there is Mike Huckabee, who charmed his way into a television hosting gig at FOX News after the campaign. Revelations that a man suspected of shooting and killing four police officers in Washington state had been granted clemency years ago by Huckabee, then governor of Arkansas, are widely believed to have seriously damaged his future electoral chances.
As a result, should they decide to run again both Romney and Huckabee will certainly find their respective tenures as governor under renewed and perhaps unwelcome scrutiny.
Meanwhile, Palin appears to be having a ball, trading comedic blows with William Shatner on the Tonight Show, receiving throngs of adoring fans at bookstores across the heartland, and weighing in on global warming in the pages of The Washington Post.
Could she be preparing, in a serious way, to become a serious candidate? It certainly looks that way to this amateur Palin watcher. If she can convince independent voters that she understands the issues, has thought them through and come to reasonable judgments about possible courses of action…if, if, if.
A lot of stars have yet to align for Palin’s path to the presidency to be illuminated. But that no longer seems impossible to me. In fact, I can now quite clearly imagine that someday, someone may say the words “Madam President,” to a moose-hunting mom from Alaska.
Wouldn’t that be something?
Wednesday, December 23, 2009
This year was full of scandals, blunders, and miscalculations. Here's what Washington can learn from its mistakes.
The world at the start of 2010 looks a lot different than it did when it was on the verge of 2009. For one, we have avoided economic collapse. It's also likely that in the new year, President Barack Obama will have delivered on his campaign promise to reform American health care -- somewhat. If he is lucky, we will begin to see an economic resurgence that will steady his job approval rating and calm Democratic fears of a GOP rout in the fall midterm elections. Republicans, looking better now than they did six months ago, will continue to attack Democrats for the exploding deficit and the decision to try to spend America out of the recession. And if Republicans are lucky, the economy will not recover quickly. But we will have to wait to see how all that turns out.
We already know how 2009 unfolded, though, and some lessons are worth remembering in the coming year. Here are the top 10:
Bipartisanship makes for good rhetoric but bad politics. Health care is the chief victim of this botched strategy. The president made early concessions -- the public option became negotiable -- in order to attract GOP votes, and it was all for naught. All he did was weaken his hand and lose a big chunk of his base.
Celebrity is not the same as politics. So don't worry about Sarah Palin, who has locked down the anti-intellectual, George W. Bush wing of the GOP and is doing everything in her power to drive everyone else out. She has fans, not votes.
When you skip town, leave forwarding info. This will henceforth be known as the Mark Sanford Doctrine. Love, we are told, can move mountains, but the Appalachian Trail is not now and has never been in Argentina. If you're the sitting governor of a state, you can't just pull Houdini for five days and then come back only to talk about how much you've cried the past week.
Resist cold hard cash. Rep. William Jefferson's decision to crassly sell out the Louisianans he was supposed to represent in Congress -- poor black people who desperately needed representation, I might add -- for the sum of $90,000, which he amateurishly hid in a freezer, is the kind of noxious betrayal of the public trust that makes it harder for the government to get anything done. Jefferson spent 18 years in Congress and is now serving a 13-year sentence for 11 counts of corruption. We'll call it even at the end.
Stop fooling around with your parents' money. The story was already bad enough: Arizona Sen. John Ensign, widely regarded as a rising star in the GOP, had to publicly confess that he had an affair with a woman on his staff, who happened to be married to a man on his staff. The story got downright ludicrous when it was revealed that Ensign somehow got his parents to pay $96,000 of what looks an awful lot like hush money to the couple, who, of course, did not hush.
Stick to the text. Chief Justice John Roberts has a simple task: Read the same oath of office that had been delivered 55 times before to 43 previous presidents over the past 220 years. But when it was Barack Obama's turn to put his hand on Abraham Lincoln's Bible, Roberts flubbed it. The Chief left out a word here, changed a word there, and forced America's first black president to retake the oath a day later, just in case. Strict constructionist, indeed.
We can't miss you if you don't go away: My recommended reading for Dick Cheney in the coming year is the Dr. Seuss classic, Marvin K. Mooney Will You Please Go Now! Cheney has taken on the role of the paranoid, defending the castle well after the war is over. All he has done in the last year is to make it harder for people to take Republicans seriously.
Getting in is only half the battle. Politicians have known this forever, but apparently Tareq and Michaele Salahi did not. The couple crashed Obama's first state dinner, only to find themselves at the center of a rather embarrassing media frenzy: The pair became a national joke practically overnight, and has since been subpoenaed by the committee on Homeland Security. And on this note, a quick word of advice to the White House Social Office: Make your best people your bouncers.
Panic is not a political strategy: Democrats, particularly those of the Blue Dog breed, should not go into 2010 playing defense on the tough issues -- health care, climate change, and job creation. The imperative for those in power is to govern, and that requires decisive action. So even if pushing legislation forward involves a high degree of difficulty and requires taking uncomfortable political risks, our leaders should not dither and hide. For Democrats, that means that health care was a fight worth having: Despite the bad poll numbers and the threat of losing in 2010, things might be a lot worse if the public's perception was that they came, stalled, and stumbled.
Self-righteousness is not principle. And therefore there should be no negotiating with Joe Lieberman. It's one problem to have to deal with genuinely conservative Democrats who have to worry about winning re-election in tough swing districts. It's another altogether to be making deals with a reliably unreliable "ally" whose only goal is to be the center of attention all while accentuating his contrariness.
Monday, December 21, 2009
"A Trillion Troubles Ahead"
by Bert Dohmen
"Not too long ago, a billion dollars in a governmental budget was a lot of money. Then we got into hundreds of billions. People understood that this was a lot, just because of all the zeros. Now, unfortunately, the number has become small: the world "trillion," as in $1.2 trillion for health care reform, seems so tiny. But it has 12 zeroes behind it, which is so easy to forget.
What is a "trillion?" According to the Web site www.100777.com, if you laid 1 dollar bills end to end, you could make a chain that stretches from Earth to the moon and back again 200 times before you ran out of dollar bills! One trillion dollars would stretch nearly from the Earth to the sun. It would take a military jet flying at the speed of sound, reeling out a roll of dollar bills behind it, 14 years before it reeled out 1 trillion dollar bills.
If the government stays on the course it's been on for the past forty years without a radical change, the federal government will soon have a $10 trillion budget. In other words, the federal budget deficit will be $1.4 trillion. Just to make the size more visible, that's $1,400 billion.
Our colleague Rob Arnott, who always does terrific research, wrote in his recent report that "at all levels, federal, state, local and GSEs, the total public debt is now at 141% of GDP. That puts the United States in some elite company- only Japan, Lebanon and Zimbabwe are higher. That's only the start. Add household debt (highest in the world at 99% of GDP) and corporate debt (highest in the world at 317% of GDP, not even counting off-balance-sheet swaps and derivatives) and our total debt is 557% of GDP. Less than three years ago our total indebtedness crossed 500% of GDP for the first time." Add the unfunded portion of entitlement programs and we're at 840% of GDP.
The world has not seen such debt levels in modern history. This debt is not serviceable. Imagine that total debt is 557% of GDP, without considering entitlements. The interest on the debt will consume all the tax revenues of the country in the not-too-distant future. Then there will be no way out but to create more debt in order to finance the old debt.
It assures a period of economic devastation. In a last, desperate attempt, politicians at the federal and local levels will raise taxes to astronomical heights to raise revenues. And that only assures destruction of the economy. Forget the fable of economic recovery. Unless there is a change in Washington by next year's election, there will be no way to turn back.
Japan's recession is now 19 years old. It has the highest debt-to-GDP level (227%) of any industrialized country. The Fitch rating agency is talking about a potential downgrade of Japan's debt. Japan's stock market is still down 75% from the high in 1990. We predict it will make new bear market lows next year. That will make it a 20-year-long bull market on the way to 25 years. The bulls in the U.S. should consider that possibility in the formerly great United States of America. I do not believe the bullish theory that the U.S. situation is different than Japan's. Ours is so much worse. Is it any wonder that our biggest creditors, China, Russia and the Middle East, are diversifying out of the dollar and into gold?"
- Bert Dohmen,
Editor of "Bert Dohmen's Wellington Letter" and founder of Dohmen Capital Research Institute.
Sunday, December 13, 2009
"Despite a treasure-trove of new information having emerged over the last forty-six years, there are many people who still think who killed President John Fitzgerald Kennedy and why are unanswerable questions. There are others who cling to the Lee Harvey Oswald "lone-nut" explanation proffered by the Warren Commission. Both groups agree, however, that whatever the truth, it has no contemporary relevance but is old-hat, history, stuff for conspiracy-obsessed people with nothing better to do. The general thinking is that the assassination occurred almost a half-century ago, so let's move on.
Nothing could be further from the truth, as James Douglass shows in his extraordinary book, "JFK and the Unspeakable: Why He Died and Why It Matters" (Orbis Books, 2008). It is clearly one of the best books ever written on the Kennedy assassination and deserves a vast readership. It is bound to roil the waters of complacency that have submerged the truth of this key event in modern American history.
It's not often that the intersection of history and contemporary events pose such a startling and chilling lesson as does the contemplation of the murder of JFK on November 22, 1963 juxtaposed with the situations faced by President Obama today. So far, at least, Obama's behavior has mirrored Johnson's, not Kennedy's, as he has escalated the war in Afghanistan by 34,000. One can't but help think that the thought of JFK's fate might not be far from his mind as he contemplates his next move in Afghanistan.
