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Sep
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Written by:
bobo
9/19/2008 12:26 AM
But in the long term, destroyed that which they sought to save.
This morning, the SEC banned short selling, all short selling, for 799 financial firms, on a temporary basis, through early October.
The market went wild. Without shorts pounding these entities, their values increased in double digits in just the first hour.
That's actually good, as it gives them the opportunity to breathe, and to structure workouts.
But in a way, it is the worst thing that could happen. What do I mean? Well, unless the SEC plans to do away with short selling entirely, it is likely setting up the worst massacre in market history once short selling is allowed again. You see, the values of these issues is likely to swing far the other direction now, into wildly overvalued territory. And that will have the wolves on the sidelines drooling to crash the system the second they can.
One unintended effect is that a lot of hedge funds will be going BK over the next week, as their short positions go underwater 500% or more. That will cause a mad scramble to cover the short positions, which will result in a market-wide short squeeze.
So why is that so bad?
Because many of those who are about to get slaughtered aren't the bad guys. They are legitimate shorts who borrowed shares, and never engaged in naked short selling in their lives. And they will be destroyed, just as many of the very bad will be. Which is fine with me in a moral equivalency sense, however part of me understands that what has just happened is very, very bad.
Government has now, with the stroke of a pen, altered the way the markets work. Which again, is fine, if short selling goes the way of the buggy whip, for good. But that is unlikely. So what it has done is prepare the stage for volatility unlike any seen in the markets ever before. Wildly high highs, to be followed by devastating lows.
I'm not so concerned about the wildly high highs. It's when the rule expires that I have a problem with. And it is the absence of coherence in the reasoning that I have a huge problem with.
What they just did doesn't make markets fair. And that is what regulators are supposed to do - ensure that laws are enforced, and that the markets are fair. Changing rules to favor price moves in one direction for select industries isn't fair. That's not the way to solve the fundamental problem, which is illegal stock manipulation. They didn't solve that. They just eliminated the ability to make a negative bet on a stock in a legal manner, which makes the market unfair, and robs it of price discovery. That is market manipulation by the government, in favor of rising prices for financials.
Look, manipulation is bad, either way. If the financials should be in the toilet due to legitimate market action, then in the toilet they go. Government manipulation to prop up their prices by eliminating fair, legal trading in one direction is a very, very bad precedent. You can't get more fair by being more unfair. This just feels wrong.
Basically, markets should be allowed to function as they have since 1934. Short selling should be allowed, but only to the extent that one can borrow and deliver shares. Naked short selling shouldn't be allowed. It is illegal. By doing away with all short selling, which again, isn't the worst thing that can happen, one could argue that the markets are going to go on a three day gin drunk, and fly through the roof based on nothing but their own alcoholic fumes. Speculators will be running them ever higher, in the knowledge that at least for a bit, there's nothing but natural supply/demand pressure to bring them down. That's fine. But what happens when the rule stops?
Crash.
It's the hamfisted manner that this was handled that is troubling. They should have just made delivery at T+3 mandatory with a buy in for fails. They also should have simply required a pre-borrow to short. That would have solved much of the problem. And if they had required all fails to be delivered, even the older ones, that would have given the desired boost to the system. That would have been, well, fair. But that's not the way they did things. It's almost as though the John Macks of the world, the real guys who run Wall Street, sort of went, enough, now that the jackals are on our tails, it's time to shut the whole lot down. Again, you don't see me crying, but for me it sort of underscores that the SEC isn't working to protect investors - it is working to ensure the royalty that runs the financial system benefits to the greatest extent possible, regardless of who gets hurt.
My problem is one of basic fairness. It isn't fair to change the rules with no notice, and swing the pendulum in a manner that can't end well. I'm the last guy in the world to defend short sellers. I actually think the entire practice should be abolished. But that is unlikely. And because it is unlikely, my problem is what happens once the three day drunk is over, and the predators are allowed back into the meadow. My other problem is that the SEC didn't just solve the fundamental problem, which is ILLEGAL NAKED SHORT SELLING, it threw the baby out with the bathwater. I will delight to think of guys like Chanos and Einhorn and Rocker losing everything over the next week, but my basic sense of fairness tells me that this was the wrong way to go about things.
Again, I'm the last guy in the world to boo hoo for short sellers. But this smacks of something, I don't know, fundamentally wrong.
It will, in the short term, boost the markets hundreds, if not thousands, of points.
