1) MEDIA BLACKOUTS: Background/Historical Knowledge
There are media blackouts on a huge amount of background/historical knowledge. As a result, the average American is amazingly uninformed about how the world really works. I am talking about the real mechanics behind the scenes (ie: how our monetary system works, how clearing in equity market works, etc). For example, most Americans haven’t even heard of the two most powerful and important organizations in the world: the Exchange Stabilization Fund (ESF) and the Depository Trust & Clearing Corporation (DTCC).
Keeping Americans uninformed about the basics of our economy/financial system is crucial to concealing the staggering amount of fraud going on.
MEDIA BLACKOUT: The government’s direct responsibility in impoverishing Americans.
FLAYS GOLD BILL AS VOTE NEARS
PASSAGE IS CERTAIN
Pittsburgh Press – Google News Archive – Jan 26, 1934
WASHINGTON, Jan. 26 — In a scathing denunciation of the Roosevelt monetary bill, Senator Reed (Rep., Pa.), predicted in the Senate today that the measure will,’ if passed, mean a “40 per cent wage reduction for every working man and’ woman in the United States.”
He spoke calmly and decisively.
His arguments were pointed.
His voice rang clear with confidence, though he knew as he talked that his words would be in vain.
He admitted the contention of administration leaders that the bill would eventually raise wages, but pointed out that “EVENTUALLY” was the hitch in administration arguments.
He said wages would be raised but only after the plain people of the country had suffered great hardships. He included VETERANS AND ELDERLY PEOPLE WITH SAVINGS AMONG THOSE HE SAID WOULD BE INNOCENT VICTIMS OF A CHEAPENED DOLLAR.
“THEY DON’T KNOW IT NOW,” he said, “BUT THEY WILL. Then we’ll have to answer for it,”
Declare A Truce in War On The Poor
Herald-Journal – Google News Archive – May 8, 1965
… old folk on modest pensions, or with savings in the bank, or dependent on annuities and other forms of insurance, nowadays often find themselves with only a fraction of the real income on which they calculated in their working and saving years. …
HAD THE DOLLAR been stable, such people would enjoy a modest competence today; but what with inflation, they experience privation or are added to the welfare rolls.
THROUGH DEFICIT SPENDING and bond issuing, THE FEDERAL GOVERNMENT IS ITSELF THE CHIEF AGENT IN INFLATION. …
Thus SOME OF THE PRESENT POOR HAVE BEEN IMPOVERISHED BY THE GOVERNMENT ITSELF — which now proposes to extend a helping hand. But very few of the elderly poor will benefit from Washington’s “War on Poverty” projects. The surest form of help to the aged of small means IS A STABLE DOLLAR.
In ignorance or indifference, rather than through design, for some years OUR GOVERNMENT HAS BEEN MAKING WAR UPON THE POOR … For pity’s sake, we ought to declare a truce.
Cruelties Hit The Elderly
Herald-Tribune – Google News Archive – Jun 2, 1966
By RUSSELL KIRK
“IN MY OLD AGE,” this gentleman writes, “I must worry about the effects of inflalion in reducing the income for my necessities. The purchasing power of my Social Security pension and my professor’s pension are reduced, and so with my bank account and savings deposits … All too often in America, insufficient income for necessities HAS CAUSED THE DEATH OF AGED PEOPLE. Instead of being slowly starved — if it comes to this — I should prefer to have the starving to death done quickly, as among some primitive peoples.”
This commentator adds that government handouts, through Medicare, the Poverty War, and other schemes, are at best palliatives for the consequences of inflation. And EVEN THE MOST ELABORATE SYSTEM OF SOCIAL SECURITY CANNOT SUFFICE TO SAVE A PEOPLE FROM ECONOMIC RUIN IF INFLATION BEGINS TO GALLOP; for such governmental benefits, too, MUST BE PAID IN INFLATED DOLLARS.