Douglass presents a very compelling argument that Kennedy was killed by "unspeakable" (the Trappist monk Thomas Merton's term) forces within the U.S. national security state because of his conversion from a cold warrior into a man of peace. He argues, using a wealth of newly uncovered information, that JFK had become a major threat to the burgeoning military-industrial complex and had to be eliminated through a conspiracy planned by the CIA - "the CIA's fingerprints are all over the crime and the events leading up to it" - not by a crazed individual, the Mafia, or disgruntled anti-Castro Cubans, though some of these may have been used in the execution of the plot.
Why and by whom? These are the key questions. If it can be shown that Kennedy did, in fact, turn emphatically away from war as a solution to political conflict; did, in fact, as he was being urged by his military and intelligence advisers to up the ante and use violence, rejected such advice and turned toward peaceful solutions, then, a motive for his elimination is established. If, furthermore, it can be clearly shown that Oswald was a dupe in a deadly game and that forces within the military/intelligence apparatus were involved with him from start to finish, then the crime is solved, not by fingering an individual who may have given the order for the murder or pulled the trigger, but by showing that the coordination of the assassination had to involve U.S. intelligence agencies, most notably the CIA . Douglass does both, providing highly detailed and intricately linked evidence based on his own research and a vast array of the best scholarship.
We are then faced with the contemporary relevance, and since we know that every president since JFK has refused to confront the growth of the national security state and its call for violence, one can logically assume a message was sent and heeded. In this regard, it is not incidental that former twenty-seven year CIA analyst Raymond McGovern, in a recent interview, warned of the "two CIAs," one the analytic arm providing straight scoop to presidents, the other the covert action arm which operates according to its own rules. "Let me leave you with this thought," he told his interviewer, "and that is that I think Panetta (current CIA Director), and to a degree Obama, are afraid - I never thought I'd hear myself saying this - I think they are afraid of the CIA." He then recommended Douglass' book, "It's very well-researched and his conclusion is very alarming."
Let's look at the history marshaled by Douglass to support his thesis. First, Kennedy, who took office in January 1961 as somewhat of a Cold Warrior, was quickly set up by the CIA to take the blame for the Bay of Pigs invasion of Cuba in April 1961. The CIA and generals wanted to oust Castro, and in pursuit of that goal, trained a force of Cuban exiles to invade Cuba. Kennedy refused to go along and the invasion was roundly defeated. The CIA, military, and Cuban exiles bitterly blamed Kennedy. But it was all a sham.
Though Douglass doesn't mention it, and few Americans know it, classified documents uncovered in 2000 revealed that the CIA had discovered that the Soviets had learned of the date of the invasion more than a week in advance, had informed Castro, but - and here is a startling fact that should make people's hair stand on end - never told the President. The CIA knew the invasion was doomed before the fact but went ahead with it anyway. Why? So they could and did afterwards blame JFK for the failure.
This treachery set the stage for events to come. For his part, sensing but not knowing the full extent of the set-up, Kennedy fired CIA Director Allen Dulles (as in a bad joke, later to be named to the Warren Commission) and his assistant General Charles Cabell (whose brother Earle Cabell, to make a bad joke absurd, was the mayor of Dallas on the day Kennedy was killed) and said he wanted "to splinter the CIA in a thousand pieces and scatter it to the winds." Not the sentiments to endear him to a secretive government within a government whose power was growing exponentially.
The stage was now set for events to follow as JFK, in opposition to nearly all his advisers, consistently opposed the use of force in U.S. foreign policy. In 1961, despite the Joint Chief's demand to put troops into Laos, Kennedy bluntly insisted otherwise as he ordered Averell Harriman, his representative at the Geneva Conference, "Did you understand? I want a negotiated settlement in Laos. I don't want to put troops in." Also in 1961, he refused to concede to the insistence of his top generals to give them permission to use nuclear weapons in Berlin and Southeast Asia. Walking out of a meeting with top military advisors, Kennedy threw his hands in the air and said, "These people are crazy."
He refused to bomb and invade Cuba as the military wished during the Cuban missile crisis in 1962. Afterwards he told his friend John Kenneth Galbraith that "I never had the slightest intention of doing so." Then in June 1963 he gave an incredible speech at American University in which he called for the total abolishment of nuclear weapons, the end of the Cold War and the "Pax Americana enforced on the world by American weapons of war," and movement toward "general and complete disarmament." A few months later he signed a Limited Test Ban Treaty with Nikita Khrushchev. In October 1963 he signed National Security Action Memorandum 263 calling for the withdrawal of 1,000 U. S. military troops from Vietnam by the end of the year and a total withdrawal by the end of 1965.
All this he did while secretly engaging in negotiations with Khrushchev via the KGB , Norman Cousins, and Pope John XXIII , and with Castro through various intermediaries, one of whom was French Journalist Jean Daniel. In an interview with Daniel on October 24, 1963 Kennedy said, "I approved the proclamation Fidel Castro made in the Sierra Maestra, when he justifiably called for justice and especially yearned to rid Cuba of corruption. I will go even further: to some extent it is as though Batista was the incarnation of a number of sins on the part of the United States. Now we will have to pay for those sins. In the matter of the Batista regime, I am in agreement with the first Cuban revolutionaries. That is perfectly clear." Such sentiments were anathema, shall we say treasonous, to the CIA and top generals.
These clear refusals to go to war and his decision to engage in private, back-channel communications with Cold War enemies marked Kennedy as an enemy of the national security state. They were on a collision course. As Douglass and others have pointed out, every move Kennedy made was anti-war. This, Douglass argues, was because JFK, a war hero, had been deeply affected by the horror of war and was severely shaken by how close the world had come to destruction during the Cuban missile crisis. Throughout his life he had been touched by death and had come to appreciate the fragility of life. Once in the Presidency, Kennedy underwent a deep metanoia, a spiritual transformation, from Cold Warrior to peace maker. He came to see the generals who advised him as devoid of the tragic sense of life and as hell-bent on war. And he was well aware that his growing resistance to war had put him on a dangerous collision course with those generals and the CIA. On numerous occasions he spoke of the possibility of a military coup d'etat against him. On the night before his trip to Dallas, he told his wife, "But, Jackie, if somebody wants to shoot me from a window with a rifle, nobody can stop it, so why worry about it." And we know that nobody did try to stop it because they had planned it. Watch treason with your own eyes:
But who killed him? Douglass presents a formidable amount of evidence, some old and some new, against the CIA and covert action agencies within the national security state, and does so in such a logical and persuasive way that any fair-minded reader cannot help but be taken aback; stunned, really. And he links this evidence directly to JFK's actions on behalf of peace.
He knows, however, that to truly convince he must break a "conspiracy of silence that would envelop our government, our media, our academic institutions, and virtually our entire society from November 22, 1963, to the present." This "unspeakable," this hypnotic "collective denial of the obvious," is sustained by a mass-media whose repeated message is that the truth about such significant events is beyond our grasp, that we will have to drink the waters of uncertainty forever. As for those who don't, they are relegated to the status of conspiracy nuts.
Fear and uncertainty block a true appraisal of the assassination - that plus the thought that it no longer matters. It matters. For we know that no president since JFK has dared to buck the military-intelligence-industrial complex. We know a Pax Americana has spread its tentacles across the globe with U.S. military in over 130 countries on 750 plus bases. We know that the amount of blood and money spent on wars and war preparations has risen astronomically. There is a great deal we know and even more that we don't want to know, or at the very least, investigate.
If Lee Harvey Oswald was connected to the intelligence community, the FBI and the CIA, then we can logically conclude that he was not "a lone-nut" assassin. Douglass marshals a wealth of evidence to show how from the very start Oswald was moved around the globe like a pawn in a game, and when the game was done, the pawn was eliminated in the Dallas police headquarters.
As he begins to trace Oswald's path, Douglass asks this question: "Why was Lee Harvey Oswald so tolerated and supported by the government he betrayed?" After serving as a U.S. Marine at the CIA's U-2 spy plane operating base in Japan with a Crypto clearance (higher than top secret but a fact suppressed by the Warren Commission), Oswald left the Marines and defected to the Soviet Union. After denouncing the U.S., working at a Soviet factory in Minsk , and taking a Russian wife - during which time Gary Powers' U-2 spy plane is shot down over the Soviet Union - he returned to the U.S. with a loan from the American Embassy in Moscow, only to be met at the dock in Hoboken, New Jersey by a man, Spas T. Raikin, a prominent anti-communist with extensive intelligence connections, recommended by the State Department. He passed through immigration with no trouble, was not prosecuted, moved to Fort Worth, Texas where , at the suggestion of the Dallas CIA Domestic Contacts Service chief, he was met and befriended by George de Mohrenschildt, an anti-communist Russian, who was a CIA asset. De Mohrenschildt got him a job four days later at a graphic arts company that worked on maps for the U.S. Army Map Service related to U-2 spy missions over Cuba.
Oswald was then shepherded around the Dallas area by de Mohrenschildt who, in 1977, on the day he revealed he had contacted Oswald for the CIA and was to meet with the House Select Committee on Assasinations' Gaeton Fonzi, allegedly committed suicide. Oswald then moved to New Orleans in April 1963 where got a job at the Reilly Coffee Company owned by CIA-affiliated William Reilly. The Reilly Coffee Company was located in close vicinity to the FBI,CIA, Secret Service, and Office of Naval Intelligence offices and a stone's throw from the office of Guy Bannister, a former FBI agent, who worked as a covert action coordinator for the intelligence services, supplying and training anti-Castro paramilitaries meant to ensnare Kennedy. Oswald then went to work with Bannister and the CIA paramilitaries.