But as with all wild drunks, they end badly. This is difficult to see ending well unless the SEC decides to ban short selling for good. And that won't happen, which means that once the rule goes away, look out below. If they wanted to create the most bizarre and massive volatility seen in the last 100 years, this would be a great way to go about it.
But solving the NSS problem for good? Not really.
My sense is that a number of things are likely to happen now. First, we will see the legal teams of the largest short sellers in full roar to mount a legal challenge to get the rule overturned, or at least shelved for a bit. That will increase volatility and uncertainty, which is bad. It will also reduce confidence in the market as a whole, because now it looks like the top cop has no frigging idea what it is doing day to day. Second, we will see short squeezes in most if not all of the issues that just got protected, as margin calls force buying, which forces more margin calls, which forces more buying. Third, we will see speculators climbing aboard for the wild ride. None of which is good for fair markets, or reassuring as to the soundness of the US market system.
You cannot increase fairness by being absolutely unfair in one direction. I applaud any steps towards FAIR and legal market functioning. But this wasn't one of them.
Maybe I'm full of it. But my reaction this morning was mixed, to say the least.
Copyright ©2008 Bob O'Brien
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25 comment(s) so far...
Re: The SEC May Be The Country's Worst Enemy
Well written thoughts and facts clearly spelled out but I have another concern. If the SEC would just ENFORCE the rules and end the manipulation by the big boys, all these stop gaps would not be necessary. Plain and simple, cut and dry. ENFORCE the rules to all. They have gone from 19 companies protected to 799 when will all companies be protected? In other words you can slaughter all the inhabitants of Florida except those rich people in Boca Raton??? Time to cut the crap, do the right thing SEC and also where it the most culpable party in this travesty..The DTCC???. Why has nobody mentioned their part in all of this. Let them come forward and address their shortcommings. They are not UNTOUCHABLE!! Lastly ex-clearing should be illegal and done away with. They hide the"Naked Shorting" activiteis of all of these"Financial Institutions" that are being protected. NO MORE EX-CLEARING.
By Sean on
9/19/2008 6:59 AM
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Re: The SEC May Be The Country's Worst Enemy
I don't think that fairness was ever a consideration. The goal seems to be to create an opportunity for CONgress to put in place another "program" to "fix" things. The fact that the legitimate shorts get smacked along with the crooks pales in comparison to keeping the dollar viable for a bit longer. Oh well, only a month and a half to go until "elections".
By ann observer on
9/19/2008 6:59 AM
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Re: The SEC May Be The Country's Worst Enemy
Bob,
I been following you for a long time but I do not agree with your sympathy for the legitimate shorts. They are part of the problem that as far as I am concerned. Destroying a company or an economy by any means for personal gain is wrong.
By Alan DeGracia on
9/19/2008 7:53 AM
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Re: The SEC May Be The Country's Worst Enemy
Your reaction is right on the money ....as always .
By tkalantzis on
9/19/2008 7:53 AM
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Re: The SEC May Be The Country's Worst Enemy
Alan: I am not at all sympathetic to short sellers. But if they are engaged in a process and doing it legally, we either have to change the law and make it illegal, or allow them to do it. Done legally, they can't destroy a company for personal gain - all they can do is take a bet on the price dropping. If they conspire to bring the company down, that is manipulation, and it is against the law. If they can borrow endless amounts to create a supply disconnect, that is a problem with the law governing share lending. That needs to be fixed. My point is that legal shorting has nothing to do with destroying companies for profit. Illegal stock manipulation does. I am against that.
But creating a completely unfair and mercurial rule that will punish those who were abiding by the rules yesterday isn't the way to solve the structural problem in the markets.
Personally, I think they should just ban all short selling, unless a hard study is done that demonstrates significant benefits for the market as a whole. No study has been done, so aside from bromides and anecdotal reasoning, there is no hard proof that anything but the short seller's pocket book is helped by the practice. I think the study will show no benefit for most investors.
But that is different than what the SEC did. I am against injustice, period, not only injustice that cramps my style.
By bobo on
9/19/2008 7:59 AM
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Re: The SEC May Be The Country's Worst Enemy
I could not agree more bobo - great post..these are my thoughts...
Once again the regulators and elected officials have completely botched things, but why should we be surprised? There was no reason to ban legitimate short selling, provided that the rules of locate, borrow, deliver and settle were abided by. The reasons why the SEC refuses to take on this most important issue are nt immediately clear, but the DTCC is a beneficiary of the unwillingness to celan up the settlement system.
