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dexion10 (27.93)

Corrupt SEC - How Embarassing is this?

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September 20, 2008 – Comments (6) | RELATED TICKERS: XLF , AIG , GS

READ ALL ABOUT IT HERE.  Try not to laugh or puke... I couldn't stop from doing either.

The SEC is going to go witch hunting to find out which shorts are responsible the poor performance of Lehman Brothers (financial stocks).
 
They are going to make people take an oath and discuss their shorts... Come on REALLY... we're going to go on a witch hunt and ask shorts why they were shorting insolvent banks with huge off balance sheet
 
The search for corruption should begin at the SEC in my opinion. I'm embarrassed.
 
How 'bout getting Fuld or Thain to take an oath instead... tell us when they realized their companies were rotten to core and toxic to the system?

IT'S TIME TO TAKE A STAND PEOPLE... WHO AMONG US IN CAPS IS CONNECTED TO THE POLITICAL POWERS THAT BE ?

 We need a grass roots effort to expose this corrupt banking system and we need to seize this opportunity to hit the reset button. Things are WAY off base now. 

No one is looking to assign accountability for the major failures here... instead the politicians -are trying to say it's nobodies fault or maybe just the "shorts" fault. But CAPS players know the truth - Lehman, Merrill Lynch, Morgan Stanley, Pacific West, Ryland Homes, have been taking advantage of aggressive accounting and mis-leading investors. 

These banks should not be allowed to walk away from this mess by handing their mistakes over to the U.S. government and retaining 100% of their equity.  No no no!   

WE SHOULD MAKE SURE THE WORST OFFENDERS LOSE ALL OF THEIR EQUITY... we don't need the old banks - we just need the system to stay intact... we can always launch new banks and create the money to go into their reserves.

MY PLAN:

Only make capital available to those banks who are willing to write down their books - if they are insolvent they need to give the U.S. a large or total equity interest. 

The government can repair any institution and then spin it off to the public at a substantial gain.

CAN WE MAKE THIS HAPPEN?

IS THERE AN ORGANIZATION MAKING A MOVE IN THIS DIRECTION ?

6 Comments – Post Your Own

#1) On September 20, 2008 at 6:42 PM, DemonDoug (98.89) wrote:

Mish said on his blog that his contacts noted that when bear stearns was headed to zero, it was goldman sachs and morgan stanley that were the two biggest shorting institutions.

what's that old addage about a capitalist selling you the rope with which you are to hang him?

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#2) On September 20, 2008 at 6:57 PM, rd80 (99.10) wrote:

This is about a lot more than just short selling.  The WSJ has a similar article out. 

The focus includes investigating rumors that some hedge funds were bidding up credit default swaps in conjunciton with shorting stocks in order to manipulate prices.

The issue isn't blaming short sellers for Lehman's demise.  It's investigating how CDS and other derivatives might have been used to manipulate prices.

The real embarassment is that the SEC hasn't investigated this yet.

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#3) On September 20, 2008 at 11:06 PM, dexion10 (27.93) wrote:

CDS wouldn't have been used if these banks didn't have excessive leverage and unknowable liabilities.

Bear Stearns isn't bankrupt because of CDS, nor is Lehman. They are bankrupt because they made extremely bad bets... especially in the case of Lehman...

Think about what happened at Lehman Brothers for a second - if you can't find a buyer after a year of searching - I think that's a pretty good sign that the issues go way beyond CDS trades.

The fact that when the chips are down no buyers step up to put a bid under investment banks and the fact the two investment banks have been purchased for 2-4x the value of their real estate is a pretty good sign that the fundamentals of investment banks stink when any real rigor is applied to investigating the business models and their balance sheets.

Don't let Morgan Stanley's smooth taste fool you  -they have tremendous OFF BALANCE SHEET liabilities just like the rest of the usual suspects.

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#4) On September 20, 2008 at 11:06 PM, dexion10 (27.93) wrote:

CDS wouldn't have been used if these banks didn't have excessive leverage and unknowable liabilities.

Bear Stearns isn't bankrupt because of CDS, nor is Lehman. They are bankrupt because they made extremely bad bets... especially in the case of Lehman...

Think about what happened at Lehman Brothers for a second - if you can't find a buyer after a year of searching - I think that's a pretty good sign that the issues go way beyond CDS trades.

The fact that when the chips are down no buyers step up to put a bid under investment banks and the fact the two investment banks have been purchased for 2-4x the value of their real estate is a pretty good sign that the fundamentals of investment banks stink when any real rigor is applied to investigating the business models and their balance sheets.

Don't let Morgan Stanley's smooth taste fool you  -they have tremendous OFF BALANCE SHEET liabilities just like the rest of the usual suspects.

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#5) On September 21, 2008 at 12:38 AM, Tastylunch (29.93) wrote:

No argument that the SEC is a joke however

The CDS needs to be regulated, unregulated markets lead to disaster everytime.

The leverage and horrific balance sheets may be what and should have killed the banks, but hedgies abusing the wild wild west CDS market likely exacerbated and sped up the process imo. That needs to be stopped. It's not fair to the rest of us if these hedge funds can actually influence/control when a company that will go bk actually goes bk.

I'm ok with this investigation. My guess is they won't find much anyway, this is the SEC we are talking about here.

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#6) On September 21, 2008 at 2:48 PM, rd80 (99.10) wrote:

I agree that LEH and BSC were toast regardless of CDS trading.  I'm not so sure about AIG.  The increasing CDS premiums were a contributing factor to their debt downgrades.  Without those debt downgrades, they may have been able to raise the capital to survive.  I don't know and I don't think the SEC knows - that's why they need to investigate.

Look at the SEC website.  The news releases on the short ban and investigation are right next to each other.  I don't think that's a coincidence.  My guess is they found enough evidence to suspect CDS trading and short selling were being used together to manipulate markets.  Since they don't have any authority over CDS trading, they tripped the only circuit breaker they had.

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