During this time up until the assassination Oswald was on the FBI payroll, receiving $200 per month. This startling fact was covered up by the Warren Commission even though it was stated by the Commission's own general counsel J. Lee Rankin at a closed door meeting on January 27, 1964. The meeting had been declared "top secret" and its content only uncovered ten years later after a lengthy legal battle by researcher Harold Weisberg. Douglass claims Oswald "seems to have been working with both the CIA and FBI," as a provocateur for the former and an informant for the latter. Jim and Elsie Wilcott, who worked at the CIA Tokyo Station from 1960-64, in a 1978 interview with the San Francisco Chronicle, said, "It was common knowledge in the Tokyo CIA station that Oswald worked for the agency."
When Oswald moved to New Orleans in April 1963, de Mohrenschildt exited the picture, having asked the CIA for and been indirectly given a $285,000 contract to do a geological survey for Haitian dictator "Papa Doc" Duvalier, which he never did , but for which he was paid. Ruth and Michael Paine then entered the picture on cue. Douglass illuminatingly traces in their intelligence connections. Ruth later was the Warren Commission's chief witness. She had been introduced to Oswald by de Mohrenschildt. In September 1963 Ruth Paine drove from her sister's house in Virginia to New Orleans to pick up Marina Oswald and bring her to her house in Dallas to live with her. Thirty years after the assassination a document was declassified showing Paine's sister Sylvia worked for the CIA. Her father traveled throughout Latin America on an Agency for International Development (notorious for CIA front activities) contract and filed reports that went to the CIA. Her husband Michael's step-father, Arthur Young, was the inventor of the Bell helicopter and Michael's job there gave him a security clearance. Her mother was related to the Forbes family of Boston and her lifelong friend, Mary Bancroft, worked as a WW II spy with Allen Dulles and was his mistress. Afterwards, Dulles questioned the Paines in front of the Warren Commission, studiously avoiding any revealing questions. Back in Dallas, Ruth Paine conveniently got Oswald a job in the Texas Book Depository where he began work on October 16, 1963.
From late September until November 22, various Oswalds are later reported to have simultaneously been seen from Dallas to Mexico City. Two Oswalds were arrested in the Texas Theatre, the real one taken out the front door and an impostor out the back. As Douglas says, "There were more Oswalds providing evidence against Lee Harvey Oswald than the Warren Report could use or even explain." Even J. Edgar Hoover knew that Oswald impostors were used, as he told LBJ concerning Oswald's alleged visit to the Soviet Embassy in Mexico City. He later called this CIA ploy, "the false story re Oswald's trip to Mexico...their ( CIA's) double-dealing," something that he couldn't forget. It was apparent that a very intricate and deadly game was being played out at high levels in the shadows.
We know Oswald was blamed for the President's murder. But if one fairly follows the trail of the crime it becomes blatantly obvious that government forces were at work. Douglass adds layer upon layer of evidence to show how this had to be so. Oswald, the mafia, anti-Castro Cubans could not have withdrawn most of the security that day. The Sheriff Bill Decker withdrew all police protection. The Secret Service withdrew the police motorcycle escorts from beside the president's car where they had been the day before in Houston; took agents off the back of the car where they were normally stationed to obstruct gunfire. They approved the fateful, dogleg turn (on a dry run on November 18) where the car came, almost to a halt, a clear security violation. The House Select Committee on Assasinations concluded this, not some conspiracy nut.
Who could have squelched the testimony of all the doctors and medical personnel who claimed the president had been shot from the front in his neck and head, testimony contradicting the official story? Who could have prosecuted and imprisoned Abraham Bolden, the first African-American Secret Service agent personally brought on to the White House detail by JFK, who warned that he feared the president was going to be assassinated? (Douglass interviewed Bolden seven times and his evidence on the aborted plot to kill JFK in Chicago on November 2 - a story little known but extraordinary in its implications - is riveting.) The list of all the people who turned up dead, the evidence and events manipulated, the inquiry squelched, distorted, and twisted in an ex post facto cover-up - clearly point to forces within the government, not rogue actors without institutional support.
The evidence for a conspiracy organized at the deepest levels of the intelligence apparatus is overwhelming. James Douglass presents it in such depth and so logically that only one hardened to the truth would not be deeply moved and affected by his book. He says it best: "The extent to which our national security state was systematically marshaled for the assassination of President John F. Kennedy remains incomprehensible to us. When we live in a system, we absorb and think in a system. We lack the independence needed to judge the system around us. Yet the evidence we have seen points toward our national security state, the systemic bubble in which we all live, as the source of Kennedy's murder and immediate cover-up."
Speaking to his friends Dave Powers and Ken O'Donnell about those who planned the Bay of Pigs invasion of Cuba, JFK said, "They couldn't believe that a new president like me wouldn't panic and try to save his own face. Well, they had me figured all wrong." Let's hope for another president like that, but one that meets a different end."
Tuesday, November 24, 2009
Monday, November 9, 2009
Acceptance Speech by Brooksley Born 2009 PICA - Brooksley Born with CBK
Caroline Kennedy presents the Profile in Courage Award to Brooksley Born. In 1998, as chair of the Commodity Futures Trading Commission (CFTC), Brooksley Born unsuccessfully tried to bring over-the-counter financial derivatives under the regulatory control of the CFTC. The government’s failure to regulate such financial deals has been widely criticized as one of the causes of the current financial crisis. In the booming economic climate of the 1990’s, Born battled other regulators in the Clinton Administration, skeptical members of Congress and lobbyists over the regulation of derivatives, warning that unregulated financial contracts such as credit default swaps could pose grave dangers to the economy. Her efforts brought fierce opposition from Wall Street and from Administration officials who believed deregulation was essential to the extraordinary economic growth that was then in full bloom.
I would like to thank the John F. Kennedy Library Foundation for this wonderful and unanticipated honor. John F. Kennedy has been one of my heroes for more than 50 years, and to receive an award for courage in his name is truly thrilling and truly humbling.
I would also like to thank a number of colleagues who served with me at the U.S. Commodity Futures Trading Commission. Their assistance and support at the CFTC was invaluable and indeed essential to my efforts.
I would like to recognize my spouse Alex Bennett and our children, whose love and confidence in me have always sustained me.
When I spoke out a decade ago about the dangers posed by the rapidly growing and unregulated over-the-counter derivatives market, I did not do so in expectation of award or praise. On the contrary, I was aware that powerful interests in the financial community were opposed to any examination of that market. Yet I spoke out because I felt a duty to let the public, the Congress and the other financial regulators know that that market endangered our financial stability and to make every effort I could to address that problem.
My voice was not popular. The financial markets had been expanding, innovation was thriving, and the country was prosperous. The financial services industry argued that markets had proven themselves to be self-regulating and that the role of government in market oversight and regulation should be reduced or eliminated.
All of us have now paid a large price for that fallacious argument. We are in the midst of the most significant financial crisis since the Great Depression, and regulatory gaps including the failure to regulate over-the-counter derivatives have played an important role in the crisis.
It is now critically important to identify and eliminate these regulatory gaps and to strengthen our financial regulatory structure. Without significant regulatory reform, our financial system will be exposed to continuing dangers and repeated crises.
No federal or state regulator has market oversight responsibilities or regulatory powers governing the over-the-counter derivatives market or indeed has even sufficient information to understand the market’s operations. The market is totally opaque and is now popularly referred to as “the dark market.” It is enormous -- the reported size of the market as of last June exceeded $680 trillion dollars of notional value, more than ten times the amount of the gross national product of all the countries in the world.
While over-the-counter derivatives have been justified as vehicles to manage financial risk, they have in practice spread and multiplied risk throughout the economy and caused great financial harm. They include the credit default swaps disastrously sold by AIG and many of the toxic assets held by our biggest banks. Warren Buffett has dubbed them “financial weapons of mass destruction.”
We now have a unique opportunity -- a narrow window of time -- to fashion and implement a comprehensive regulatory scheme for these instruments. Existing U.S. laws governing the futures and options markets provide a model for regulating the closely related instruments traded in the over-the-counter derivatives market. The new regulatory scheme should provide that the instruments must be traded on regulated derivatives exchanges and cleared by regulated derivatives clearing houses to the extent feasible. This would allow government oversight and enforcement efforts, insure price discovery, openness and transparency, reduce leverage and speculation, and limit counterparty risk. If any residual over-the-counter market is to be permitted, it must also be subject to robust federal regulation.
These measures would go far toward bringing this enormous and dangerous market under control. They must be adopted and implemented if we hope to avoid future financial crises caused by this market. Special interests in the financial services industry are beginning to advocate a return to business as usual and to argue against any need for serious reform. We have to muster the political will to overcome these special interests. If we fail now to take the remedial steps needed to close the regulatory gap, we will be haunted by our failure for years to come.
Remarks of Brooksley Born on accepting the 2009 Profile in Courage Award, May 18, 2009.
As Prepared for Delivery
Acceptance Speech by Brooksley Born,Acceptance Speech by Brooksley Born,
Sunday, November 8, 2009
November 5, 2009, 7:00 am
When Will the S.E.C. Ever Admit They Made a Mistake?