It is simply and totally unfair for the SEC to ban short selling in a specific category of stocks. It is unfair to discriminate against any company by not providing the same protection. It is unfair to game the system to try to clean up a problem created by those who game the system.
I am not a huge fan of short selling, but it should be a part of our capital markets. Indeed, what happens when all of the short squeezes are done by these emergency rules that have little to do with cleaning up the system and the rules expire? what will prevent the shares from imploding from artificially high levels.
This isn’t capitalism, it’s stupidity.
Clean up the settlement system and stop this BS
By clearthinker on
9/19/2008 10:47 AM
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Re: The SEC May Be The Country's Worst Enemy
What is wrong with ONLY natural supply/demand pressure (in either direction)?
Every other auction market for anything but securities operates fine with no short selling. Many may not understand how an auction market typically works - with only a very small percentage of the item owned either bid for or offered at any specific price level. Even legal shortselling can add up to 95% of the float to the supply side of a market normally trading 5% of the float. I do not believe that multiplying the supply of something by 20 times gives more accurate "price discovery".
By Jeff on
9/19/2008 10:48 AM
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Re: The SEC May Be The Country's Worst Enemy
The hedge funds were hedged... right. After all, these are professionals and they would never subject their funds to those kinds of losses. They just had to have calls to protect their shorts.
The crisis must have been pretty severe for this move.. it seems to be in response to Britain doing the same.. just make the shorts put the money back.. for now.
If we are going to nationalize something, why don't we nationalize the Federal Reserve. They are printing our currency. Why should we pay them to print money that we have to produce. That's right... the only one who could do a worse job in finances would be our government.
By mhelburn on
9/19/2008 10:48 AM
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Re: The SEC May Be The Country's Worst Enemy
I'm admittedly not the sharpest tool in the shed but I know better than to hurl a hand grenade at the ant hill in my lawn. I know that these guys are supposed to be the best at finance so why did they go to such an extreme to correct the problem? Rather than fix the problems, they protected a few, admitting a problem does exist, but choose not to protect the rest of the market from it.
The only thing I can surmise is that if you have 5 crooks cornered in a building of citizens and you don't want them to be caught, pull the fire alarm. They aren't as concerned with fixing the markets through enforcement of existing laws as they are of covering up either their own stupidity (not likely) or their own complicity in the crimes.
By Doc Holliday on
9/19/2008 10:49 AM
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Re: The SEC May Be The Country's Worst Enemy
Perfectly stated case. Arbitrary rule making is bad for markets. People that are playing by the rules shouldn't have the rules changed on them overnight. Agree with all of Bobo's comments. Still, it's kinda of fun to think about Rocker and co. at this point. They deserve everything they get.
By Jim on
9/19/2008 10:58 AM
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Re: The SEC May Be The Country's Worst Enemy
Jeff. I dont disagree. In fact, I think the SEC needs to do some research, and identify if the mouch touted but little researched benefit that shorts claim to provide is measurable or real. I think it probably isnt. But that is different than arbitrarily stopping something that is legal under the current law.
What is so odd about this is that I should be taking the position that this is a major win. Hurray. After many years of hard work, the issue is now the biggest issue in the financial world. You would think the reporters would be standing in line for the interviews and congrats. Not. And worse, I find myself in the very odd position of having to condemn probably the only effective step taken so far in this battle. This was just the wrong thing, in the wrong way, at the right time. It bought the financials some breathing room, while the rest of the market can be cremated by those deemed too dangerous to be allowed to work their magic in the financial sector. There are so many things wrong with this, upon consideration, that one wonders if it wasnt designed deliberately so it wouldnt survive a legal challenge.
My solution would be to demand some hard data that shows short selling delivers any benefit to anyone besides those doing the short selling, or make the practice illegal in a formal and well thought out manner. The way the SEC did it is just plain wrong, much as I hate to say it.
By bobo on
9/19/2008 10:56 AM
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Re: The SEC May Be The Country's Worst Enemy
Bob I understand your views but while you present the objective the gang of liars/cheats and thieves bring in a Doug Kass. He then uses the smoke and mirror to distract with the lemmings responding never debate with a man with FACTS. Whose facts? What facts? Distorted facts of the DTCC.
So your objective view is wasted here. What is needed is to STOP the insanity and if it takes BANNING shorts like one would close the doors before doing an inventory control then I'm comfortable with such. Especially when those who are complict ask a one of their own questions. I don't know how you do it but if you want to bring your knowledge to the MASSES who are listening then it is either done by you or one of yours who can present FACTS and not distorted facts. THEN we can fix this system.