MEDIA BLACKOUT: The CIA’s history
Most Americans don’t have
The CIA: Beyond Redemption and Should be Terminated
July 24, 2010
By Sherwood Ross
Over the years “the Agency” as it is known, has given U.S. presidents so much wrong information on so many critical issues, broken so many laws, subverted so many elections, overthrown so many governments, funded so many dictators, and killed and tortured so many innocent human beings that THE PAGES OF ITS OFFICIAL HISTORY COULD BE WRITTEN IN BLOOD, NOT INK. …
In Iran in 1953, for example, a CIA-directed coup restored the Shah (king) to absolute power, initiating what journalist William Blum in “Rogue State” (Common Courage Press) called “a period of 25 years of repression and torture; while THE OIL INDUSTRY WAS RESTORED TO FOREIGN OWNERSHIP, WITH THE US AND BRITAIN EACH GETTING 40 PERCENT.” About the same time in Guatemala, Blum adds, a CIA-organized coup “overthrew the democratically-elected and progressive government of Jacobo Arbenz, INITIATING 40 YEARS OF MILITARY GOVERNMENT DEATH SQUADS, TORTURE, DISAPPEARANCES, MASS EXECUTIONS, AND UNIMAGINABLE CRUELTY, TOTALING MORE THAN 200,000 VICTIMS—indisputably one of the most inhuman chapters of the 20th century.” The massive slaughter compares, at least in terms of sheer numbers, with Hitler’s massacre of Romanian and Ukranian Jews during the holocaust. YET FEW AMERICANS KNOW OF IT.
Blum provides yet other examples of CIA criminality. In Indonesia, it attempted in 1957-58 to overthrow neutralist president Sukarno. It plotted Sukarno’s assassination, tried to blackmail him with a phony sex film, and joined forces with dissident military officers to wage a full-scale war against the government, including bombing runs by American pilots, Blum reported. This particular attempt, like one in Costa Rica about the same time, failed. So did the CIA attempt in Iraq in 1960 to assassinate President Abdul Kassem. Other ventures proved more “successful”.
In Laos, the CIA was involved in coup attempts in 1958, 1959, and 1960, creating a clandestine army of 30,000 to overthrow the government. In Ecuador, the CIA ousted President Jose Velasco for recognizing the new Cuban government of Fidel Castro. The CIA also arranged the murder of elected Congo Prime Minister Patrice Lumumba in 1961 and installation of Mobutu Seko who ruled “with a level of corruption and cruelty that shocked even his CIA handlers,” Blum recalls.
In Ghana, in 1966, the CIA sponsored a military coup against leader Kwame Nkrumah. In Chile, it financed the overthrow of elected President Salvador Allende in 1973 and brought to power the murderous regime of General Augusto Pinochet who executed 3,000 political opponents and tortured thousands more. In Greece in 1967, the CIA helped subvert the elections and backed a military coup that killed 8,000 Greeks in its first month of operation. “Torture, inflicted in the most gruesome of ways, often WITH EQUIPMENT SUPPLIED BY THE UNITED STATES, became routine,” Blum writes.
In South Africa, the CIA gave the apartheid government information that led to the arrest of African National Congress leader Nelson Mandela, who subsequently spent years in prison. In Bolivia, in 1964, the CIA overthrew President Victor Paz; in Australia from 1972-75, the CIA slipped millions of dollars to political opponents of the Labor Party; ditto, Brazil in 1962; in Laos in 1960, the CIA stuffed ballot boxes to help a strongman into power; in Portugal in the Seventies the candidates it financed triumphed over a pro-labor government; in the Philippines, the CIA backed governments in the 1970-90 period that employed torture and summary execution against its own people; in El Salvador, the CIA in the Nineties backed the wealthy in a civil war in which 75,000 civilians were killed; and THE LIST GOES ON AND ON.
Of course, the hatred that the CIA engenders for the American people and American business interests is enormous. Because the Agency operates largely in secret, MOST AMERICANS ARE UNAWARE OF THE CRIMES IT PERPETRATES IN THEIR NAMES. …
The descriptions in the article above are in no way
exaggerated (if anything CIA’s illegal activity is
understated). To verify the CIA’s black history for yourself, below
are the Google Archive News results with thousands of articles for the
"president Sukarno" CIA
"Jacobo Arbenz" cia
MEDIA BLACKOUT: CIA control of the media
(There is a mountain on material on much material on this.)
David Guyatt, Subverting
the Media (undated)
In an October 1977, article published by Rolling Stone magazine, Bernstein reported that more than 400 AMERICAN JOURNALISTS WORKED FOR THE CIA. Bernstein went on to reveal that this cozy arrangement had covered the preceding 25 years. Sources told Bernstein that the New York Times, America’s most respected newspaper at the time, was one of the CIA’s closest media collaborators. Seeking to spread the blame, the New York Times published an article in December 1977, revealing that “MORE THAN EIGHT HUNDRED NEWS AND PUBLIC INFORMATION ORGANISATIONS AND INDIVIDUALS,” had participated in the CIA’s covert subversion of the media.
“One journalist is worth twenty agents,” a high-level source told Bernstein. Spies were trained as journalists and then later INFILTRATED – often with the publishers consent – INTO THE MOST PRESTIGIOUS MEDIA OUTLETS IN AMERICA, including the New York Times and Time Magazine. Likewise, numerous reputable journalists underwent training in various aspects of “spook-craft” by the CIA. This included techniques as varied as secret writing, surveillance and other spy crafts.
