Wall Street's Naked Swindle

[Edi]

This is a couple of weeks old, but I have yet to see all of the rotten core of the US financial markets laid out in such clear detail.

It's simply fucking amazing. The article is 8 pages long, definitely worth reading. The quote is an excerpt of the first page.

Rolling Stone

Wall Street's Naked Swindle
A scheme to flood the market with counterfeit stocks helped kill Bear Stearns and Lehman Brothers — and the feds have yet to bust the culprits

MATT TAIBBIPosted Oct 14, 2009 9:30 AM

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."

[Solauren]

(slaps Pelranius with a cheese gratter).
If the CIA needs money, they just take it from the treasury, dumb ass. Did you even ready the article?

Quite frankly, I'm not surprised by this. Odds are, however, that whomever caused the problems (as discussed in the article), not only knew how to pull this off, but also knew how to conceal themselves. This would give them time to 'slip off the radar' before they were discovered, letting them go into hiding with millions of dollars.

[Edi]

It's not just that. It's that the ridiculously lax "regulations" they have in place would have any effect, but that when there is blatant violation by someone influential, there is not even an attempt at investigation let alone enforcement. Not the tiniest sliver.

The first page is telling: It's worth sending a SEC agent abroad after a $2000 securities fraud infraction or insider trading job, but oh no, can't even consider investigating the Bear Sterns or Lehman improprieties or the other shit that went down and continues to go down.

To be facetious for a moment, when the revolution comes, it's not the lawyers that will get lined up against the wall and shot first, it's the investment bankers. And to be serious, the Wall Street ones actually deserve it.

[Chris OFarrell]

The SEC used to be feared. And rightly so.

When SEC agents stormed in the front door of major firms, there would be lots of panic and running around with the executives screaming 'WE'RE ALL GOING TO DIE!'

They have however been made so toothless over the last couple of decades that everyone on the Street just laughs at them...