By Fintas_1981 on
9/20/2008 4:49 PM
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Re: The SEC May Be The Country's Worst Enemy
Personally,
I too would like short selling to just stop. What good does it do? Nothing except for traders who bet correctly, but that's a zero sum game and does not contribute to the economy, main street or the corporations. If traders want to go short, there is always options that options market makers can hedge via futures contracts, rather than short selling themselves.
But this is a work in progress. If short selling in equities goes ahead again, there should be natural limits to it, like with everything. Say, no more than a certain percentage of the shares outstanding and then only if those borrowed shares are debited and removed from those whose shares are being borrowed. There should never be more shares settled and held in accounts than the issuer has issued.
So there are ways to avoid a meltdown once shorting resumes, it's all in how the details are handled. We'll see what happens. But the SEC basic mentality has not changed as the market makers continue to be singled out for preferential treatment. They can still fail to deliver and none of the rules adopted thus far affects them at all. I'm very disappointed in that fact, as that's another loophole that was not closed and once the miscreants figure out how to use that one, it'll be done wholesale and blown wide open.
Look for a sharp increase in the number of "marker makers" in equities.......it's always in the details and ham fisting it will just jerk it around in different directions. All loopholes must be closed and nobody should be given preferential treatment lest we start all over again with this nonsense.
By tommytoyz on
9/19/2008 4:50 PM
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Re: The SEC May Be The Country's Worst Enemy
My letter to Mr. Cox,
Mr. Cox,
You said you would not put up with Naked Shorting. But yet it goes on as usual! I'm playing alittle stock that is Naked Shorted into the Ground! CPSL has beat earnings Quarter after Quarter by big margins pluse positive guidance! It has been on the SHO's List for Months!!I heard you on the News last night saying you would not put up with any Naked Shorting. Maybe you should tell the people that are Naked Shorting. Now I see why MaCain said he would FIRE YOU! You either are not capable of not doing your job, or you are on the TAKE of Hedge Funds and Prime Brokers! I don't no witch? This is a problem that has gone on check for years! Now you tell me, Why the Granfather Clause on Naked Shorts? Why did you get rid of the UP TIC RULE? As we speack Naked Shorting is going on as Business as usual! Mr. Cox YOU HAVE BLOOD ON YOUR HADS! Now I no why Sen. MaCain would FIRE YOU! This letter will be sent to my Congress Men and Sen. Also Sen. MaCain! Good luck with your JOB down the road!
Thank You For your time.
Cox is the problem, Cox is on the take!!!!
By hoag on
9/19/2008 12:03 PM
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Re: The SEC May Be The Country's Worst Enemy
You have x amount of capital in the system. The investor decides where he wants to allocate it. If a company is bum, it will not trade the same as one that is more profitable. Besides the market, there are other places that one can allocate resousrces. Shorts insist that they put data into the market. This they may do, but whether the data is accurate doesn't seem to matter to the same people who tout the benefits. The regulators have destroyed the market by allowing bear raids and this only makes the criminals more intent to manipulate.
I am terribly disappointed that after the long campaign that it was probably John Mack who convinced the SEC to engage their brains. He was claiming a pile on, but a hedge fund guy said that he checked and there were ample shares to short of the banking stocks. He also quoted the DTCC as to how many fails were in the system. So it looks like the uptick rule or lack thereof was very powerful in bringing these stocks down.. Of course, if he quoting the DTCC, I don't trust his data on anything. Shorting increases volatility/liquidity because the same shares are trading twice.
It was the pigs at the trough who did this. Start with the lobbyists who wanted to create more loans and talked the president into pushing homes on people who were not credit worthy. Assets overstated and interest rate artificially low.. Any raise in the interest rate then causes prices to drop and a glut in the market.. enter mortgage fraud, broker fraud, and even counterfeit bonds.
Ming has a name for the newest boondoggle: Securitized Holdings Investor's Trust to hold the toxic mortgages. Forgive me but I don't see how the same people who got us here are going to save us after they've taken the money out of the system.
We need accountability.. and with all the deregulation, we are at the mercy of those who are likely to steal, defraud, and take advantage of inside connections.