By Joe Nocera
That was the headline — in ALL CAPS — of a e-mail message I received recently from a lawyer named Robert W. Pearce. Mr. Pearce’s client, Steven J. Wilson, was one of the two men I wrote about in late June who had been accused by the Securities and Exchange Commission of taking part in a small-time stock-manipulation scheme — and who, after five years of investigation and various legal proceedings, had been found not guilty in trials that lasted literally days.
One point I made in that column is that when people who aren’t rich get sucked into the vortex of a lengthy government investigation, they often wind up broke — and broken, even if they are innocent. Mr. Wilson — and his co-defendant, Richard Kwak — were no exceptions. In the column, I focused mainly on Mr. Kwak, who lost his job as a broker at Morgan Stanley, but Mr. Wilson’s plight was no different.
When the investigation began, Mr. Wilson was working for a small investment boutique called Noble Financial Group. Not surprisingly, he lost that job once the S.E.C. decided to come after him. “The really terrible thing is that clients you’ve had for years, companies you’ve done I.P.O.’s for, they won’t even talk to you when they learn you are being investigated by the S.E.C.,” Mr. Wilson told me when I spoke to him several months after his acquittal. And he was unable to find another job. “Personally, I’m pretty broke,” he said. “They decimated me.” At the time I spoke to him, Mr. Wilson, now 63, was trying to make ends meet as an oil filter salesman.
A month after my column was published, Judge Janet C. Hall of United States District Court ordered the S.E.C. to pay Mr. Wilson $481,844.09 in legal fees. (You can read her order here.) This would hardly end all of Mr. Wilson’s financial woes, but it would at least relieve him of some of the debt he piled up as a result of his ordeal. (Mr. Kwak is currently struggling to get Morgan Stanley to pay some of his legal fees.) Under the law, the government loses its immunity from recovery of lawyers’ fees if the action brought by the prosecution was either frivolous or in bad faith. On that argument, the judge sided with the S.E.C., ruling that bringing the case against the alleged stock manipulators was justified. (After all, she wrote, five of the seven defendants copped pleas. As I note in my column, I don’t think those pleas necessarily show there was a stock-manipulation scheme, only that pressure from the government is more than most people can withstand. But that’s a story for another day.)
But then she went on to say that the evidence against Mr. Wilson was so slim that the S.E.C. had no business making him part of the case — and bringing him into the case was frivolous. (“As thin as the S.E.C.’s evidence against Wilson on the marking the close and aiding and abetting claims was, its evidence on the matched trades claim was even thinner.”) Hence the awarding of $480,000-plus in legal fees.
How did the S.E.C. respond? You guessed it: it recently filed notice that it will appeal Judge Hall’s ruling. In doing so, of course, the S.E.C. is prolonging Mr. Wilson’s ordeal, which the agency itself caused, thus compounding the original injustice. My attempt to get the agency to explain itself went nowhere — all I got was an official “decline to comment.”
The S.E.C. has long since acknowledged its mistakes in missing the Bernard Madoff fraud for so many years. Now it ought to acknowledge that it sometimes — maybe more than sometimes — makes the opposite mistake: it relentlessly pursues people, usually small fry with limited resources, who are not guilty of anything except being in the wrong place at the wrong time. Paying Mr. Wilson’s legal bills would be a good place to start.
Tuesday, October 27, 2009
On Tuesday, March 11th, 2008, somebody — nobody knows who — made one of the craziest bets Wall Street has ever seen. The mystery figure spent $1.7 million on a series of options, gambling that shares in the venerable investment bank Bear Stearns would lose more than half their value in nine days or less. It was madness — "like buying 1.7 million lottery tickets," according to one financial analyst.
But what's even crazier is that the bet paid.
At the close of business that afternoon, Bear Stearns was trading at $62.97. At that point, whoever made the gamble owned the right to sell huge bundles of Bear stock, at $30 and $25, on or before March 20th. In order for the bet to pay, Bear would have to fall harder and faster than any Wall Street brokerage in history.
The very next day, March 12th, Bear went into free fall. By the end of the week, the firm had lost virtually all of its cash and was clinging to promises of state aid; by the weekend, it was being knocked to its knees by the Fed and the Treasury, and forced at the barrel of a shotgun to sell itself to JPMorgan Chase (which had been given $29 billion in public money to marry its hunchbacked new bride) at the humiliating price of … $2 a share. Whoever bought those options on March 11th woke up on the morning of March 17th having made 159 times his money, or roughly $270 million. This trader was either the luckiest guy in the world, the smartest son of a bitch ever or…
Or what? That this was a brazen case of insider manipulation was so obvious that even Sen. Chris Dodd, chairman of the pillow-soft-touch Senate Banking Committee, couldn't help but remark on it a few weeks later, when questioning Christopher Cox, the then-chief of the Securities and Exchange Commission. "I would hope that you're looking at this," Dodd said. "This kind of spike must have triggered some sort of bells and whistles at the SEC. This goes beyond rumors."
Cox nodded sternly and promised, yes, he would look into it. What actually happened is another matter. Although the SEC issued more than 50 subpoenas to Wall Street firms, it has yet to identify the mysterious trader who somehow seemed to know in advance that one of the five largest investment banks in America was going to completely tank in a matter of days. "I've seen the SEC send agents overseas in a simple insider-trading case to investigate profits of maybe $2,000," says Brent Baker, a former senior counsel for the commission. "But they did nothing to stop this."
The SEC's halfhearted oversight didn't go unnoticed by the market. Six months after Bear was eaten by predators, virtually the same scenario repeated itself in the case of Lehman Brothers — another top-five investment bank that in September 2008 was vaporized in an obvious case of market manipulation. From there, the financial crisis was on, and the global economy went into full-blown crater mode.
Like all the great merchants of the bubble economy, Bear and Lehman were leveraged to the hilt and vulnerable to collapse. Many of the methods that outsiders used to knock them over were mostly legal: Credit markers were pulled, rumors were spread through the media, and legitimate short-sellers pressured the stock price down. But when Bear and Lehman made their final leap off the cliff of history, both undeniably got a push — especially in the form of a flat-out counterfeiting scheme called naked short-selling.
That this particular scam played such a prominent role in the demise of the two firms was supremely ironic. After all, the boom that had ballooned both companies to fantastic heights was basically a counterfeit economy, a mountain of paste that Wall Street had built to replace the legitimate business it no longer had. By the middle of the Bush years, the great investment banks like Bear and Lehman no longer made their money financing real businesses and creating jobs. Instead, Wall Street now serves, in the words of one former investment executive, as "Lucy to America's Charlie Brown," endlessly creating new products to lure the great herd of unwitting investors into whatever tawdry greed-bubble is being spun at the moment: Come kick the football again, only this time we'll call it the Internet, real estate, oil futures. Wall Street has turned the economy into a giant asset-stripping scheme, one whose purpose is to suck the last bits of meat from the carcass of the middle class.
What really happened to Bear and Lehman is that an economic drought temporarily left the hyenas without any more middle-class victims — and so they started eating each other, using the exact same schemes they had been using for years to fleece the rest of the country. And in the forensic footprint left by those kills, we can see for the first time exactly how the scam worked — and how completely even the government regulators who are supposed to protect us have given up trying to stop it.
This was a brokered bloodletting, one in which the power of the state was used to help effect a monstrous consolidation of financial and political power. Heading into 2008, there were five major investment banks in the United States: Bear, Lehman, Merrill Lynch, Morgan Stanley and Goldman Sachs. Today only Morgan Stanley and Goldman survive as independent firms, perched atop a restructured Wall Street hierarchy. And while the rest of the civilized world responded to last year's catastrophes with sweeping measures to rein in the corruption in their financial sectors, the United States invited the wolves into the government, with the popular new president, Barack Obama — elected amid promises to clean up the mess — filling his administration with Bear's and Lehman's conquerors, bestowing his papal blessing on a new era of robbery.
To the rest of the world, the brazenness of the theft — coupled with the conspicuousness of the government's inaction — clearly demonstrates that the American capital markets are a crime in progress. To those of us who actually live here, however, the news is even worse. We're in a place we haven't been since the Depression: Our economy is so completely fucked, the rich are running out of things to steal.
If you squint hard enough, you can see that the derivative-driven economy of the past decade has always, in a way, been about counterfeiting. At their most basic level, innovations like the ones that triggered the global collapse — credit-default swaps and collateralized debt obligations — were employed for the primary purpose of synthesizing out of thin air those revenue flows that our dying industrial economy was no longer pumping into the financial bloodstream. The basic concept in almost every case was the same: replacing hard assets with complex formulas that, once unwound, would prove to be backed by promises and IOUs instead of real stuff. Credit-default swaps enabled banks to lend more money without having the cash to cover potential defaults; one type of CDO let Wall Street issue mortgage-backed bonds that were backed not by actual monthly mortgage payments made by real human beings, but by the wild promises of other irresponsible lenders. They even called the thing a synthetic CDO — a derivative contract filled with derivative contracts — and nobody laughed. The whole economy was a fake.
For most of this decade, nobody rocked that fake economy — especially the faux housing market — better than Bear Stearns. In 2004, Bear had been one of five investment banks to ask the SEC for a relaxation of lending restrictions that required it to possess $1 for every $12 it lent out; as a result, Bear's debt-to-equity ratio soared to a staggering 33-1. The bank used much of that leverage to issue mountains of mortgage-backed securities, essentially borrowing its way to a booming mortgage business that helped drive its share price to a high of $172 in early 2007.
