The Naked Short Selling That Toppled Wall Street

[kjack]

http://www.deepcapture.com/the-naked...d-wall-street/


...If a company has weaknesses that can be blown out of proportion with help from the media, and if hedge funds blast the company with phantom stock, then pause, then blast again, then pause, then blast again — over and over — for a couple of months, then the company’s share price can soon be in the single digits. – without ever having appeared on the SEC’s threshold list.

Unsurprisingly, the data through June shows this blast-pause-blast pattern in the stocks of nearly ever major financial institution that has been wiped off the map, and quite a few that were in death spirals before the SEC temporarily banned short-selling. Very often, huge failures to deliver have occurred in stretches of precisely five days – just long enough to keep a stock off the threshold list.

The attack on Bear Stearns, for example, began on January 9, when hedge funds naked shorted more than 1.1 million shares. The shares “failed to deliver” at the end of Friday, January 11 (the three-day deadline). For the next four days, beginning Monday, January 14, there were massive failures to deliver, peaking at 1 million shares on January 17. That is, the attack lasted a total of eight days, with failures to deliver lasting precisely five days. On day six, there were few failures to deliver, so Bear did not appear on the threshold list.

Over the next few weeks, there were several more blasts – with failures to deliver ranging from 200,000 to 500,000 shares. Those were threshold levels, but the failures lasted less than five consecutive days, so no flashing red light at the SEC.

On February 28, 800,000 shares of Bear Stearns failed to deliver. For the next five business days, anywhere from 100,000 to 350,000 shares failed to deliver. On day six, there was a pause — few failures to deliver. So no threshold list – no flashing red light at the SEC.

A week later, just before CNBC’s David Faber reported the false information (given to him by a hedge fund “friend” whom he had “known for twenty years”) that Goldman Sachs had cut off Bear’s credit, somebody naked shorted more than a million shares of Bear’s stock.. Over the course of the next couple of weeks, there was a sustained effort to drive the stock to zero, with massive failures to deliver every day — peaking at 13 million shares.

This attack lasted long enough to put Bear Stearns on the threshold list, but by then, it was too late. The bank’s mangled remains had been swallowed by JP Morgan. Ultimately, at least 11 million shares of Bear Stearns were sold and never delivered....