The subversion operation was orchestrated by Frank Wisner, an old CIA hand who’s clandestine activities dated back to WWII. Wisner’s media manipulation programme became known as the “Wisner Wurlitzer,” and proved an effective technique for sending journalists overseas to spy for the CIA. Of the fifty plus overseas news proprietary’s owned by the CIA were The Rome Daily American, The Manilla Times and the Bangkok Post.
Meanwhile, however, Wisner had “implemented his plan and owned respected members of the New York Times, Newsweek, CBS and other communication vehicles, plus stringers…” according to Deborah Davis in her biography of Katharine Graham – wife of Philip Graham – and current publisher of the Washington Post. The operation was overseen by Allen Dulles, Director of Central Intelligence. Operation Mockingbird continued to flourish with CIA agents boasting at having “important assets” INSIDE EVERY MAJOR NEWS OUTLET IN THE COUNTRY." The list included such luminaries of the US media as Henry Luce, publisher of Time Magazine, Arthur Hays Sulzberger, of the New York Times and C.D. Jackson of Fortune Magazine, according to Constantine.
As these stories hit the news, Senate investigators began to probe the CIA sponsored manipulation of the media – the “Fourth Estate” that supposedly was dedicated to acting as a check and balance on the excesses of the executive. This investigation was, however, curtailed at the insistence of Central Intelligence Agency Directors, William Colby and George Bush – who would later be elected US President. THE INFORMATION GATHERED BY THE SENATE SELECT INTELLIGENCE COMMITTEE CHAIRED BY SENATOR FRANK CHURCH, WAS "DELIBERATELY BURIED" Bernstein reported.
Despite this suppression of evidence, information leaked out that revealed THE WILLING ROLE OF MEDIA EXECUTIVES TO SUBVERT THEIR OWN INDUSTRY. “Let’s not pick on some reporters,” CIA Director William Colby stated during an interview. “Let’s go to the managements. They were witting.” Bernstein concluded that “America’s leading publishers allowed themselves and their news services TO BECOME HANDMAIDENS TO THE INTELLIGENCE SERVICES.” Of the household names that went along with this arrangement were: Columbia Broadcasting System, Copley News Service – which gave the CIA confidential information on antiwar and black protestors – ABC TV, NBC, Associated Press, United Press International, Reuters, Newsweek, Time, Scripps-Howard, Hearst Newspapers and the Miami Herald. Bernstein additionally stated that the two most bullish media outlets to co-operate were the new York Times and CBS Television. The New York Times even went so far as to submit stories to Allen Dulles and his replacement, John McCone, TO VET AND APPROVE BEFORE PUBLICATION.
Yet, with the demise of the cold war the motive for media propaganda has collapsed. OR HAS IT? James Lilly, former Director of Operations at the CIA later became Director of Asian studies at the American Enterprise Institute – a think tank heavily staffed by former intelligence types. Lilly, in giving testimony to a Senate committee during 1996 observed: “Journalists, I think, you don’t recruit them. We can’t do that. They’ve told us not to do that. But you certainly sit down with your journalists, and I’ve done this and the Station Chief has done it, others have done it…”
But even as the cold war rationale for subverting the media recedes into the distance, press manipulation continues anon. A classified CIA report surfaced in 1992, that revealed the Agency’s public affairs office "… HAS RELATIONSHIPS WITH REPORTERS FROM EVERY MAJOR WIRE SERVICE, NEWSPAPER, NEWS WEEKLY, AND TELEVISION NETWORK IN THE NATION." The report added that the benefits of these continued contacts had been fruitful to the CIA by turning “Intelligence failure stories into intelligence success stories…” Basking in a glow of self satisfaction, the report continued “In many cases, WE HAVE PERSUADED REPORTERS TO POSTPONE, CHANGE, HOLD OR EVEN SCRAP STORIES THAT COULD HAVE ADVERSELY AFFECTED NATIONAL SECURITY INTERESTS."
Google Archive News results for Cord Meyer media cia
C.I.A.’s 3-Decade Effort To Mold the World’s Views;
Agency Network Using News Organs, Books and Other Methods Is Detailed C.I.A. Attempted to shape public Opinion Toward U.S. Policy Over Three Decades
New York Times – December 25, 1977, Sunday
following article was written by John M. Crewdson and is based on reporting by
him and Joseph B. Treaster.