But that summer, Bear started to crater. Two of its hedge funds that were heavily invested in mortgage-backed deals imploded in June and July, forcing the credit-raters at Standard & Poor's to cut its outlook on Bear from stable to negative. The company survived through the winter — in part by jettisoning its dipshit CEO, Jimmy Cayne, a dithering, weed-smoking septuagenarian who was spotted at a bridge tournament during the crisis — but by March 2008, it was almost wholly dependent on a network of creditors who supplied it with billions in rolling daily loans to keep its doors open. If ever there was a major company ripe to be assassinated by market manipulators, it was Bear Stearns in 2008.
Then, on March 11th — around the same time that mystery Nostradamus was betting $1.7 million that Bear was about to collapse — a curious thing happened that attracted virtually no notice on Wall Street. On that day, a meeting was held at the Federal Reserve Bank of New York that was brokered by Fed chief Ben Bernanke and then-New York Fed president Timothy Geithner. The luncheon included virtually everyone who was anyone on Wall Street — except for Bear Stearns.
Bear, in fact, was the only major investment bank not represented at the meeting, whose list of participants reads like a Barzini-Tattaglia meeting of the Five Families. In attendance were Jamie Dimon from JPMorgan Chase, Lloyd Blankfein from Goldman Sachs, James Gorman from Morgan Stanley, Richard Fuld from Lehman Brothers and John Thain, the big-spending office redecorator still heading the not-yet-fully-destroyed Merrill Lynch. Also present were old Clinton hand Robert Rubin, who represented Citigroup; Stephen Schwarzman of the Blackstone Group; and several hedge-fund chiefs, including Kenneth Griffin of Citadel Investment Group.
The meeting was never announced publicly. In fact, it was discovered only by accident, when a reporter from Bloomberg filed a request under the Freedom of Information Act and came across a mention of it in Bernanke's schedule. Rolling Stone has since contacted every major attendee, and all declined to comment on what was discussed at the meeting. "The ground rules of the lunch were of confidentiality," says a spokesman for Morgan Stanley. "Blackstone has no comment," says a spokesman for Schwarzman. Rubin declined a request for an interview, Fuld's people didn't return calls, and Goldman refused to talk about the closed-door session. The New York Fed said the meeting, which had been scheduled weeks earlier, was simply business as usual: "Such informal, small group sessions can provide a valuable means to learn about market functioning from people with firsthand knowledge."
So what did happen at that meeting? There's no evidence that Bernanke and Geithner called the confidential session to discuss Bear's troubles, let alone how to carve up the bank's spoils. It's possible that one of them made an impolitic comment about Bear during a meeting held for other reasons, inadvertently fueling a run on the bank. What's impossible to believe is the bullshit version that Geithner and Bernanke later told Congress. The month after Bear's collapse, both men testified before the Senate that they only learned how dire the firm's liquidity problems were on Thursday, March 13th — despite the fact that rumors of Bear's troubles had begun as early as that Monday and both men had met in person with every key player on Wall Street that Tuesday. This is a little like saying you spent the afternoon of September 12th, 2001, in the Oval Office, but didn't hear about the Twin Towers falling until September 14th.
Given the Fed's cloak of confidentiality, we simply don't know what happened at the meeting. But what we do know is that from the moment it ended, the run on Bear was on, and every major player on Wall Street with ties to Bear started pulling IV tubes out of the patient's arm. Banks, brokers and hedge funds that held cash in Bear's accounts yanked it out in mass quantities (making it harder for the firm to meet its credit payments) and took out credit- default swaps against Bear (making public bets that the firm was going to tank). At the same time, Bear was blindsided by an avalanche of "novation requests" — efforts by worried creditors to sell off the debts that Bear owed them to other Wall Street firms, who would then be responsible for collecting the money. By the afternoon of March 11th, two rival investment firms — Credit Suisse and Goldman Sachs — were so swamped by novation requests for Bear's debt that they temporarily stopped accepting them, signaling the market that they had grave doubts about Bear.
All of these tactics were elements that had often been seen in a kind of scam known as a "bear raid" that small-scale stock manipulators had been using against smaller companies for years. But the most damning thing the attack on Bear had in common with these earlier manipulations was the employment of a type of counterfeiting scheme called naked short-selling. From the moment the confidential meeting at the Fed ended on March 11th, Bear became the target of this ostensibly illegal practice — and the companies widely rumored to be behind the assault were in that room. Given that the SEC has failed to identify who was behind the raid, Wall Street insiders were left with nothing to trade but gossip. According to the former head of Bear's mortgage business, Tom Marano, the rumors within Bear itself that week centered around Citadel and Goldman. Both firms were later subpoenaed by the SEC as part of its investigation into market manipulation — and the CEOs of both Bear and Lehman were so suspicious that they reportedly contacted Blankfein to ask whether his firm was involved in the scam. (A Goldman spokesman denied any wrongdoing, telling reporters it was "rigorous about conducting business as usual.")
The roots of short-selling date back to 1973, when Wall Street went to a virtually paperless system for trading stocks. Before then, if you wanted to sell shares you owned in Awesome Company X, you and the buyer would verbally agree to the deal through a broker. The buyer would take legal ownership of the shares, but only later would the broker deliver the actual, physical shares to the buyer, using an absurd, Brazil-style network of runners who carried paper shares from one place to another — a preposterous system that threatened to cripple trading altogether.
To deal with the problem, Wall Street established a kind of giant financial septic tank called the Depository Trust Company. Privately owned by a consortium of brokers and banks, the DTC centralizes and maintains all records of stock transactions. Now, instead of being schlepped back and forth across Manhattan by messengers on bikes, almost all physical shares of stock remain permanently at the DTC. When one broker sells shares to another, the trust company "delivers" the shares simply by making a change in its records.
Watch Matt Taibbi break down short-selling vs. naked short-selling on his blog, Taibblog.
This new electronic system spurred an explosion of financial innovation. One practice that had been little used before but now began to be employed with great popularity was short- selling, a perfectly legal type of transaction that allows investors to bet against a stock. The basic premise of a normal short sale is easy to follow. Say you're a hedge-fund manager, and you want to bet against the stock of a company — let's call it Wounded Gazelle International (WGI). What you do is go out on the market and find someone — often a brokerage house like Goldman Sachs — who has shares in that stock and is willing to lend you some. So you go to Goldman on a Monday morning, and you borrow 1,000 shares in Wounded Gazelle, which that day happens to be trading at $10.
Now you take those 1,000 borrowed shares, and you sell them on the open market at $10, which leaves you with $10,000 in cash. You then take that $10,000, and you wait. A week later, surveillance tapes of Wounded's CEO having sex with a woodchuck in a Burger King bathroom appear on CNBC. Awash in scandal, the firm's share price tumbles to 3½. So you go out on the market and buy back those 1,000 shares of WGI — only now it costs you only $3,500 to do so. You then return the shares to Goldman Sachs, at which point your interest in WGI ends. By betting against or "shorting" the company, you've made a profit of $6,500.
It's important to point out that not only is normal short-selling completely legal, it can also be socially beneficial. By incentivizing Wall Street players to sniff out inefficient or corrupt companies and bet against them, short-selling acts as a sort of policing system; legal short- sellers have been instrumental in helping expose firms like Enron and WorldCom. The problem is, the new paperless system instituted by the DTC opened up a giant loophole for those eager to game the market. Under the old system, would-be short-sellers had to physically borrow actual paper shares before they could execute a short sale. In other words, you had to actually have stock before you could sell it. But under the new system, a short-seller only had to make a good-faith effort to "locate" the stock he wanted to borrow, which usually amounts to little more than a conversation with a broker:
Evil Hedge Fund: I want to short IBM. Do you have a million shares I can borrow?
Corrupt Broker [not checking, playing Tetris]: Uh, yeah, whatever. Go ahead and sell.
There was nothing to prevent that broker — let's say he has only a million shares of IBM total — from making the same promise to five different hedge funds. And not only could brokers lend stocks they never had, another loophole in the system allowed hedge funds to sell those stocks and deliver a kind of IOU instead of the actual share to the buyer. When a share of stock is sold but never delivered, it's called a "fail" or a "fail to deliver" — and there was no law or regulation in place that prevented it. It's exactly what it sounds like: a loophole legalizing the counterfeiting of stock. In place of real stock, the system could become infected with "fails" — phantom IOU shares — instead of real assets.
If you own stock that pays a dividend, you can even look at your dividend check to see if your shares are real. If you see a line that says "PIL" — meaning "Payment in Lieu" of dividends — your shares were never actually delivered to you when you bought the stock. The mere fact that you're even getting this money is evidence of the crime: This counterfeiting scheme is so profitable for the hedge funds, banks and brokers involved that they are willing to pay "dividends" for shares that do not exist. "They're making the payments without complaint," says Susanne Trimbath, an economist who worked at the Depository Trust Company. "So they're making the money somewhere else."
Trimbath was one of the first people to notice the problem. In 1993, she was approached by a group of corporate transfer agents who had a complaint. Transfer agents are the people who keep track of who owns shares in corporations, for the purposes of voting in corporate elections. "What the transfer agents saw, when corporate votes came up, was that they were getting more votes than there were shares," says Trimbath. In other words, transfer agents representing a corporation that had, say, 1 million shares outstanding would report a vote on new board members in which 1.3 million votes were cast — a seeming impossibility.
