The Payoff
by Jeff Connaughton · 202pp · 66,742 words
(R-GA) was one of them. Isakson and Ted shared an interest in financial issues, and both had recently received complaints from constituents about the naked short selling of stocks by hedge funds and about the SEC’s rescission of the uptick rule. If you think a stock is undervalued, you can buy
…
in time to deliver it at settlement, which happens three days later. Selling a stock without intending to locate it in time for settlement is naked short selling. It amounts to selling shares that don’t exist, which increases the supply of a stock in a way that can push its price down
…
their way. Next, we asked for a briefing by the SEC’s Enforcement Division. We wanted to learn about the status of its investigation into naked short selling of the stock of Bear Stearns and Lehman. At the briefing, SEC lawyers told us we’d have to be patient and that the investigation
…
us that it’s almost impossible to prove intent under the current rule (that is, the reasonable-belief standard). Under this rule, anyone accused of naked short selling can simply say: “I reasonably believed I could find the stock in time.” In essence, the SEC lawyers confirmed our view that the rule against
…
naked short selling was unenforceable and that they knew it. Most stock trades in the United States are cleared by a Wall Street backroom firm called the Depository
…
we have a proposal that will work.” It turns out that months previously the DTCC had gone to the SEC with a proposed solution to naked short selling: The DTCC would create a computer system in which the actual shares of a stock must first be declimated (more simply: flagged or identified) before
…
. A centralized database would prevent the same shares from being used for multiple short sales. The DTCC believed that such a system would effectively stop naked short selling for the shares it cleared, which represented a vast majority of all shares traded in the United States. Larry told us that the SEC had
…
the way stocks are traded in this country.” Not long after receiving the letter, the SEC announced it would hold a public roundtable to discuss naked short selling and possible solutions on September 24, 2009. I was convinced we were making progress. We must have been. Because major banks like Goldman Sachs started
…
favor of maintaining the status quo. During the meeting, the DTCC representative sat mute and didn’t even mention the DTCC’s proposed solution for naked short selling. Afterwards, I went over to Larry and Bill and asked “What happened?” Sheepishly, and to their credit, they admitted, “We got pulled back.” They meant
…
interesting to me that an industry that is so technically adept at finding ways to make money cannot come up with a technical solution to naked short selling.” I was the only Senate person in the audience who knew the DTCC had come up with a technical solution. There were two reasons why
…
first punch in the fight to protect average investors. Undeterred by our setbacks in seeking the return of the uptick rule and tighter restrictions on naked short selling, Ted and I had delved deeper into an even more arcane, complex, and problematic realm: the overall functioning of the U.S. stock market. As
…
industry come from the industry itself, creating a temptation for the industry to spin the data in its favor (as we’d seen with the naked-short-selling data provided by Goldman Sachs). Second, The Blob oozes endlessly in and out of the revolving door of public service. According to the Project on
Crapshoot Investing: How Tech-Savvy Traders and Clueless Regulators Turned the Stock Market Into a Casino
by Jim McTague · 1 Mar 2011 · 280pp · 73,420 words
rule had interfered with the returns on their new, popular products. As soon as the rule disappeared, traders began engaging in a practice known as “naked” short selling, where speculators sold short stocks they didn’t physically possess. Actual shares are supposed to be borrowed from other investors in a short-selling transaction
…
and returned when the short seller closes out his position with a purchase, but some investors were bending the rules. With naked short selling, it was theoretically possible to short more shares than a particular company actually had outstanding. In effect, it was a license to print stock certificates
…
the stock prices of weak banks that were beneficiaries of federal bailout dollars. In October 2009, when the ban expired, program traders again engaged in naked short selling. In fact, the market plunged the day after the temporary ban was lifted. Connaughton came up with an idea for Kaufman to have a voice