…media activities. They knew, but they didn’t have the force or the funds to do anything about it." From the C.I.A.’s standpoint, its own "black" propaganda was far more…
Cord Meyer Jr., the C.I.A. official in charge of many of the agency’s propaganda activities, visited Random House, the book s publisher, and was told that…
Propaganda Network Built by the C.I.A.;
A Worldwide Network for Dissemination of Propaganda Was Built by the C.I.A.
New York Times – Dec 26, 1977
December 26, 1977, Monday
… Propaganda operation was first headed by Tom Braden, who is now a syndicated columnist, and was run for many years by Cord Meyer Jr. …
IMPLICATIONS: We have obvious media blackouts on several HUNDRED topics and a CIA which claims to "we have persuaded reporters to postpone, change, hold or even scrap stories that could have adversely affected national security interests." Maybe we should believe the CIA on this one?
MEDIA BLACKOUT: THE DEPOSITORY TRUST & CLEARING CORPORATION
unknown 20 trillion dollar company
by Flemming Funch
There is a busy little private company you probably never have heard about, BUT WHICH YOU SHOULD. Its name is THE DEPOSITORY TRUST & CLEARING CORPORATION. See their website. Looks pretty boring. Some kind of financial service thing, with a positive slogan and out there to make a little business. You can even get a job there. Now, go and take a look at their annual report. Starts with a nice litte Flash presentation and has a nice message from the CEO. And take a look at the numbers. It turns out that THIS COMPANY HOLDS 23 TRILLION DOLLARS IN ASSETS, and had 917 trillion dollars worth of transactions in 2002. That’s TRILLIONS, as in thousands of thousands of millions. 23,000,000,000,000 dollars in assets.
… In brief, they process the vast majority of all stock transactions in the United States as well as for many other countries. And – and that’s the real interesting part – 99% of all stocks in the U.S. appear to be LEGALLY OWNED BY THEM.
In the old days, when you owned stocks you would have the stock certificates lying in your safe. And if you needed to trade them, you needed to get them shipped off to a broker. Nowadays that would be considered very cumbersome, and it would be impractical to invest via computer or over the phone. So the shortcut was invented that the broker would hold your stocks instead of you. And in order for him to legally be able to trade them for you, the stocks were placed under their "street name". I.e. they’re in the name of the brokerage, but they’re just holding them in trust and trading them for you. And you’re in reality THE BENEFICIARY RATHER THAN THE OWNER. Which is all fine and dandy if everything goes right. Now, it appears the rules were then changed so the brokers are not allowed any longer to put the stocks in their own name. Instead, what they typically do is to put the stocks into the name of "Cede and Company" or "Cede & Co" or some such variation. And the broker might tell you that it is just a fictitious name, and will explain why it is really more practical to do that than to put it in your name.
The problem with that is that it appears that Cede isn’t just some dummy name, but an actual corporation that DTCC controls. And, well, if you ask anybody about this, who actually knows about it, they will naturally tell you that it is all a formality. To serve you better, of course. And, well, maybe it is. DTCC seems like a nice and friendly company. It is a private company, owned by the same people (major U.S. banks) who own the Federal Reserve Bank. And if they all stick to their job, and just keep the money and your stocks flowing smoothly, I’m sure that is all well and good. But if somebody at some point should decide otherwise, and there’s a national U.S. emergency and/or the U.S. government becomes unable to pay its debts, well, they might just not give you your stocks back. BECAUSE LEGALLY THEY OWN THEM. Something to think about.
Look, stock ownership is actually simple. The legal owner of a stock
is whomever is on the a company’s Stockholder list. This is the
DTCC, who acts as an intermediary for you, the beneficiary owner. The
DTCC votes on your behalf (hopefully the way you intended), and forwards
dividends to you.
Companies today have no idea who their shareholders are. All they see on stockholder list is “Cede & Co” (a corporation that DTCC controls).
Basically, if you have your stocks placed under their "street name" (like 99.99% of people today), it is because you don’t have a clue how the system works.
MEDIA BLACKOUT: The Exchange Stabilization Fund
Google Archive News results for "covert" "Stabilization Fund"
Above a Chinese Cafe, GAO Men Investigate Secret Treasury Unit
a Chinese Cafe, GAO Men Investigate Secret Treasury Unit
Washington Rented Rooms Are Scene for Probe of Agency That Backs Foreign Money
Wall Street Journal - Jan 28, 1971
By RICHARD F. JANSSEN
WASHINGTON — Something’s cooking above the Gung Ho Chinese restaurant. Maybe a case of indigestion for incoming Treasury Secretary John Connally. For it’s not egg-foo-yong that’s drawing Government auditors to the decrepit building a halfblock the Treasury. It’s a set of records kept in rented rooms on the seventh floor by A SUPERSECRET TREASURY OPERATION CALLED THE EXCHANGE STABILIZATION FUND. In secrecy if not scope THE ESF HAS LONG RIVALLED THE CIA. It has about $2.6 billion to manipulate and since its creation in 1934. A handful of top Treasury officials have been in on where the money goes. But now Congress has given its watchdog the General Accounting Office limited access to the books and both the GAO and the Treasury are prepared for the worst…
The Treasury fears the GAO will jeopardize some very delicate
and legitimate operations.