Analyzing the problem, Trimbath came to an ugly conclusion: The fact that short-sellers do not have to deliver their shares made it possible for two people at once to think they own a stock. Evil Hedge Fund X borrows 100 shares from Unwitting Schmuck A, and sells them to Unwitting Schmuck B, who never actually receives that stock: In this scenario, both Schmucks will appear to have full voting rights. "There's no accounting for share ownership around short sales," Trimbath says. "And because of that, there are multiple owners assigned to one share."
Trimbath's observation would prove prophetic. In 2005, a trade group called the Securities Transfer Association analyzed 341 shareholder votes taken that year — and found evidence of over-voting in every single one. Experts in the field complain that the system makes corporate-election fraud a comically simple thing to achieve: In a process known as "empty voting," anyone can influence any corporate election simply by borrowing great masses of shares shortly before an important merger or board election, exercising their voting rights, then returning the shares right after the vote is over. Hilariously, because you're only borrowing the shares and not buying them, you can effectively "buy" a corporate election for free.
Back in 1993, over-voting might have seemed a mere curiosity, the result not of fraud but of innocent bookkeeping errors. But Trimbath realized the broader implication: Just as the lack of hard rules forcing short-sellers to deliver shares makes it possible for unscrupulous traders to manipulate a corporate vote, it could also enable them to manipulate the price of a stock by selling large quantities of shares they didn't possess. She warned her bosses that this crack in the system made the specter of organized counterfeiting a real possibility.
"I personally went to senior management at DTC in 1993 and presented them with this issue," she recalls. "And their attitude was, 'We spill more than that.'" In other words, the problem represented such a small percentage of the assets handled annually by the DTC — as much as $1.8 quadrillion in any given year, roughly 30 times the GDP of the entire planet — that it wasn't worth worrying about.
It wasn't until 10 years later, when Trimbath had a chance meeting with a lawyer representing a company that had been battered by short-sellers, that she realized someone outside the DTC had seized control of a financial weapon of mass destruction. "It was like someone figured out how to aim and fire the Death Star in Star Wars," she says. What they "figured out," Trimbath realized, was an early version of the naked-shorting scam that would help take down Bear and Lehman.
Here's how naked short-selling works: Imagine you travel to a small foreign island on vacation. Instead of going to an exchange office in your hotel to turn your dollars into Island Rubles, the country instead gives you a small printing press and makes you a deal: Print as many Island Rubles as you like, then on the way out of the country you can settle your account. So you take your printing press, print out gigantic quantities of Rubles and start buying goods and services. Before long, the cash you've churned out floods the market, and the currency's value plummets. Do this long enough and you'll crack the currency entirely; the loaf of bread that cost the equivalent of one American dollar the day you arrived now costs less than a cent.
With prices completely depressed, you keep printing money and buy everything of value — homes, cars, priceless works of art. You then load it all into a cargo ship and head home. On the way out of the country, you have to settle your account with the currency office. But the Island Rubles you printed are now worthless, so it takes just a handful of U.S. dollars to settle your debt. Arriving home with your cargo ship, you sell all the island riches you bought at a discount and make a fortune.
This is the basic outline for how to seize the assets of a publicly traded company using counterfeit stock. What naked short-sellers do is sell large quantities of stock they don't actually have, flooding the market with "phantom" shares that, just like those Island Rubles, depress a company's share price by making the shares less scarce and therefore less valuable.
The first documented cases of this scam involved small-time boiler-room grifters. In the late 1990s, not long after Trimbath warned her bosses about the problem, a trader named John Fiero executed a series of "bear raids" on small companies. First he sold shares he didn't possess in huge quantities and fomented negative rumors about a company; then, in a classic shakedown, he approached the firm with offers to desist — if they'd sell him stock at a discount. "He would press a button and enter a trade for half a million shares," says Brent Baker, the SEC official who busted Fiero. "He didn't have the stock to cover that — but the price of the stock would drop to a penny."
In 2005, complaints from investors about naked short-selling finally prompted the SEC to try to curb the scam. A new rule called Regulation SHO, known as "Reg SHO" for short, established a series of guidelines designed, in theory, to prevent traders from selling stock and then failing to deliver it to the buyer. "Intentionally failing to deliver stock," then-SEC chief Christopher Cox noted, "is market manipulation that is clearly violative of the federal securities laws." But thanks to lobbying by hedge funds and brokers, the new rule included no financial penalties for violators and no real enforcement mechanism. Instead, it merely created a thing called the "threshold list," requiring short-sellers to close out their positions in any company where the amount of "fails to deliver" exceeded 10,000 shares for more than 13 days. In other words, if counterfeiters got caught selling a chunk of phantom shares in a firm for two straight weeks, they were no longer allowed to counterfeit the stock.
A nice, if timid idea — except that it's completely meaningless. Not only has there been virtually no enforcement of the rule, but the SEC doesn't even bother to track who is targeting companies with failed trades. As a result, many stocks attacked by naked short-sellers spent years on the threshold list, including Krispy Kreme, Martha Stewart and Overstock.com.
"We were actually on it for 668 consecutive days," says Patrick Byrne, the CEO of Overstock, who became a much-ridiculed pariah on Wall Street for his lobbying against naked short-selling. At one point, investors claimed ownership of nearly 42 million shares in Overstock — even though fewer than 24 million shares in the company had actually been issued.
Byrne is not an easy person for anyone with any kind of achievement neuroses to like. He is young, good-looking, has shitloads of money, speaks fluent Chinese, holds a doctorate in philosophy and spent his youth playing hooky from high school and getting business tips from the likes of Warren Buffett. But because of his fight against naked short-selling, he has been turbofragged by the mainstream media as a tinfoil-hat lunatic; one story in the New York Post featured a picture of Byrne with a flying saucer coming out of his head.
Nonetheless, Byrne's howlings about naked short-selling look extremely prescient in light of what happened to Bear and Lehman. Over the past four years, Byrne has outlined the parameters of a naked-shorting scam that always includes some combination of the following elements: negative rumors planted in the financial press, the flooding of the market with enormous quantities of undelivered shares, absurdly high trading volumes and the prolonged appearance of the targeted company on the Reg SHO list.
In January 2005 — at the exact moment Reg SHO was launched — Byrne's own company was trading above $65 a share, and the number of failed trades in circulation was virtually nil. By March 2006, however, Overstock was down to $28 a share, and Reg SHO data indicated an explosion of failed trades — nearly 4 million undelivered shares on some days. At those moments, in other words, nearly a fifth of all Overstock shares were fake.
"This really isn't about my company," Byrne says. "I mean, I've made my money. My initial concern, of course, was with Overstock. But the more I learned about this, the more my real worry became 'Jesus, what are the implications for the system?' And given what happened to Bear and Lehman last year, I think we ended up seeing what some of those implications are."
Bear Stearns wasn't the kind of company that had a problem with naked short-selling. Before March 11th, 2008, there had never been a period in which significant quantities of Bear stock had been sold and then not delivered, and the company had never shown up on the Reg SHO list. But beginning on March 12th — the day after the Fed meeting that failed to include Bear, and the mysterious purchase of the options betting on the firm's imminent collapse — the number of counterfeit shares in Bear skyrocketed.
The best way to grasp what happened is to look at the data: On Tuesday, March 11th, there were 201,768 shares of Bear that had failed to deliver. The very next day, the number of phantom shares leaped to 1.2 million. By the close of trading that Friday, the number passed 2 million — and when the market reopened the following Monday, it soared to 13.7 million. In less than a week, the number of counterfeit shares in Bear had jumped nearly seventyfold.
The giant numbers of undelivered shares over the course of that week amounted to one of the most blatant cases of stock manipulation in Wall Street history. "There is not a doubt in my mind, not a single doubt" that naked short-selling helped destroy Bear, says Sen. Ted Kaufman, a Democrat from Delaware who has introduced legislation to curb such financial fraud. Asked to rate how obvious a case of naked short-selling Bear is, on a scale of one to 10, former SEC counsel Brent Baker doesn't hesitate. "Easily a 10," he says.
At the same time that naked short- sellers were counterfeiting Bear's stock, the firm was being hit by another classic tactic of bear raids: negative rumors in the media. Tipped off by a source, CNBC reporter David Faber reported on March 12th that Goldman Sachs had held up a trade with Bear because it was worried about the firm's creditworthiness. Faber noted that the hold was temporary — the deal had gone through that morning. But the damage was done; inside Bear, Faber's report was blamed for much of the subsequent panic.
"I like Faber, he's a good guy," a Bear executive later said. "But I wonder if he ever asked himself, 'Why is someone telling me this?' There was a reason this was leaked, and the reason is simple: Someone wanted us to go down, and go down hard."
At first, the full-blown speculative attack on Bear seemed to be working. Thanks to the media-fueled rumors and the mounting anxiety over the company's ability to make its payments, Bear's share price plummeted seven percent on March 13th, to $57. It still had a ways to go for the mysterious short-seller to make a profit on his bet against the firm, but it was headed in the right direction. But then, early on the morning of Friday, March 14th, Bear's CEO, Alan Schwartz, struck a deal with the Fed and JPMorgan to provide an emergency loan to keep the company's doors open. When the news hit the street that morning, Bear's stock rallied, gaining more than nine percent and climbing back to $62.
