Tag Archives: gary weiss

Preet Bharara – Overhyped and Toothless

Posted on by

Gary Weiss in Salon

“Yet nowhere in Gabriel Sherman’s well-researched piece in New York is there even one mention of Preet Bharara.

There’s a simple reason for that:  Preet Bharara is not busting Wall Street. He’s not collaring the masters of the meltdown. He’s done nothing to even slightly discomfit Wall Street’s still-ferocious money machine, or has yet to bring to justice the architects, enablers and continuers of the 2008 financial crisis — the bankers who got us into that mess, and the ones who are continuing to extract pain from foreclosed homeowners, in the New York area and beyond.

As a matter of fact, his over-hyped insider-trading prosecutions, the main focus of the Time piece, are doing the Street a favor, by targeting people who actually ripped off Wall Street — individuals like hedge fund managers Raj Rajaratnam and Danielle Chiesi, who functioned a bit like the goons who used to dope race horses in the old days.

Bharara’s insider trading targets rigged the game for their own profit by illegally misappropriating information, in effect stealing from their employers and other investors, just as the horse-dopers cheated racetracks and other betters. Another analogy, also from the racetracks of old, would be to the scam artists who used to “past-post”: bet on races after they knew the outcome.

That’s how insider trading works. It’s a form of theft and cheating. It’s bad. Bharara was right to prosecute them, just as he has aggressively pursued drug gangs in the outer boroughs. But let’s be clear on something: The big players, the Goldman Sachses, Merrill Lynches, Banks of America and so on, don’t like insider trading any more than Preet Bharara does.

And none of his criminal prosecutions to date — including his recent bust of three high-ranking former Credit Suisse execs, accused of rigging the value of mortgage bonds they held in 2008 — had any connection to the pain being felt by Americans today, which can be directly traced to the misconduct of mortgage bankers and derivatives traders in the run-up to the financial crisis.

The real perps of the financial crisis haven’t been in Bharara’s — or the Justice Department’s — cross hairs for a single moment since Barack Obama took office three years ago. It’s one of the most troublesome failings of his administration.”

Wiki Fudges Importance of Naked Short-Selling

Posted on by

(Continued from previous post)

Many people (including this blogger) see naked short-selling as one of the central rackets used by Wall Street’s racketeers to pull off their heists. It’s a view with quite a few supporters in the industry, government, and major media. But you wouldn’t know it from the wiki entry on naked short selling.

In a piece earlier this piece, urging sharper treatment of Geithner during his hearing, an off-shore journalist Lucy Komisar pointed out that naked short-selling of US Treasury bonds artificially depresses the price of the bonds by increasing the number of shares. It’s in effect a theft from the portfolios of ordinary people who hold them, unaware that their brokers are lending them out and leaving them only with electronic IOUs.
In other words, they’re lending to their broker, rather than to the US government….

In fact, the most prominent critic of naked short-selling, Patrick Byrne, has this to say on his blog, Deep Capture:

“Notwithstanding thousands of articles such as the ones cited above, the current Wikipedia article on naked short selling insists that experts believe that it is not a problem. No mention is made of hearings, statements by economists and SEC Chairmen, emergency federal actions and emergency meetings of regulators from the G-20 to stop the world financial system from imploding, etc. ……… notwithstanding the thousands of articles such as the ones I cited above, the current Wikipedia page maintains that the mass media agrees that naked short selling is not a problem…”

— “The Hijacking of Social Media”

Byrne’s site has a useful video by Judd Bagley on naked short-selling:

Byrne is the CEO of Overstock, an online retailer of surplus and returned goods, which, he claims has been the victim of naked short-selling for many years. At one point, around 30% of Overstock’s float (shares held by the public and not institutional investors or insiders) consisted of fails (shares that did not deliver at settlement of the trade) and although fails can have many causes, naked short-selling is certainly the most important of them.

Note: Byrne claims that this isn’t the principal motivation for his campaign against the practice and points to his other philanthropic initiatives as proof. Major media business reporters, including Joe Nocera and Gary Weiss, have argued otherwise.

Note: Bagley has been accused of cyberstalking Weiss over Weiss’s alleged complicity in the social engineering of wikipedia.

Update: Note also that several experts have contradicted Byrne’s assessment of the effects of naked short selling on the price of the stocks he’s analyzed.

Still, whether Byrne is a hero or an out-of-control conspiracist is beside the point.

With the scale of criminality on Wall Street now, you’d have to be a hero and out-of-control to go after any of it successfully.

And conspiracy-mongering seems to be largely in the eye of the beholder.

Byrne deserves credit.

Update: To be fair to Byrne’s critics here is a criticism by one Sam Antar (a reformed felon who now consults on white collar crime) of Overstock’s accounting practices.

To be fair to Byrne, Antar’s original fraud was extensive and involved his whole family. Antal also admits to profiting from short positions in the companies he criticizes for fraud.