Thursday, May 17, 2012

Inside Goldman et al's naked short selling

See Matt Taibbi's 5/15/12 blog post on this. One of Goldman's lawyers inadvertently released documents revealing what investigators have been requesting for some time, information Goldman heretofore refused to release. Therein some not so startling facts were revealed as to the nature of vulture (vampire) capitalism. In essence, naked short selling is used "to artificially depress the value of the stocks they’ve bet against." In typical short selling a broker must borrow the stock it bets against and then return it when the price lowers, making a profit on the difference. In naked short selling though a fraud it perpetrated because no stock is borrowed in the first place. The broker then sells stock it doesn't possess, creating an artificial supply which devalues the stock, thus artificially manipulating its decline and making a profit on the short sell.

Goldman knew this was going on. In fact "one of the companies Goldman used to facilitate these trades was called SBA Trading, whose chief, Scott Arenstein, was fined $3.6 million in 2007 by the former American Stock Exchange for naked short selling." And the attitude of those doing this, as revealed in emails, was "fuck the compliance area." And they manipulated rules to avoid reporting such activities. And this is the kind of business Romney supports? The only jobs created here are for the 1% ripping off the economy, which costs the loss of so many other jobs and reduces the standard of living for everyone but those who really don't give a fuck about anything but their own enrichment. No, this is not envy, this is criminal.

Also see this article. Excerpt:

"The problem, however, is that the act of borrowing shares provides a limitation factor. You can only borrow as many shares as there are available to lend. In the case of naked shorting, however, there is no such limit. The created IOUs essentially become the equivalent of counterfeit shares that flood the market. At the same time, the mass selling dampens demand because on Wall Street, mass selling suggests that something is wrong and new buyers are scared away. Thus, in large enough amounts, naked short selling simultaneously increases supply and dampens demand which results in falling prices according to the laws of supply and demand."

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