The Market Ticker
Commentary on The Capital Markets- Category [Corruption]

This is being presented as "The Secret Goldman Tapes"; it is in fact about much more.

That (ed: the public's glazed-eye look when you speak of financial reform) may very well change today, for today -- Friday, Sept. 26 --- the radio program "This American Life" will air a jaw-dropping story about Wall Street regulation, and the public will have no trouble at all understanding it.

The reporter, Jake Bernstein, has obtained 46 hours of tape recordings, made secretly by a Federal Reserve employee, of conversations within the Fed, and between the Fed and Goldman Sachs. The Ray Rice video for the financial sector has arrived.

The half-baked conclusion?

The Fed encourages its employees to keep their heads down, to obey their managers and to appease the banks. That is, bank regulators failed to do their jobs properly not because they lacked the tools but because they were discouraged from using them.

They weren't "discouraged", they were fired when they attempted to use them.

Further, this isn't just a matter of not asking questions, it is a matter of willful and intentional malfeasance -- that is, the willful refusal to act on known (not suspected) information:

For instance, in one meeting a Goldman employee expressed the view that "once clients are wealthy enough certain consumer laws don't apply to them." After that meeting, Segarra turned to a fellow Fed regulator and said how surprised she was by that statement -- to which the regulator replied, "You didn't hear that."

If you remember when the Valukis report came out after Lehman's collapse, a forensic look into Lehman in the months leading up to the firm's detonation, there were several stunners in the report that nobody in the media paid attention to.  Indeed, I think I've been the only one banging the drum on this since the report was issued.

Specifically, in the weeks leading up to the detonation Lehman attmepted a tri-party Repo with Citibank.  Citibank rejected their collateral, calling it trash, and asked what else Lehman had they could put up.  Lehman's reply: Nothing.

Now this wouldn't be so extraordinary (people say "nuts!" to a proposed transaction all the time) except that a tri-party repo involves, as the name implies, three parties, not two.  

The third party was the NY Fed, at the time under control of one TurboTax Tim Geithner.

In other words The NY Fed was a party to the failed transaction attempted by Lehman before they got into critical liquidity trouble and blew up.  In point of fact at that instant in time the NY Fed knew they were out of collateral and, thus, out of money.  So did Citibank.

This is the stock price chart from the time:

Citibank didn't know of this just in those last five days -- they knew factually when the Repo failed and so did the NY Fed.

How much money do you make if you buy PUTs and short a stock when you know the company is going to under but that material inside information has not yet been disclosed to the public at large?  Remember: For everyone who did have that information, bet using it and won someone else lost and that someone was likely someone like you.

Further, the economic damage from the Fed's willful failure to intervene, when under the law The Fed is required to deal only with solvent institutions and had to know, by the manifest weight of the evidence, that the firm was bankrupt, was to at least some extent avoidable if they had simply done their job.

It is often said in America that nobody pays attention to anything, even when it has to be true until there are audio or video tapes shown to the public.  The disgraceful and willful behavior of the Federal Reserve, which I will remind you crosses the line of their statutory authority and thus they are not immune, either as an institution nor are the persons involved personally immune from prosecution and/or lawsuit, has been apparent for a very long time.  Incidents like Lehman's failure have left indelible and quite damning evidence "in print" that this is the case.

But now we have audio tape, and like the video of a woman getting decked in the elevator, it is in your face America.

Are you going to stand up and do something about this, or will you continue to accede to being ripped off wholesale and on purpose, not only by the banks themselves but by the so-called "government agencies" that are charged formally and legally with preventing it from happening?

View this entry with comments (registration required to post)

2014-09-26 07:10 by Karl Denninger
in Corruption , 599 references

It's about damn time.

One of the main reasons for the American Revolution was the arrogance of British officials who searched and raided people’s property at will. To keep that from recurring in the new United States, this language was included in the Fourth Amendment: “The right of the people to be secure in their persons, houses, papers, and effects against unreasonable searches and seizures shall not be violated.”

Grand words, but unfortunately they cannot prevent government officials from engaging in such conduct. Consider the following case.