The sudden and unexpected rally prompted celebrations inside Bear's offices. "We're alive!" someone on the company's trading floor reportedly shouted, and employees greeted the news by high-fiving each other. Many gleefully believed that the short-sellers targeting the firm would get "squeezed" — in other words, if the share price kept going up, the bets against Bear would blow up in the attackers' faces.
The rally proved short-lived — Bear ended the day at $30 — but it suggested that all was not lost. Then a strange thing happened. As Bear understood it, the emergency credit line that the Fed had arranged was originally supposed to last for 28 days. But that Friday, despite the rally, Geithner and then-Treasury secretary Hank Paulson — the former head of Goldman Sachs, one of the firms rumored to be shorting Bear — had a sudden change of heart. When the market closed for the weekend, Paulson called Schwartz and told him that the rescue timeline had to be accelerated. Paulson wouldn't stay up another night worrying about Bear Stearns, he reportedly told Schwartz. Bear had until Sunday night to find a buyer or it could go fuck itself.
Bear was out of options. Over the course of that weekend, the firm opened its books to JPMorgan, the only realistic potential buyer. But upon seeing all the "shit" on Bear's books, as one source privy to the negotiations put it — including great gobs of toxic investments in the subprime markets — JPMorgan hedged. It wouldn't do the deal, it announced, unless it got two things: a huge bargain on the sale price, and a lot of public money to wipe out the "shit."
So the Fed — on whose New York board sits JPMorgan chief Jamie Dimon — immediately agreed to accommodate the new buyers, forking over $29 billion in public funds to buy up the yucky parts of Bear. Paulson, meanwhile, took care of the bargain issue, putting the government's gun to Schwartz's head and telling him he had to sell low. Really low.
On Saturday night, March 15th, Schwartz and Dimon had discussed a deal for JPMorgan to buy Bear at $8 to $12 a share. By Sunday afternoon, however, Geithner reported that the price had plunged even further. "Shareholders are going to get between $3 and $5 a share," he told Paulson.
But Paulson pissed on even that price from a great height. "I can't see why they're getting anything," he told Dimon that afternoon from Washington, via speakerphone. "I could see something nominal, like $1 or $2 per share."
Just like that, with a slight nod of Paulson's big shiny head, Bear was vaporized. This, remember, all took place while Bear's stock was still selling at $30. By knocking the share price down 28 bucks, Paulson ensured that the manipulators who were illegally counterfeiting Bear's shares would make an awesome fortune.
Although we don't know who was behind the naked short-selling that targeted Bear — short-traders aren't required to reveal their stake in a company — the scam wasn't just a fetish crime for small-time financial swindlers. On the contrary, the widespread selling of shares without delivering them translated into an enormously profitable business for the biggest companies on Wall Street, fueling the growth of a booming sector in the financial-services industry called Prime Brokerage.
As with other Wall Street abuses, the lucrative business in counterfeiting stock got its start with a semisecret surrender of regulatory authority by the government. In 1989, a group of prominent Wall Street broker-dealers — led, ironically, by Bear Stearns — asked the SEC for permission to manage the accounts of hedge funds engaged in short-selling, assuming responsibility for locating, lending and transferring shares of stock. In 1994, federal regulators agreed, allowing the nation's biggest investment banks to serve as Prime Brokers. Think of them as the house in a casino: They provide a gambler with markers to play and to manage his winnings.
Under the original concept, a hedge fund that wanted to short a stock like Bear Stearns would first "locate" the stock with his Prime Broker, then would do the trade with a so-called Executing Broker. But as time passed, Prime Brokers increasingly allowed their hedge-fund customers to use automated systems and "locate" the stock themselves. Now the conversation went something like this:
Evil Hedge Fund: I just sold a million shares of Bear Stearns. Here, hold this shitload of money for me.
Prime Broker: Awesome! Where did you borrow the shares from?
Evil Hedge Fund: Oh, from Corrupt Broker. You know, Vinnie.
Prime Broker: Oh, OK. Is he sure he can find those shares? Because, you know, there are rules.
Evil Hedge Fund: Oh, yeah. You know Vinnie. He's good for it.
Prime Broker: Sweet!
Following the SEC's approval of this cozy relationship, Prime Brokers boomed. Indeed, with the rise of discount brokers online and the collapse of IPOs and corporate mergers, Prime Brokerage — in essence, the service end of the short- selling business — is now one of the most profitable sectors that big Wall Street firms have left. Last year, Goldman Sachs netted $3.4 billion providing "securities services" — the lion's share of it from Prime Brokerage.
When one considers how easy it is for short-sellers to sell stock without delivering, it's not hard to see how this can be such a profitable business for Prime Brokers. It's really a license to print money, almost in the literal sense. As such, Prime Brokers have tended to be lax about making sure that their customers actually possess, or can even realistically find, the stock they've sold. That point is made abundantly clear by tapes obtained by Rolling Stone of recent meetings held by the compliance officers for big Prime Brokers like Goldman Sachs, Morgan Stanley and Deutsche Bank. Compliance officers are supposed to make sure that traders at their firms follow the rules — but in the tapes, they talk about how they routinely greenlight transactions they know are dicey.
In a conference held at the JW Marriott Desert Ridge Resort in Phoenix in May 2008 — just over a month after Bear collapsed — a compliance officer for Goldman Sachs named Jonathan Breckenridge talks with his colleagues about how the firm's customers use an automated program to report where they borrowed their stock from. The problem, he says, is the system allows short-sellers to enter anything they want in the text field, no matter how nonsensical — or even leave the field blank. "You can enter ABC, you can enter Go, you can enter Locate Goldman, you can enter whatever you want," he says. "Three dots — I've actually seen that."
The room erupts with laughter.
After making this admission, Breckenridge asks officials from the Securities Industry and Financial Markets Association, the trade group representing Wall Street broker-dealers, for guidance in how to make this appear less blatantly improper. "How do you have in place a process," he wonders, "and make sure that it looks legit?"
The funny thing is that Prime Brokers didn't even need to fudge the rules. They could counterfeit stocks legally, thanks to yet another loophole — this one involving key players known as "market makers." When a customer wants to buy options and no one is lining up to sell them, the market maker steps in and sells those options out of his own portfolio. In market terms, he "provides liquidity," making sure you can always buy or sell the options you want.
Under what became known as the "options market maker exception," the SEC permitted a market maker to sell shares whether or not he had them or could find them right away. In theory, this made sense, since delaying the market maker from selling to offset a big buy order could dry up liquidity and slow down trading. But it also created a loophole for naked short-sellers to kill stocks easily — and legally. Take Bear Stearns, for example. Say the stock is trading at $62, as it was on March 11th, and someone buys put options from the market maker to sell $1.7 million in Bear stock nine days later at $30. To offset that big trade, the market maker might try to keep his own portfolio balanced by selling off shares in the company, whether or not he can locate them.
But here's the catch: The market maker often sells those phantom shares to the same person who bought the put options. That buyer, after all, would love to snap up a bunch of counterfeit Bear stock, since he can drive the company's price down by reselling those fake shares. In fact, the shares you buy from a market maker via the SEC-sanctioned loophole are sometimes called "bullets," because when you pump these counterfeit IOUs into the market, it's like firing bullets into the company — it kills the price, just like printing more Island Rubles kills a currency.
Which, it appears, is exactly what happened to Bear Stearns. Someone bought a shitload of puts in Bear, and then someone sold a shitload of Bear shares that never got delivered. Bear then staggered forward, bleeding from every internal organ, and fell on its face. "It looks to me like Bear Stearns got riddled with bullets," John Welborn, an economist with an investment firm called the Haverford Group, later observed.
So who conducted the naked short- selling against Bear? We don't know — but we do know that, thanks to the free pass the SEC gave them, Prime Brokers stood to profit from the transactions. And the confidential meeting at the Fed on March 11th included all the major Prime Brokers on Wall Street — as well as many of the biggest hedge funds, who also happen to be some of the biggest short-sellers on Wall Street.
The economy's financial woes might have ended there — leaving behind an unsolved murder in which many of the prime suspects profited handsomely. But three months later, the killers struck again. On June 27th, 2008, an avalanche of undelivered shares in Lehman Brothers started piling up in the market. June 27th: 705,103 fails. June 30th: 814,870 fails. July 1st: 1,556,301 fails.
Then the rumors started. A story circulated on June 30th about Barclays buying Lehman for 25 percent less than the share price. The tale was quickly debunked, but the attacks continued, with hundreds of thousands of failed trades every day for more than a week — during which time Lehman lost 44 percent of its share price. The major players on Wall Street, who for years had confined this unseemly sort of insider rape to smaller companies, had begun to eat each other alive.
It made great capitalist sense to attack these giant firms — they were easy targets, after all, hideously mismanaged and engorged with debt — but an all-out shooting war of this magnitude posed a risk to everyone. And so a cease-fire was declared. In a remarkable order issued on July 15th, Cox dictated that short-sellers must actually pre-borrow shares before they sell them. But in a hilarious catch, the order only covered shares of the 19 biggest firms on Wall Street, including Morgan Stanley and Goldman Sachs, and would last only a month.
This was one of the most amazing regulatory actions ever: It essentially told Wall Street that it was enjoined from counterfeiting stock — but only temporarily, and only the stock of the 19 of the richest companies on Wall Street. Not surprisingly, the share price for Lehman and some of the other lucky robber barons surged on the news.
