Northwest Indiana Discussion

Blunt? Devoid of sufficient nuance? It's about damn time someone started telling like it is instead of "nuancing away" the full naked impact of what's transpiring. I'm reminded of Robert DeNiro's character holding up a bullet to John Cazalle in the Deer Hunter and emphasizing, "This is this!"

Today, news reports are out stating Goldman Sachs is being criminally investigated. We'll see how far the investigation goes, but you can bet the Taibbi material and its "bluntness" is one of the main reasons DOJ is going after Goldman. Everyday people are finally getting a concrete conception of what is really being perpetrated behind all the legal legerdemain and language games veiling strategies of plutonomy.

Consider this from Taibbi:

"In a conference held at the JW Marriott Desert Ridge Resort in Phoenix in May 2008 — just over a month after Bear collapsed — a compliance officer for Goldman Sachs named Jonathan Breckenridge talks with his colleagues about how the firm's customers use an automated program to report where they borrowed their stock from. The problem, he says, is the system allows short-sellers to enter anything they want in the text field, no matter how nonsensical — or even leave the field blank. "You can enter ABC, you can enter Go, you can enter Locate Goldman, you can enter whatever you want," he says. "Three dots — I've actually seen that."

The room erupts with laughter.

After making this admission, Breckenridge asks officials from the Securities Industry and Financial Markets Association, the trade group representing Wall Street broker-dealers, for guidance in how to make this appear less blatantly improper. "How do you have in place a process," he wonders, "and make sure that it looks legit?"

The funny thing is that Prime Brokers didn't even need to fudge the rules. They could counterfeit stocks legally, thanks to yet another loophole — this one involving key players known as "market makers."

When a customer wants to buy options and no one is lining up to sell them, the market maker steps in and sells those options out of his own portfolio. In market terms, he "provides liquidity," making sure you can always buy or sell the options you want.

Under what became known as the "options market maker exception," the SEC permitted a market maker to sell shares whether or not he had them or could find them right away. In theory, this made sense, since delaying the market maker from selling to offset a big buy order could dry up liquidity and slow down trading. But it also created a loophole for naked short-sellers to kill stocks easily — and legally. Take Bear Stearns, for example. Say the stock is trading at $62, as it was on March 11th, and someone buys put options from the market maker to sell $1.7 million in Bear stock nine days later at $30.

To offset that big trade, the market maker might try to keep his own portfolio balanced by selling off shares in the company, whether or not he can locate them.

But here's the catch: The market maker often sells those phantom shares to the same person who bought the put options."

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You ought to read what Goldman did to Birmingham, Alabama and the refinancing of its new storm sewer system. (See article Looting Main Street, Rolling Stone)