Officially the ESF is the channel for the
Treasury’s gold and foreign currency dealings. This means COVERT OPERATIONS
GAO men who have also rented an office above the Gung Ho restaurant to be close to the records fear COVERT OPERATIONS OF A DIFFERENT SORT. Their suspicions began when they discovered the $150,000 house in Tokyo. This was enough to start the inherently suspicious GAO men wondering whether the Treasury isnt sometimes tempted to clandestinely finance other questionable ventures from its kitty which has grown by roughly $600 million since 1934.
Unlike his predecessors, Mr. Kennedy failed to talk Congress out of giving the GAO access to ESF records. But the bill that did emerge in the final hectic days of the last Congress does sharply limit the scope of the gao’s access.
Not until July 1972 will the investigating team be permitted to crack the books and then only for the fiscal year that starts this coming July 1. Moreover the auditors may check only administrative expenses not money spent to implement high policy. But the GAO men are already boning up is their outpost and THE TREASURY IS IN A SWEAT. THIS IS A VERY, VERY SENSITIVE SUBJECT demurs one expert who declines to talk about it. …
Take salaries for example. Although only a handful of Treasury people apparently are involved in direct operation of the ESF the Treasury admits to having MORE THAN 300 PEOPLE on the payroll of $5 million. The Treasury says many are monetary experts on the staff of the Assistant Secretary for International Affairs but JUST WHO THEY ARE is something even the White House’s powerful Office of Management and Budget CAN’T SEEM TO FIND OUT.
Presidential Slush Fund
The International Economy – Sept, 2000
The inside story of how THE FUND ESTABLISHED TO HELP STABILIZE THE DOLLAR, supplemented by enemy assets during World War II, FINANCED THE FIRST U.S. COVERT OPERATIONS AFTER THE COLD WAR.
The new creation was called the Office of Policy Coordination (OPC), an opaque label for the command headquarters running operations for which, the NSC mandated, the United States government could "plausibly disclaim any responsibility." (This was the origin of the doctrine, later infamous as its cynicism became all too evident, of "plausible deniability.") Recruitment of agents to parachute behind the Iron Curtain, their training, and logistical support became the secret mission assigned to a creative and energetic New York lawyer and World War II intelligence veteran named Frank G. Wisner. [Yes, THE SAME Frank G. Wisner mentioned above in Subverting the Media]
Wisner’s obvious first task, before any of the skullduggery could be mounted, was to scrounge up THE CASH TO PAY FOR IT ALL. …
He found his first tempting target in an extraordinary and (at the time) little-noted account accumulating out of sight in the Department of the Treasury known as THE EXCHANGE STABILIZATION FUND (ESF). …
For Wisner and his OPC, THIS EXTRAVAGANT FREEDOM FROM SCRUTINY, ENSHRINED IN LAW, WAS NOTHING SHORT OF IDEAL.
The lure of the vast discretionary funds proved too much to resist. As one journalist put it, "The only limitation [on ESF spending] has been the sitting Treasury Secretary’s imagination." (26) A series of secretaries tapped the ESF to pay the salaries of Central Intelligence Agency and Treasury staffers and diplomats; underwrite luncheons and receptions; and cover lodging, hotel bills, and travel expenses. Apparently, spending for any purpose remotely related to the foreign exchange value of the dollar was considered legitimate. …
The fundamental objection to the involvement of the ESF is that it undermines the separation of powers. A case can be made that circumventing the congressional appropriations process violates Article I of the Constitution. In fact, the Gold Reserve Act itself is of questionable constitutionality, because it gives to the executive branch UNREVIEWABLE AUTHORITY TO ENGAGE IN COVERT ACTIONS IN INTERNATIONAL FINANCE …
Foreign aid has rarely drawn much support in the United States. As a consequence, administrations have attempted to avoid approaching Congress for appropriations for such ventures– THE IRAN-CONTRA SCHEME BEING A RECENT EXTREME EXAMPLE. The ESF has been A SOURCE OF FUNDS FOR DISCRETIONARY EXECUTIVE BRANCH SPENDING, THE LIKES OF WHICH CONGRESS SOUGHT TO PREVENT. …
… Executive branch influence on the Fed through ESF transactions raises questions about the independence of monetary policymakers to pursue price stability.