By The idea that short selling is necessary is totall on
9/19/2008 4:51 PM
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Re: The SEC May Be The Country's Worst Enemy
There should be a forum where the SEC and Paulson and all the rest of gang of charlatans who put this mess together would answer the questions put to them by people like yourself Bobo, Dave Patch, Tommy Toyz and many of the other fine folks who visit this site who understand the ramifications of this move and they must be forced to answer the questions, not the usual political dance of Cox and Co. If these people represent us then they should explain to us what they did and answer questions. Problem is I am being naive to think that these morons represent us in the least. Something about lipstick and pork I guess.
By rtway on
9/19/2008 4:52 PM
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Re: The SEC May Be The Country's Worst Enemy
They had to do something. Banks runs were starting. Huge outflows of Mutual Funds, Money Market accounts and Brokerage Accounts.
The Country and the entire Money system was being destroyed.
Although, what I really find funny is that when Paulson (prior CEO of GS) started to tank we get a Ban on short selling on all financials. After Paulson destroyed may Icons like BSC, FRE, FNM, AIG, LEH, when the stock he probably owns a ton of went down it was to Ban Short selling all together on the Financial stocks. Too Funny.
But, as we speak the Option Writers are petitioning the SEC to allow them to continue to short the stocks. And after the first pump on the stocks on the news, I have no reason to believe the SEC will give the exemption to them as before. So nothing has really changed.
The Option Writers were the main problem to start with as they were paid to short the stock even when it was on the SHO list. If the SEC allows them to be exempt from the rule nothing will change and the financial stocks will continue to go down. Same as before.
If they change the Ban on Short selling than in my opinion everyone needs to take all of the money they have in the Banks and find a safe place for it. Also, need to close all of your Brokerage accounts and find a safe place for your money. The question is where to put the money. Maybe pay off your mortgage it would be safe there and you would make the interest you were paying. Pay off your car, same as the mortgage. Do like they used to do, dig a hold under the 5th fence post and burry the money there.
We all knew this would happen with the naked short selling. The problem is that it has destroyed our Country, the value of our Dollar, our Companies and the spiral is going down, down, down and now they do not know what to do about it. If they had taken action 5 years ago we would not have been here.
By Waterfallsparkles on
9/20/2008 6:24 AM
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Re: The SEC May Be The Country's Worst Enemy
bob,
i have been a follower of your blog for a while and believe you are right on with the problem of naked shorting issues.
One thing i have been wondering is when phantom stock is created; where does it go after its created; does the original naked shorter in essence continue to own this stock?
Im sort of thinking Lehman probably was one of the biggest naked shorters out there; but this is just suspicion on my part. I just wonder if the unwinding of Lehman might expose "extra" stock that did not otherwise exist for a lot of companies because lehman was naked shorting other companies through there hedge funds. If lehman was performing naked shorting and created extra stock, it might have a bunch of phantom stock on its books that now have to be dumped on the market...or maybe lehman never booked the phantom stock. i do not know on this and could be completely off base;but would like to know what you think.
By derick on
9/20/2008 6:26 AM
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Re: The SEC May Be The Country's Worst Enemy
H.R. 6517- Legislation to reinstate the Uptick Rule
H.R. 6517: To require the Securities and Exchange Commission to reinstate the uptick rule on short sales of securities
Sponsor: Rep. Gary Ackerman [D-NY]show cosponsors (3)
Cosponsors [as of 2008-08-31]
Rep. Michael Capuano [D-MA]
Rep. Carolyn Maloney [D-NY]
Rep. Carolyn McCarthy [D-NY]
Bill Text: Full Text
Status: Introduced Jul 16, 2008
Scheduled for Debate -
Voted on in House -
Voted on in Senate -
Signed by President -
This bill is in the first step in the legislative process. Introduced bills go first to committees that deliberate, investigate, and revise them before they go to general debate. The majority of bills never make it out of committee. Keep in mind that sometimes the text of one bill is incorporated into another bill, and in those cases the original bill, as it would appear here, would seem to be abandoned. [Last Updated: Aug 30, 2008]
Last Action: Jul 16, 2008: Referred to the House Committee on Financial Services.
http://www.govtrack.us/congress/bill.xpd?bill=h110-6517
By Sean on
9/20/2008 6:25 AM
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Re: The SEC May Be The Country's Worst Enemy
If they are nationalizing, they should nationalize the Fed AND the DTC.
By dtc on
9/20/2008 6:26 AM
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Re: The SEC May Be The Country's Worst Enemy
The new emergency short selling rule is a sheer ruse, a canard in a dress.
The short sellers were told they could keep shorting, if trading patterns are any indication.