But the relief was short-lived. On August 12th, 2008, the Cox order expired — and fails in Lehman stock quickly started mounting. The attack spiked on September 9th, when there were over 1 million undelivered shares in Lehman. On September 10th, there were 5,877,649 failed trades. The day after, there were an astonishing 22,625,385 fails. The next day: 32,877,794. Then, on September 15th, the price of Lehman Brothers stock fell to 21 cents, and the company declared bankruptcy.
That naked shorting was the tool used to kill the company — which was, like Bear, a giant bursting sausage of deadly subprime deals that didn't need much of a push off the cliff — was obvious to everyone. Lehman CEO Richard Fuld, admittedly one of the biggest assholes of the 21st century, said as much a month later. "The naked shorts and rumormongers succeeded in bringing down Bear Stearns," Fuld told Congress. "And I believe that unsubstantiated rumors in the marketplace caused significant harm to Lehman Brothers."
The methods used to destroy these companies pointed to widespread and extravagant market manipulation, and the death of Lehman should have instigated a full-bore investigation. "This isn't a trail of bread crumbs," former SEC enforcement director Irving Pollack has pointed out. "This audit trail is lit up like an airport runway. You can see it a mile off. Subpoena e-mails. Find out who spread false rumors and also shorted the stock, and you've got your manipulators."
It would be an easy matter for the SEC to determine who killed Bear and Lehman, if it wanted to — all it has to do is look at the trading data maintained by the stock exchanges. But 18 months after the widespread market manipulation, the federal government's cop on the financial beat has barely lifted a finger to solve the two biggest murders in Wall Street history. The SEC refuses to comment on what, if anything, it is doing to identify the wrongdoers, saying only that "investigations related to the financial crisis are a priority."
The commission did repeal the preposterous "market maker" loophole on September 18th, 2008, forbidding market makers from selling phantom shares. But that same day, the SEC also introduced a comical agreement called "Rule 10b-21," which makes it illegal for an Evil Hedge Fund to lie to a Prime Broker about where he borrowed his stock. Basically, this new rule formally exempted Wall Street's biggest players from any blame for naked short-selling, putting it all on the backs of their short-seller clients. Which was good news for firms like Goldman Sachs, which only a year earlier had been fined $2 million for repeatedly turning a blind eye to clients engaged in illegal short-selling. Instead of tracking down the murderers of Bear and Lehman, the SEC simply eliminated the law against aiding and abetting murder. "The new rule just exempted the Prime Brokers from legal responsibility," says a financial player who attended closed-door discussions about the regulation. "It's a joke."
But the SEC didn't stop there — it also went out of its way to protect the survivors from the normal functioning of the marketplace. On September 15th, the same day that Lehman declared bankruptcy, the share price of Goldman and Morgan Stanley began to plummet sharply. There was little evidence of phantom shares being sold — in Goldman's case, fewer than .02 percent of all trades failed. Whoever was attacking Goldman and Morgan Stanley — if anyone was — was for the most part doing it legally, through legitimate short-selling. As a result, when the SEC imposed yet another order on September 17th curbing naked short-selling, it did nothing to help either firm, whose share prices failed to recover.
Then something extraordinary happened. Morgan Stanley lobbied the SEC for a ban on legitimate short-selling of financial stocks — a thing not even the most ardent crusaders against naked short- selling, not even tinfoil-hat-wearing Patrick Byrne, had ever favored. "I spent years just trying to get the SEC to listen to a request that they stop people from rampant illegal counterfeiting of my company's stock," says Byrne. "But when Morgan Stanley asks for a ban on legal short-selling, they get it literally overnight."
Indeed, on September 19th, Cox imposed a temporary ban on legitimate short- selling of all financial stocks. The stock price of both Goldman and Morgan Stanley quickly rebounded. The companies were also bailed out by an instant designation as bank holding companies, which made them eligible for a boatload of emergency federal aid. The law required a five-day wait for such a conversion, but Geithner and the Fed granted Goldman and Morgan Stanley their new status overnight.
So who killed Bear Stearns and Lehman Brothers? Without a bust by the SEC, all that's left is means and motive. Everyone in Washington and on Wall Street understood what it meant when Lehman, for years the hated rival of Goldman Sachs, was chosen by Treasury Secretary Hank Paulson — the former Goldman CEO — to be the one firm that didn't get a federal bailout. "When Paulson, a former Goldman guy, chose to sacrifice Lehman, that's when you knew the whole fucking thing was dirty," says one Democratic Party operative. "That's like the Yankees not bailing out the Mets. It was just obvious."
The day of Lehman's collapse, Paulson also bullied Bank of America into buying Merrill Lynch — which left Goldman Sachs and Morgan Stanley as the only broker-teens left unaxed in the Camp Crystal Lake known as the American economy. Before they were hacked to bits, Merrill, Bear and Lehman all nurtured booming businesses as Prime Brokers. All that lucrative work had to go somewhere. So guess which firms made the most money in Prime Brokerage this year? According to a leading industry source, the top three were Goldman, JPMorgan and Morgan Stanley.
We may never know who killed Bear and Lehman. But it sure isn't hard to figure out who's left.
While naked short-selling was the weapon used to bring down both Bear and Lehman, it would be preposterous to argue that the practice caused the financial crisis. The most serious problems in this economy were the result of other, broader classes of financial misdeed: corruption of the ratings agencies, the use of smoke-and-mirrors like derivatives, an epidemic tulipomania called the housing boom and the overall decline of American industry, which pushed Wall Street to synthesize growth where none existed.
But the "phantom" shares produced by naked short-sellers are symptomatic of a problem that goes far beyond the stock market. "The only reason people talk about naked shorting so much is that stock is sexy and so much attention is paid to the stock market," says a former investment executive. "This goes on in all the markets."
Take the commodities markets, where most of those betting on the prices of things like oil, wheat and soybeans have no product to actually deliver. "All speculative selling of commodity futures is 'naked' short selling," says Adam White, director of research at White Knight Research and Trading. While buying things that don't actually exist isn't always harmful, it can help fuel speculative manias, like the oil bubble of last summer. "The world consumes 85 million barrels of oil per day, but it's not uncommon to trade 1 billion barrels per day on the various commodities exchanges," says White. "So you've got 12 paper barrels trading for every physical barrel."
The same is true for mortgages. When lenders couldn't find enough dope addicts to lend mansions to, some simply went ahead and started selling the same mortgages over and over to different investors. There are now a growing number of cases of such double-selling of mortgages: "It makes Bernie Madoff seem like chump change," says April Charney, a legal-aid attorney based in Florida. Just like in the stock market, where short-sellers delivered IOUs instead of real shares, traders of mortgage-backed securities sometimes conclude deals by transferring "lost-note affidavits" — basically a "my dog ate the mortgage" note — instead of the actual mortgage. A paper presented at the American Bankruptcy Institute earlier this year reports that up to a third of all notes for mortgage-backed securities may have been "misplaced or lost" — meaning they're backed by IOUs instead of actual mortgages.
How about bonds? "Naked short-selling of stocks is nothing compared to what goes on in the bond market," says Trimbath, the former DTC staffer. Indeed, the practice of selling bonds without delivering them is so rampant it has even infected the market for U.S. Treasury notes. That's right — Wall Street has actually been brazen enough to counterfeit the debt of the United States government right under the eyes of regulators, in the middle of a historic series of government bailouts! In fact, the amount of failed trades in Treasury bonds — the equivalent of "phantom" stocks — has doubled since 2007. In a single week last July, some $250 billion worth of U.S. Treasury bonds were sold and not delivered.
The counterfeit nature of our economy is troubling enough, given that financial power is concentrated in the hands of a few key players — "300 white guys in Manhattan," as a former high-placed executive puts it. But over the course of the past year, that group of insiders has also proved itself brilliantly capable of enlisting the power of the state to help along the process of concentrating economic might — making it less and less likely that the financial markets will ever be policed, since the state is increasingly the captive of these interests.
The new president for whom we all had such high hopes went and hired Michael Froman, a Citigroup executive who accepted a $2.2 million bonus after he joined the White House, to serve on his economic transition team — at the same time the government was giving Citigroup a massive bailout. Then, after promising to curb the influence of lobbyists, Obama hired a former Goldman Sachs lobbyist, Mark Patterson, as chief of staff at the Treasury. He hired another Goldmanite, Gary Gensler, to police the commodities markets. He handed control of the Treasury and Federal Reserve over to Geithner and Bernanke, a pair of stooges who spent their whole careers being bellhops for New York bankers. And on the first anniversary of the collapse of Lehman Brothers, when he finally came to Wall Street to promote "serious financial reform," his plan proved to be so completely absent of balls that the share prices of the major banks soared at the news.
The nation's largest financial players are able to write the rules for own their businesses and brazenly steal billions under the noses of regulators, and nothing is done about it. A thing so fundamental to civilized society as the integrity of a stock, or a mortgage note, or even a U.S. Treasury bond, can no longer be protected, not even in a crisis, and a crime as vulgar and conspicuous as counterfeiting can take place on a systematic level for years without being stopped, even after it begins to affect the modern-day equivalents of the Rockefellers and the Carnegies. What 10 years ago was a cheap stock-fraud scheme for second-rate grifters in Brooklyn has become a major profit center for Wall Street. Our burglar class now rules the national economy. And no one is trying to stop them.
[From Issue 1089 — October 15, 2009]