From the Federal Reserve website
Exchange Stabilization Fund
The Exchange Stabilization Fund (ESF) of the United States Treasury was created and originally financed by the Gold Reserve Act of 1934 to contribute to exchange rate stability and counter disorderly conditions in the foreign exchange market. The Act authorized the Secretary of the Treasury, to deal in GOLD, FOREIGN EXCHANGE, SECURITIES, AND INSTRUMENTS OF CREDIT, under the exclusive control of the Secretary of the Treasury subject to the approval of the President.
The Federal Reserve and the ESF
ESF operations are conducted THROUGH THE FEDERAL RESERVE BANK OF NEW YORK in its capacity as fiscal agent for the Treasury. THE NEW YORK FED, which executes foreign operations on behalf of the Federal Reserve System and the Treasury, ACTS AS AN INTERMEDIARY FOR THE PARTIES INVOLVED…
Several times each day, the foreign exchange trading desk of the New York Fed provides current information on market conditions to the Treasury. Whenever necessary, the trading desk buys or sells foreign currencies on behalf of the Treasury, through the ESF, for intervention purposes. …
Fed Debate in the 1960s over Sterilized Foreign Exchange Intervention
reveals the ESF’s preferred method of intervention to prop up the dollar
was OTC derivatives (forward contracts).
THE EXCHANGE STABILIZATION FUND
In 1961, the Exchange Stabilization Fund (ESF) of the U.S. Treasury began to intervene in the foreign exchange markets. Its ability to intervene, however, was limited by its resources. …
Because so much of its resources were tied up, the ESF intervened mainly in the forward markets [forward contracts are a type of OVER-THE-COUNTER (OTC) DERIVATIVE]. In that way, it would only need foreign exchange if it had to close out a position at a loss. “Reference was made to the extent of operations of the ESF in the forward market, as opposed to spot transactions, and Mr. Coombs [manager of the New York Fed’s foreign exchange desk] said the basic reason was that the ESF was short of money” (Board of Governors 1962, p. 169). …
The Exchange Stabilization Fund organized and participated in the London Gold Pool to stabilize the price of gold.
Gold Supply Drops
Montreal Gazette – Google News Archive – Dec 29, 1967
The EXCHANGE [STABILIZATION] FUND IS USED BY THE U.S. to convert foreign currency into gold here in this country and TO PARTICIPATE IN THE ACTIVITIES OF THE CENTRAL GOLD POOL CONDUCTED BY SEVEN NATIONS IN LONDON.
The pool, including the United States, the United Kingdom, the Netherlands, Belgium, Italy, West Germany and Switzerland, buys and sells gold through the Bank of England IN AN ATTEMPT TO STABILIZE GOLD SPECULATION IN OTHER WORLD MARKETS. France, although a member of the pool, has been a “non contributing member” for several months.
As the entity behind the New York Fed’s and the CIA’s covert operations,
including the CIA’s control of the media, the ESF’s is arguably the most
powerful institution in the world.
1) The ESF is the channel for the Treasury’s gold and foreign currency dealings.
2) The ESF’s entire purpose is to engage in covert operations. The London gold pool, which was a conspiracy by central banks to stabilize gold prices, is an example of this.
3) The money to run CIA worldwide covert operations doesn’t just appear out of thin air. The Exchange Stabilization Fund has sourced covert ops for decades because its books fall outside of Congressional oversight. It makes perfect sense that the CIA’s "black budget" be run by highly secretive Exchange Stabilization Fund (which most of the world doesn’t even know exists).
4) If the dollar ever suffers a drastic fall in value, the ESF is certain to undergo a complete audit and be shut down. At that point, all the US’s darkest secrets, buried in the ESF’s books, will be revealed (the full scope of the CIA’s illegal worldwide activities, the extent of the ESF’s dealing in derivatives, the true state of the nations gold reserves, the answer behind a dead president (if it exists), etc…).
5) The management of the US’s gold reserves is the ESF’s responsibility. (If it turns out that there is gold missing from Fort Knox, the ESF is to blame.)