Florida has a statute requiring that barbers be licensed and it gives the Department of Business and Professional Regulation (DBPR) authority to enforce it through biennial inspections of barber shops. Two inspectors conducted an inspection of the Strictly Skillz shop in Orlando on August 19, 2010. They found no violations.

But only two days later, DBPR came back to Strictly Skillz, this time with an astounding display of force: eight armed officers, including narcotics agents, some of them wearing masks and bullet-proof vests burst into the shop with weapons drawn. Squad cars blocked off the parking lot. The officers shouted that the customers were to leave immediately and that the shop was “closed down indefinitely.”

Four of the barbers sued, arguing not just that the raid was unconscionable but that the officers had violated their civil rights under color of law or authority and thus were exposed personally to damages.

Note the distinction here, because it's an important one: Suing a police agency or city is all well and good, but you're suing yourself in part, because anything you get comes not from the individual officers involved but rather from the taxpayers!

This is a major problem because there is zero deterrent value to such a lawsuit; it may make you whole but it will never deter further behavior of that sort because the person who does the bad thing never faces any consequence personally.

As expected the officers claimed "qualified immunity" -- that is, that they were immune from personal suit as state actors.

The court disagreed, ruling (properly so, I might add) that when a government actor goes beyond their lawful remit they lose that immunity and are exposed to personal liability.


Now, all you ****headed pigs in Boston and Pennsylvania who violated (and in the case of PA continue to violate) the rights of hundreds if not thousands of people who had committed no crime and you know it because you think you're entitled to invoke special protections and protocols when one of your own is subjected to a crime that you would never invoke for anyone else and which trample on the rights of all of those innocent people....

Consider this: How would you like to lose your cushy job and pension and, in states other than the few that provide full protection of your residence in bankruptcy, your house?

I hope you think long and hard on that, and for those who have been similarly abused, I hope you sue the magical blue costumes off these jackbooted *******s -- not as an agency but in their personal capacity.

That's what the law provides for, and it's what you should do.

View this entry with comments (registration required to post)

Yes, you should trust your school system and its staff members with your special-needs child who they use as bait to try to catch a sexual predator.

"A school board cannot avoid summary judgment as a matter of law when a school administrator willfully ignores a plan to use a 14-year-old special needs student as bait to catch a student with a known history of sexual and violent misconduct, and as a result, the student is sodomized," reads the federal brief filed in the 11th Circuit Court of Appeals late today.

You got that down here folks?

Your school administration thinks it has the right to use your 14 year old kid as bait to catch a sexual predator they know is in their school building with their consent.

They devise such a plan (which, I might add, cannot come with said "bait's" consent because she's not of age to give consent) and then blow it on top of that and she gets raped.


The first crime was the arrogation of a right to use the girl as bait in the first instance.  If no act had occurred beyond that it should still be a criminal felony.  But no, it gets better!  Not only did they set this up they then failed to put anyone in the bathroom where the alleged "bait" was supposed to result in a "catch" and the girl was in fact raped.

And for this we have a lawsuit instead of felony criminal charges laid against everyone in the school that knew about or participated in it, and the school is (as usual) trying to duck responsibility, civilly or otherwise.

**** you all among the so-called "prosecutors" and "law enforcement" in Alabama who have failed to indict everyone responsible.

View this entry with comments (registration required to post)

You know, it's never the original event -- it's always the cover up.  Obstruction of justice, evidence tampering, destruction of official records, you know, all those things that get you.  And it looks like it might "get" Hitlery this time.

A former State Department official has told lawmakers that Hillary Clinton allies privately removed politically damaging documents before turning over files to the supposedly independent board investigating the Benghazi terror attack.

That's probably a crime.

And since her chief of staff was allegedly overseeing this, guess who fries for it?  Not just them -- Hillary too.

Of course the State Department is denying it.  I'd deny it too, considering that at best it's career-ending and at worst it might get you some time in Club Fed.

According to The Daily Signal report, Maxwell walked in on the weekend session on a Sunday afternoon after hearing about it. He reportedly claims he saw stacks of documents when he arrived as well as an office director who worked for him -- but who hadn't told him about the assignment. 

Maxwell reportedly claimed she told him they were instructed to go through the stacks and pull out items that could put anybody in the NEA "front office" or seventh floor -- where the secretary's office is -- in a "bad light." 

