UPDATE: This is pretty important. Think it through. How bad does it have to be for the Fed to remove the thin facade of being a quasi banking regulatory mechanism, and instead be unveiled as a facilitating mechanism for its big bank owners? "Bend"? How about violate? That is the word the reporter was looking for. Violate, trash, ignore. This basically says that the American taxpayer/US government is going to underwrite the lending these banks do to their brokerage underlings, effectively making the taxpayer an insurer of the brokers - that worked really well for the S&Ls, now didn't it?
This is bad, folks. Any time you see these types of "exceptions" it has to be very, very bad indeed: They are violating the safeguards that keep banks from acting as partners for brokers. They didn't decide to do that just for fun.
You were warned. This says that most of the safeguards that were put in place to prevent an economic catastrophe are now being removed - the uptick rule, key banking regs....gee, how much more like 1929 does it have to be?
"NEW YORK (Fortune) -- In the clear sign that the credit crunch is still affecting the nation's largest financial institutions, the Federal Reserve agreed this week to bend key banking regulations to help out Citigroup (Charts, Fortune 500) and Bank of America (Charts, Fortune 500), according to documents posted Friday on the Fed's web site.
The Aug. 20 letters from the Fed to Citigroup and Bank of America state that the Fed, which regulates large parts of the U.S. financial system, has agreed to exempt both banks from rules that effectively limit the amount of lending that their federally-insured banks can do with their brokerage affiliates. The exemption, which is temporary, means, for example, that Citigroup's Citibank entity can substantially increase funding to Citigroup Global Markets, its brokerage subsidiary. Citigroup and Bank of America requested the exemptions, according to the letter. "
Wonder why these brokerages NEED MORE FUNDING? Could it be to prop up their ailing hedge fund buddies, or their own hedge funds, or runs on the brokerage bank? Or simply to pass the buck to the taxpayer?
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A lot of stuff happened this last week.
A study came out that showed that the majority of Wall Street would commit a felony if they thought they could get away with it. Wow. What a newsflash. Next thing they will say is that the majority of hookers will steal your wallet if they thought they could get away with it.
Huh.
And this is the succinct reason that self-regulation is a farce. The MAJORITY of those expected to police themselves are crooks. Seems pretty straightforward to me. Crooks who would break the law, gladly, if they thought they could get away with it are not capable of the honesty required to self-police.
On that topic, I note that the professional association of the crooks (SIFMA) is now advocating eliminating paper certificates, which are the only proof the individual shareholder can get that he actually wasn't screwed by the crooks. That also isn't too hard to figure out - they want to do away with any mechanism that would show them counterfeiting shares. Simple. Question is, is there anything we can do about it, other than pulling every last dime out of the market, never to return?
The credit situation continues to deteriorate. As predicted, we are just now understanding the level of damage that unregulated hedge funds, holding questionable assets they then leverage by 10 or 20 or higher, can cause when the assets fall out of bed and lose value. Synopsis: It ain't pretty, and it is going to get much worse before it gets better. Call it a hunch.
The SEC's decision to damage the investor so Wall Street privateers can run roughshod over the equities market (by eliminating the uptick rule) has resulted in daily bear raids on the markets, which seemingly everyone on the planet except for the experts that weighed in for eliminating it figured out. So we now have a virtually completely unregulated market, in the sense that few regulations that would stop massive market manipulation exist, and those that do, are routinely ignored.
Some, like the market maker exemption, which allows options market makers to naked short limitless numbers of shares, directly damaging equity investors, are being examined by the SEC, with a sort of credulous, "Is that bad, to allow options speculators to destroy the equity investors' market, thereby directly harming investors, in direct contradiction to the SEC's mandate?"
The following is a letter I suggest everyone send to the SEC, via their website request for comment, on that exemption. It has my complete and total endorsement, so feel free to copy it verbatim, or to modify it as necessary.
You can submit it painlessly and electronically here:
http://www.sec.gov/cgi-bin/ruling-comments?ruling=s71907&rule_path=/comments/s7-19-07&file_num=S7-19-07&action=Show_Form&title=Amendments%20to%20Regulation%20SHO
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August ___, 2007
Ms. Nancy M. Morris, Secretary
Securities and Exchange Commission
100 F. Street, NE
Washington, DC 20549-1090
Re: Comments on Proposed Amendments to Regulation SHO
File No S7-19-07
Dear Secretary Morris:
I appreciate the opportunity to provide comments on the Commission’s proposed amendments to Regulation SHO. I am a shareholder of a company that has appeared on the Regulation SHO threshold list day after day after week and month after year.
I support the Commission’s proposed elimination of Regulation SHO’s options market maker exception and encourage the Commission to complete the administrative steps to accomplish this change as quickly as possible (e.g., by year’s end). The options market maker exception has been a well known tool of manipulation and must be eliminated promptly to ensure a level playing field for public companies and shareholders.
I commend the Commission’s recent action to strengthen Regulation SHO through the elimination of Regulation SHO’s grandfather provision. I am also pleased that over the past several months that Chairman Cox has personally spoken about the abuses of naked short selling and the need to end this manipulative practice. However, I remain concerned that, despite the Commission’s recent efforts and Chairman Cox’s public comments, these abuses continue.
While the elimination of the options market maker exception and the grandfather provision will significantly strengthen Regulation SHO, these changes alone will not adequately solve the problem that results in continued naked short selling and failures-to-deliver. I request that the Commission (1) impose in Regulation SHO a requirement of a firm location of shares to be borrowed before a short sale can be executed, and (2) enable transparency by requiring timely disclosure of the volume of failures-to-deliver shares of companies on the Regulation SHO threshold list. The Commission should issue and complete promptly a notice of proposed rulemaking to implement these two critical components of effective Regulation SHO reform.
Sincerely,
[Name]
[Address]
cc: Christopher Cox, Chairman, U.S. Securities and Exchange Commission
Paul S. Atkins, Commissioner, U.S. Securities and Exchange Commission
Roel C. Campos, Commissioner, U.S. Securities and Exchange Commission
Kathleen L. Casey, Commissioner, U.S. Securities and Exchange Commission
Annette L. Nazareth, Commissioner, U.S. Securities and Exchange Commission