Observation: Corruption in the US pretty much emanates outwards from the ESF. The most corrupt are the CIA and New York Fed, which act as agents for the ESF. Primary dealers, which trade directly with the New York, are the most corrupt part of our banking sector. ETC…
MEDIA BLACKOUT: The dark history of options and bucket shops
FALSE NARRATIVE: Options as a recent innovation
Options: Essential Concepts and Trading Strategies
OPTIONS TRADING BEGAN CENTURIES AGO
Although many people perceive options as a recent innovation, options have been traded for centuries. In fact, many trace the use of options back to 3500 BC, …
OPTIONS TRADING IN INDUSTRIAL EUROPE
Perhaps the most often cited example of the historical significance of options occurred in Holland during the tulip craze in the 17th century. During the tulip craze, contracts on tulip bulbs were actively traded by tulip dealers and tulip farmers. Dealers and farmers traded contracts for the option to buy or sell a particular type of tulip bulb at a specified price by some future date as a way to hedge against a poor tulip bulb harvest.
Tulip dealers bought call options to guarantee them the right to purchase a supply of bulbs at a stated price, in case bulb prices rose substantially. Tulip growers bought put options as insurance that they could sell their bulbs at a stated price after the harvest.
A secondary market in tulip contracts evolved, and speculators began trading contracts based on price fluctuations, rather than manage the business risk of a poor harvest. Tulip bulb prices skyrocketed, and many members of the public began using their savings to speculate.
Soon afterward the Dutch economy collapsed, partly because of speculators who REFUSED TO HONOR THEIR OBLIGATIONS UNDER THE CONTRACTS. The government tried to force people to uphold the contracts, but many never did. Not surprisingly, options developed a terrible reputation throughout Holland and Europe.
Options rose again in popularity in England about 50 years later. …
… When the price plummeted, many speculators COULD NOT FULFILL THEIR OBLIGATIONS. As a result, options trading was declared illegal, although options trading did continue on a smaller scale.
OPTIONS TRADING IN THE UNITED STATES
… the reputation of options as an investment tool did not improve in the 1900s when some abusive practices in the financial markets were unchecked. One such practice was the opening of what are referred to as BUCKET SHOPS. …
Public perception of options declined further in the 1920s when brokers were granted options on certain securities in exchange for an agreement to recommend these stocks to their customers. Small investors were the main target for these MANIPULATIVE SCHEMES, and many lost great sums of money. Due to these abuses of options, the fate of options as an investment vehicle was uncertain.
CREATION OF THE SECURITIES AND EXCHANGE COMMISSION
Following the stock market crash in 1929, Congressional hearings were held to determine how to regulate the securities industry and hopefully prevent market crashes in the future. These hearings resulted in the formation of the Securities and Exchange Commission (SEC).
Many of the option pools had folded following the 1929 stock market crash. After the SEC was created, it began to review the options business and the manipulative schemes of the 1920s. The fate of the options market appeared dismal.
… a bill concerning the options market was read. The bill stated that "…not knowing the difference between good and bad options, for the matter of convenience, we [Congress] STRIKE THEM ALL OUT".
Congress had judged the option business by the option pool stock offerings … and concluded that ALL OPTIONS TRADING WAS MANIPULATIVE.
Options have been around for hundreds, if not thousands of years.
This section is from the book "Money And Investments", by Montgomery Rollins.
… “Bucket shops" are run by irresponsible brokers… in the case of a " bucket shop," the stock itself is usually not purchased or sold for the customer. If the order is actually executed upon a bona fida exchange, then the "bucket shop" PUTS IN A CONTRARY ORDER FOR A LIKE AMOUNT. For example, a " bucket shop " would sell an amount equivalent to the customer’s purchase, or, likewise, purchase an equivalent amount to his sale, thus in no event carrying stocks. It amounts to the customer wagering his money upon a given stock either going up or down, and THE "BUCKET SHOP," ACCEPTING HIS WAGER, GAMBLES THE OTHER WAY; and, in the long run, they, like most other gambling establishments, come out winners. … He will be charged the buying and selling commission, and interest on the account, the same as in a legitimate broker’s office, although NO STOCK WILL BE ACTUALLY PURCHASED OR SOLD. …
… legitimate stock exchange brokers have been known to "bucket" their orders…
shop (stock market)
Bucket shop is a brokerage firm that “books" (i.e., takes the opposite side of) retail customer orders WITHOUT ACTUALLY HAVING THEM EXECUTED ON AN EXCHANGE. … THE TRANSACTION GOES ‘IN THE BUCKET’ AND IS NEVER EXECUTED. …
New York Times - Aug 24, 1907
PLTTSBURG, Aug 23.—Chief of County Detectives George H. Waggoner said this afternoon that he would tomorrow raid every bucket-shop in Pittsburg… Waggoner classes the bucket-shops just the same as poker or faro rooms.