Maxwell said he "didn't feel good about it" and left a short time later. 

Hoh hoh hoh hoh hoh.....

Bill Still has picked up on it too.

This is gonna get interesting....

View this entry with comments (registration required to post)

From the CFTC, effective allegedly today:

Rule 575. Disruptive Practices Prohibited
All orders must be entered for the purpose of executing bona fide transactions. Additionally, all non-actionable messages must be entered in good faith for legitimate purposes.
A. No person shall enter or cause to be entered an order with the intent, at the time of order entry, to cancel the order before execution or to modify the order to avoid execution;
B. No Person shall enter or cause to be entered an actionable or non-actionable message or messages with intent to mislead other market participants;
C. No Person shall enter or cause to be entered an actionable or non-actionable message or messages with intent to overload, delay, or disrupt the systems of the Exchange or other market participants; and
D. No person shall enter or cause to be entered an actionable or non-actionable message with intent to disrupt, or with reckless disregard for the adverse impact on, the orderly conduct of trading or the fair execution of transactions.

To the extent applicable, the provisions of this Rule apply to open outcry trading as well as electronic trading activity. Further, the provisions of this Rule apply to all market states, including the pre-opening period, the closing period and all trading sessions.

So let me see if I get this right.

Several years after I posted a Youtube video over a holiday in which I showed clearly (by video evidence) orders being entered that were simply intended to be canceled, years after this started, all of which is in direct violation of the Securities and Exchange Act of 1934, 15 USC §78i(a), we now have a "rule"

Let me remind you what that law says:

(a) Transactions relating to purchase or sale of security
It shall be unlawful for any person, directly or indirectly, by the use of the mails or any means or instrumentality of interstate commerce, or of any facility of any national securities exchange, or for any member of a national securities exchange—
(1) For the purpose of creating a false or misleading appearance of active trading in any security other than a government security, or a false or misleading appearance with respect to the market for any such security,
(A) to effect any transaction in such security which involves no change in the beneficial ownership thereof, or
(B) to enter an order or orders for the purchase of such security with the knowledge that an order or orders of substantially the same size, at substantially the same time, and at substantially the same price, for the sale of any such security, has been or will be entered by or for the same or different parties, or
(C) to enter any order or orders for the sale of any such security with the knowledge that an order or orders of substantially the same size, at substantially the same time, and at substantially the same price, for the purchase of such security, has been or will be entered by or for the same or different parties.
(2) To effect, alone or with 1 or more other persons, a series of transactions in any security registered on a national securities exchange, any security not so registered, or in connection with any security-based swap or security-based swap agreement with respect to such security creating actual or apparent active trading in such security, or raising or depressing the price of such security, for the purpose of inducing the purchase or sale of such security by others.

In other words all of this activity is already illegal.

And has been for about 80 years.

(Oh, by the way, why is there an exemption for manipulation of the market for a government security?)

Yet we need a rule to stop what has been able to generate (under that same law) actual legal sanction (not just a "rule") since the Securities and Exchange Act went into effect.

Are you ready to admit that the entire ****ing market is nothing other than a scam, given that nobody will enforce black-letter anti-fraud provisions that have been on the books for 80 ****ing years?

View this entry with comments (registration required to post)

Main Navigation
Full-Text Search & Archives
Archive Access
Get Adobe Flash player
Legal Disclaimer

The content on this site is provided without any warranty, express or implied. All opinions expressed on this site are those of the author and may contain errors or omissions.


The author may have a position in any company or security mentioned herein. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility.

Market charts, when present, used with permission of TD Ameritrade/ThinkOrSwim Inc. Neither TD Ameritrade or ThinkOrSwim have reviewed, approved or disapproved any content herein.

The Market Ticker content may be reproduced or excerpted online for non-commercial purposes provided full attribution is given and the original article source is linked to. Please contact Karl Denninger for reprint permission in other media or for commercial use.

Submissions or tips on matters of economic or political interest may be sent "over the transom" to The Editor at any time. To be considered for publication your submission must include full and correct contact information and be related to an economic or political matter of the day. All submissions become the property of The Market Ticker.