…
had a strong voice and the populist’s gift for projecting outrage. He urged the SEC to reinstate the Uptick Rule. Critics like Kaufman blamed naked short selling for the precipitous drop in the share prices of major financial firms like Bear Stearns and Lehman Brothers in 2007 and 2008, claiming the bearish
…
said the Commission will soon move to ban flash orders. But that is not the end of the story. It is becoming increasingly clear that naked short selling was just the first of a series of issues surrounding the way stock trades are executed that create unfair advantages for powerful insiders,” he said
…
most frustrating experience as a senator, Kaufman failed to get Banking Committee Chairman Senator Chris Dodd, a fellow Democrat, to add language about HFT and naked short-selling to the financial reform legislation he was crafting with Representative Barney Frank of Massachusetts, chairman of the House Financial Services Committee. The bill would be
…
, number one, it has got to be something that demonstrably was part of the problem that brought the market down, and high-frequency trading and naked short selling were not part of that problem.” After the Flash Crash, Senator Kaufman convinced Senator Mark Warner of Virginia to coauthor a letter to Dodd asking
…
Moss, John E., 113-122 Murphy, Eddie, 29 mutual funds, ETFs (exchange-traded funds) versus, 232 N Nagy, Chris, 8, 225 naked puts, 127-128 naked short selling, banning, 47-59 naked sponsored access, 226 Nanex, 200 Narang, Manoj, 152-156 NASD (National Assocation of Securities Dealers), 102 regulation after Black Monday (October
…
Securities Investor Protection Corporation (SIPC), 62, 109, 115 self-regulation, 120 Senate. See Congress servers, collocating, 17, 22, 34 Shell, Adam, 214 short selling, banning naked short selling, 47-59 Silver, Jeff, 163 SIPC (Securities Investor Protection Corporation), 62, 109, 115 Sloan, Alfred P., 14 small investors in capital crisis of 1969-70
After the Music Stopped: The Financial Crisis, the Response, and the Work Ahead
by Alan S. Blinder · 24 Jan 2013 · 566pp · 155,428 words
, pummeled. As he later lamented to the FCIC, “Bear went down on rumors and a liquidity crisis of confidence. Immediately thereafter, the rumors and the naked short-selling came after us.” It certainly did. But Lehman managed to hold things together for another six months. Lehman’s primary regulator was the same as
…
done”: Paulson, On the Brink, 170. $200 billion worth of repos outstanding: FCIC Report, 326. “what we learned scared us”: Paulson, On the Brink, 121. “naked short-selling came after us”: FCIC Report, 326–27. better than they actually were: See Latman, “New York Accuses Ernst & Young of Fraud in Lehman Collapse,” New
The Lost Bank: The Story of Washington Mutual-The Biggest Bank Failure in American History
by Kirsten Grind · 11 Jun 2012 · 549pp · 147,112 words
buy new shares to replace the old ones. If the new shares were bought for less than the original borrowed stock, the investor makes money. Naked short selling means that original shares aren’t borrowed. Either way, both forms of trading were driving down WaMu’s stock, which was now hovering around $3
…
could use his influence at the Securities and Exchange Commission (SEC) to help WaMu get on a list of 19 financial institutions temporarily protected from naked short selling. The SEC had given JPMorgan, Bank of America, and Citigroup this privilege. “What’s interesting about that list,” noted the Seattle Post-Intelligencer at the
…
to Killinger about, 103–4 Rotella hired as first, 104–5, 106 Chrysler Financial, 235 Citigroup Dimon at, 230 as largest U.S. bank, 104 naked short selling protection for, 247 near failure of, 314, 314n OTS defense of oversight and, 317, 318 as potential buyer of WaMu, 3, 271, 282, 283, 289
…
, 233–35, 283 philanthropy of, 326–28 political connections of, 231 regulators’ meetings with, 232–34 Rotella hiring of employees from, 107 SEC protection from naked short selling of, 247 shareholders at, 325 subprime mortgages and, 325 TARP and, 315, 328 See also JPMorgan Chase, WaMu and; specific person JPMorgan Chase, WaMu and
…
, 212–13, 263, 268–69, 276–77, 278, 292, 320, 323–24 Murphey Favre, 18–19, 29, 37, 38 Murray, Patty, 275 Mutual Travel, 27 naked short selling, 247–48, 330 Naroff Economic Advisors, 152 National Association of Realtors, 136, 151, 152, 152n National Australia Bank Limited, 97 negatively amortizing mortgage, 112, 113
The Divide: American Injustice in the Age of the Wealth Gap
by Matt Taibbi · 8 Apr 2014 · 455pp · 138,716 words