They were told to preclude any short squeezes, but otherwise don't worry, be happy.
I am more certain than ever that we are headed to a massive global depression, and possible, if not probable, revolution here.
The scum bureaucrats running this circus need to become familiar with the smell of burning things. They are setting the fires.
Paulsen is a major disappointment here. He will ultimately have to face his Dartmouth classmatees and our other contemporaries. It won't be pleasant for him.
That this bar only temporarily protects the very largest companies tells you where the SEC stands. Anyone bringing a company public here knowing what we know should be flogged, then thrown to sharks.
Let the small companies in this country eat cake!
By Bud Burrell on
9/20/2008 6:51 AM
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Re: The SEC May Be The Country's Worst Enemy - more SEC news!
http://www.bloomberg.com/apps/news?pid=20601087&sid=a9AeBwRLLoHk&refer=home
By Beegdawg/// on
9/20/2008 7:37 AM
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Re: The SEC May Be The Country's Worst Enemy
Bob O'
I believe we would get some more press out of this if you were to send a copy of the AD that was run in the Wa. Post in 2005 to Rush Limbaugh and Niel Cavuto. Niel had Patrick on a month ago and he conducted a very fair interview with PB. I thnk Cauto is sympathetic to this issue. Rush could get months worth of news out of this if he started digging into it. Maybe an interview with you or PB etc. The issue I think we should expose is that thousands of investors have sent tens of thousands of letters to the SEC about the crooks involved in this over the past five years. The SEC had to have been well aware of this. I'd like to see the public start to question whether Cox and other SEC officials and perhaps even a Senator or two have been involved in this all along. I suspect that alll of us who have followed this for the past 5 years believe that SEC officials have been cooperating with some of the hedge funds in this effort for many years. There were just to many SEC inquiries which were launched into dozens of companies that were under attack by these short sellers to have been a mere coincidence. I actually tink that Spitzer was involved when he filed a lawsuit agaings AIG.. The dirt here goes everywhere...
By beegdawg on
9/20/2008 1:00 PM
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Re: The SEC May Be The Country's Worst Enemy
Why is the middle man needed? Think about an Ebay exchange, no middle man you own your share and it can be lent with permission. The totals, subtotals and Pin and password reciept along with date & time could be used to create a TRANSPARENT MARKET free from brokers.
The company would have a share tally that could not be oversold thus a true free market.
Now ask why the inventor of this system was threatened with a bullet to the head.
It's a racket and the matrix is showing.
By Jen on
9/20/2008 1:00 PM
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Re: The SEC May Be The Country's Worst Enemy
I have a problem with the so called Bail Outs of FRE, FNM and AIG. They are basically wiping out the Common Shareholders. The way they are doing that is that the Government gives the Company's a "Loan". But, is the Government really giving the Company a Loan or are they just giving the Company the Shareholder's stock value? In which case they do not have to even give the Company any real money.
Also, why are they giving the Federa Reserve (made up of Private Banks) Warrants for 79.9% of the stock in the Companies? I think in the case of FRE & FNM they can purchast the 79.9% of the Company thru Warrants for $40,000. What right does the Federal Reserve have to take over a Trillion Dollares of value in these Companies for $40,000.? This dilutes the Sharehoders to almost 0.
With FRE & FNM they did not even ask for the Governments help they were sufficiently capatalized. But, the Government had ML come in and draw their own conclusions so the Government could come in and take them over for 1 Billion in loans each. Of which to date have not been given to the Company. The "loans" are at 10% interest for each Company, plus they need to be paid back by the Companies. They were not a gift for the 79.9% in stock Warrants.
If the Government is being paid back the money they lend to the Companies, then why do they get 79.9% of the Company for $40,000. in Warrants? Sounds like legal theft to me.
I have not done the math on the value of the Shareholders stock but I would bet that it would exceed the 1 Billion they lend the Companies.
Now the Government is talking about putting all of the Banks Bad Loans or CDO's into FRE & FNM to let the Banks off the hook for write downs on thoes loans so they can appear to be profitable again. The Governments purchase of all of these bad loans from the Banks will equal as some analysts have stated over 1 Trillion dollars. This doubles our National Debt.
I cannot believe that no one has put a pen and pencil to this atrocity. Now we have the Government in on the Theft of the average Americans Wealth and stock holdings. Plus, the average American Tax Payer will pay for their free interest in these firms. In my humble opinion.
By Waterfallsparkles on
9/20/2008 4:50 PM
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