PREPARE THE GALLOWS!
The evidence is in and it is persuasive. The Securities & Exchange Commission is captured completely by the financial forces of Wall Street the agency is supposed to regulate and police.
But First, Please, Begin an Investigation!!
By Wayne Jett © October 26, 2009
Dormant SEC Barely Breathes
The SEC is conducting no investigation of financial crimes committed in the destruction of investment bank Bear Stearns during March, 2008, despite (1) mountains of evidence of fraudulent trading practices, (2) a mysterious meeting of other Wall Street players convened by the Federal Reserve one day before the share manipulation began, and (3) SEC chairman Christopher Cox’s promise to Congress that such an investigation would be completed promptly.
The SEC is conducting no investigation of massive naked short selling of shares of IndyMac, the large mortgage bank, by hedge funds with close ties to Senator Charles Schumer (D-NY), who precipitated a “run on the bank” and FDIC’s seizure of its assets by publicizing his letter to bank regulators expressing concern about IndyMac.
The SEC is conducting no investigation of the destruction of Fannie Mae and Freddie Mac, the two trillion-dollar mortgage buyers backed by federal sponsorship. Naked short sellers did the deeds last Summer after the SEC allowed its emergency order to expire, which had protected Fannie and Freddie temporarily from naked short selling. Within a week before Treasury’s Paulson grabbed the two GSOs on a Sunday, a Lehman Bros. analyst opined both were financially sound. But Paulson would not be denied and, thanks to his efforts, naked short sellers were able to take their profits on a Monday morning as they did with Bear Stearns.
No SEC investigation of the destruction of Lehman Bros. by naked short selling either. Lehman was chosen to walk the plank into bankruptcy oblivion as soon as Paulson finished with Fannie and Freddie. Paulson surely was not amused by Lehman’s analyst getting in his way as he was making his move on Fannie and Freddie. But the SEC sees nothing, hears nothing, understands nothing. Its chairman Cox was smart enough, though, to stop attending tactical planning meetings with Paulson and the Fed’s Bernanke after his first such meeting on the Bear Stearns take-down. Being present when unlawful activities are proposed makes some law enforcement people uncomfortable – conflicts of interest, personal liability and all that, you know.
No SEC investigations of fraudulent trading practices in the destruction of AIG, Lehman Bros., Washington Mutual, Wachovia Bank, National City Corp., General Motors, Ford or Chrysler either. This list could be much longer. Neither has the SEC done anything to require billions of counterfeit shares sold into the markets to unsuspecting investors to be repurchased by the wrongdoers.
No Hope, No Change
The SEC, under President Obama’s “hope and change” administration, is doing nothing to reinstate the uptick rule or to stop so-called “high frequency trading,” which presently front-runs every trade in U. S. financial markets. SEC’s new chairman Mary Schapiro came straight from FINRA, the so-called “self-regulatory organization” which assists Wall Street’s big players in having their way with other investors. No one, Obama included, should be surprised that Schapiro is doing the same at the SEC.
Yes, the evidence is in. The SEC is operated sadistically to shield major financial criminals from investigation, much less prosecution. Congress gave the SEC discretionary power to ignore fraud in 1935 and still does nothing to change this malicious intent, despite mountains of evidence Wall Street is robbing middle class investors blind.
Hope? ... Change? ...
But here’s a NEWS FLASH! On October 16, SEC’s director of enforcement trumpeted "the biggest hedge fund insider trading case ever brought." A billionaire hedge fund manager of Galleon Group, Raj Rajaratnam, was indicted for insider trading producing illicit gains of $20 million, sending chills through Wall Street traders worried about who would be next! Most chilling of all was information that federal prosecutors made use of telephone wiretaps to gather proof of the insider trading. Transcripts of recorded telephone statements tell of a female tipper quavering in fear of the certainty of becoming another “Martha F---ing Stewart” if anyone leaked the information she provided Galleon.
Contrast this with the deferential treatment accorded Pequot Capital and big player John Mack by the SEC back in 2005 and a naïve observer might conclude the SEC has turned a new leaf – that it has become a law enforcement tiger instead of a pussy cat. But readers of this site know better. In the Pequot case, the agency fired its lead investigator Gary Aguirre and closed its investigation as soon as Aguirre disclosed to superiors the suspected tipper for Pequot’s insider trading was Mack.
Since then, the SEC has taken a lot of flack for inaction/ineptness because the dominant elite who control the agency have engaged in a carefully planned assault against middle class investors. So the agency needs “another Martha Stewart” to throw under the bus as a public demonstration of its vigilant enforcement of securities laws. But this sacrificial lamb needs to look more like an actual evil financial wrong-doer than a nice home-maker; the SEC learned its lesson with Martha in that regard.
Raj appears to be the perfect fit for SEC’s needs. He’s a billionaire, a hedge fund manager, a foreigner who plays in New York circles and spends lavishly. But would anyone mistake him for a true insider of Wall Street’s elite? Not likely. The proof is Raj’s presence under the bus.
A Broader Probe
Early reports indicate possible broadening of the Galleon probe to reach towards Stephen A. Cohen and SAC Capital. This may be rank-and-file staff proceeding without asking their superiors at SEC for permission, as occurred in 2005, when CNBC “star” James Cramer wrote “BULL” on his subpoena and threw it to the floor for his TV audience’s entertainment. Cox's SEC revoked those subpoenas and rebuked its staff. If SEC actually proceeds against SAC or a comparable firm, and looks for something more than relatively innocuous “insider trading,” say naked short selling, the agency might be taken semi-seriously by the Street. But this is unlikely.
More typical of the SEC is the second shoe that dropped this past week. As SEC splashed news headlines with the Galleon indictments, its enforcement division quietly announced hiring a new chief operating officer straight from – guess who – Goldman Sachs.
Who better than a 29-year-old from the Street’s biggest, baddest “player” to keep the agency’s investigators “looking for fraud (wink, wink) in all the wrong places?” Adam Storch’s specialty is business intelligence, presumably meaning technological means of gathering and assessing data. If he is an honest man, he can make a real difference for the better at the SEC, in the financial sector and in the world. Time will tell.
By the agency’s past and current conduct, however, almost surely Storch would not have been selected for the SEC position if he has any notion of bringing justice to Wall Street’s biggest players. The evidence is piled high of financial crimes of monstrous proportions, yet no law enforcement agency will investigate or prosecute them.
Congress must break its Wall Street bonds, repeal the SEC’s discretionary power to ignore fraudulent violations of securities laws, and mandate enforcement of the securities laws by the Justice Department. Most certainly, the entire financial sector should be made expressly subject to federal anti-trust laws. ~