vast geography, and it’s hard to see. It’s because of this that lots of Wall Street people genuinely think of insider trading and naked short selling as victimless crimes. People get hurt, sure, but the victims are mostly sophisticated investors who should know better, and it’s not like you’re
…
business and/or mired in scandal. Many of those tales revolve around the issue of naked short selling, a type of financial counterfeiting that allows short investors to artificially depress the stock prices of target companies. Whether naked short selling is a serious social contagion or meaningless conspiracy theory is a passionately debated topic on Wall
…
. One of the reasons I originally shied away from the Fairfax story was that it has a naked short-selling angle that makes some serious observers dismiss it out of hand as nutty conspiracy. So even though naked short selling was actually a factor in the Fairfax case, I’ve left it out of this narrative
Too big to fail: the inside story of how Wall Street and Washington fought to save the financial system from crisis--and themselves
by Andrew Ross Sorkin · 15 Oct 2009 · 351pp · 102,379 words
News Service, July 15, 2008. SEC to begin cracking down on improper short selling: The SEC issued an emergency diktat to halt “unlawful manipulation through ‘naked’ short selling,” which was set to start that Monday, July 21, 2008, and expire after thirty days. Kara Scannell and Jenny Strasburg, “SEC Moves to Curb Short
Endless Money: The Moral Hazards of Socialism
by William Baker and Addison Wiggin · 2 Nov 2009 · 444pp · 151,136 words
of short selling was heavily directed against the financial sector itself, and by July 2008 Congress looked into the matter, triggering the SEC to ban “naked” short selling of the common stocks of 19 banks and brokers. By generating such a list, the government favored some companies over others, socialistically guiding where dollars
…
excessive, or for that matter, if they effectively serve the public good. But what is far more relevant is the SEC’s tacit allowance of naked short selling through what became known as the “Madoff Rule,” which exempted market makers from the same requirements to deliver stock after stock sales. This essentially provided
…
rent this resource out to hedge fund clients. Patrick Byrne, CEO of Overstock.com, a company victimized by relentless naked short selling, worked with reporter Mark Mitchell to reveal the extent of the naked short-selling problem through his web site www.deepcapture.com. Clearly this activity has been pernicious to the equity of some companies
…
about $1,000 per ounce. In response to this fear, many have begun to buy specie instead, which would reveal this subterfuge and also suspected naked short selling by bullion banks generally. An interesting alternative to specie is digital gold, essentially deposit accounts that enable electronic transactions for commerce that are 100 percent
The End of Growth: Adapting to Our New Economic Reality
by Richard Heinberg · 1 Jun 2011 · 372pp · 107,587 words
and pocketing the price difference. Of course, if the price of the assets rises, the short seller loses money. If this sounds dodgy, then consider naked short selling, in which the investor sells a financial instrument without bothering first to buy or borrow it, or even to ensure that it can be borrowed
…
. Naked short selling is illegal in the US, but many knowledgeable commentators assert that the practice is widespread nonetheless. In the boom years leading up to the 2007–
The Rise of the Quants: Marschak, Sharpe, Black, Scholes and Merton
by Colin Read · 16 Jul 2012 · 206pp · 70,924 words
derives its asset value on a collection of underlying mortgages; in other words, a financial security that is backed by a collection of financial securities. Naked short – selling of securities for which one does not own the title or a right to sell. Normal distribution of returns – a distribution that follows a prescribed
A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers
by Lawrence G. Mcdonald and Patrick Robinson · 21 Jul 2009 · 430pp · 140,405 words
even match to me. What Wall Street’s financial maestros came up with while the SEC guys were consumed with backdated options, insider trading, and naked short-selling was something brand-new—a fee-generating machine hereinafter referred to as the dreaded credit derivatives, also known as securitization. They invented a method of
Value Investing: From Graham to Buffett and Beyond
by Bruce C. N. Greenwald, Judd Kahn, Paul D. Sonkin and Michael van Biema · 26 Jan 2004 · 306pp · 97,211 words