From “The Faulking Truth Blog“, by Mark Faulk
After years of spreading the word on The Faulking Truth (http://www.thefaulkingtruth.com) for the last five and half years, this is my introductory post for Investrend Weblogs for FinancialWire(tm). Thanks to Todd Essary, Investrend’s CEO, for the opportunity, and for taking up the cause of stock market reform that his father Gayle Essary championed so courageously for so many years.
“A small group of thoughtful people could change the world. Indeed, it’s the only thing that ever has.” ~Margaret Mead
It began when Bear Stearns began to fall apart at the seams in March of 2008, triggering the SEC’s first emergency weekend meeting in over 30 years. Over the next few months, all of America, in fact, the entire world, watched in trepidation as our financial markets unraveled like a slow motion train wreck, one that the vast majority of Americans had been oblivious to until it was too late. Over the next few months, the train wreck began to pick up speed, prompting SEC chairman Christopher Cox to invoke a one-month ban on July 15, 2008 against naked short selling in 19 battered financial stocks, including Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), Citigroup (NYSE: C), Lehman Brothers (OTC: LEHMQ.PK), Credit Suisse (NYSE: CS), Merrill Lynch (DOA, as in dead on arrival), Bank of America (NYSE: BAC), J.P. Morgan Chase (NYSE: JPM), Fannie Mae (NYSE: FNM), and Freddie Mac (NYSE: FRE). The emergency rule, designed to eliminate the illegal downward manipulation of those companies’ stock prices, stated that no one could short sell stock in those companies unless they had “borrowed or arranged to borrow the security” and that they settle the trade on the required settlement date. Of course, as usual, even that rule imposed absolutely no penalties for anyone who violated the rule.
It proved to be too little, and decidedly too late. On September 15, 2008, our economy officially imploded: Lehman Brothers filed for Chapter 11 bankruptcy (its stock now trades for less than a nickel a share), Bank of America took over troubled Merrill Lynch, and AIG (NYSE: AIG) sought $40 million from the federal government under the guise of being “too big to fail” (the following day they received $85 billion from the fed, setting off what would become the largest government bailout of private sector businesses in history). And Washington Mutual was teetering on the brink of collapse.
What a difference a day makes. On September 19, the SEC enacted another temporary ban, this one prohibiting short selling of 799 financial firms. Why short selling was considered a crisis in those particular firms but was deemed okay in other publicly-traded companies remains a mystery, but it didn’t matter. The markets continued to tank, with the Dow eventually losing over 60% of its value by March of this year. [entire post]