“The only difference between the bucket-shops and the poker and faro rooms is that the latter are a little more on the square. In them the player has some little chance for his money, but in the bucket-shop HE HAS ABSOLUTELY NONE. My detectives have visited a number of the bucket-shops lately and transacted business in all of them. In not one Single instance did they win a penny. …
shop (stock market)
Bucket shop is a brokerage firm that “books" (i.e., takes the opposite side of) retail customer orders WITHOUT ACTUALLY HAVING THEM EXECUTED ON AN EXCHANGE. … THE TRANSACTION GOES ‘IN THE BUCKET’ AND IS NEVER EXECUTED. …
In 1978, Tuscaloosa News reports about Swindlers invading commodities.
By JACK ANDERSON
Jan 3, 1978
… a new breed of swindler has grown up around the commodity exchange. These modern Samuel Insulls are known in the trade as “BUCKET SHOP OPERATORS” and they are making a killing in COMMODITY OPTIONS — at the expense, of course, of the unwary investors.
Many investors, trusting the federal regulators to protect them from being fleeced, purchase their options from sleazy firms… The firms simply pocket the custuniors’ money and TOSS THE OPTIONS INTO A TRASH BUCKET. That’s why these outfits are called “BUCKET SHOPS.”
The bucket system pays off because eight out of 10 buyers lose money on their options. …
In an attempt to keep up with the frenetic market, the Commodity Futures Trading Commission has stumbled badly. A House Appropriations subcommittee has concluded tentatively, according to a draft report, that the commission “has not been able to deal with the FRAUD-RIDDEN COMMODITY OPTIONS INDUSTRY”
Indeed, the agency has acknowledged its own failings in an Internal memo, which we have obtained. According to the memo, staff assigned to get repayments for cheated customers has been “OVERWHELMED.”
This candid document, dated Dec 22, claims “virtually every section of the CFTC is clogged because of the options problems.” This has forced the agency to shunt experts from other fields into the options area.
Footnote: The House Appropriations subcommittee and the General Accounting Office REFUSED TO DISCUSS THEIR SECRET REPORTS ON THE SCANDALOUS SITUATION. …
Options: Nothing But a Fancy Name For Bucket Shops
Newsday - Aug 28, 1988
By Robert Sobel
In the United States, establishments MASQUERADING AS BROKERAGES where speculators SUPPOSEDLY purchased stock on margin were dubbed BUCKET SHOPS. …
Many of the bucket shops transacted whatever actual buys and sells they placed at the Consolidated Stock Exchange on lower Broadway. For a while, it was a thriving concern – there were years during which volume at the CSE was larger than that at the New York Stock Exchange, galling because the CSE traded many of the same stocks as the older market. Both the bucket shops and the CSE were KILLED BY STATE INVESTIGATIONS – supported by the NYSE – and by the late 1920s both were no longer there.
Tribune - Feb 11, 1892
has opened the eyes of many members of the Board of Trade of this and other
cities to the fact that the buying and selling of privileges,
otherwise defined as options or puts and calls, CANNOT BE
DEFENDED … AS LEGITIMATE TRADING.
Sam Knows Best about the Economy – Except When He Doesn’t
14 months ago
March 5, 2009 – … beginning in the 1970’s Congress decided that IT WOULD PREEMPT CERTAIN STATE LAWS, and by the beginning of this decade THEY HAD PRETTY WELL DECIMATED STATE AUTHORITY TO REGULATE BUSINESSES IN THE FINANCIAL SECTOR. We’re going to take a little time to examine why now is the time to return to a period of state’s rights and limited federal regulation.
State’s Rights and the Economy
To understand how preemption of state’s rights undermined the US economy, you don’t have to look far. A great example comes from STATE BUCKET SHOP LAWS.
If you have never heard of a bucket shop, don’t feel left out. …
By 1929, bucket shops WERE ILLEGAL IN VIRTUALLY EVERY STATE IN THE COUNTRY. The states had outlawed them for two reasons. One was that BUCKET SHOPS COULD BUY OR SELL LARGE BLOCKS OF STOCK AND MANIPULATE STOCK PRICES. This meant that if a lot of their clients were betting on a stock going up in price, they could sell a large block of stock in that company. This would cause the stock price to fall and allow them to keep all of their investors’ money. In other words, THEY WERE FRAUDSTERS. …
Secondly, the market manipulation that bucket shops were responsible for had been blamed for destabilizing the markets, and had caused many investors to lose large sums of money. Simply put, the only people that benefited from bucket shops WERE THE PEOPLE THAT RAN THEM.
What the bucket shops were selling are what we commonly refer to as derivatives. …
Nine years ago, Congress passed a law called the Commodity Futures Modernization Act of 2000. On December 21, 2000, then President Bill Clinton signed the law which contained a preemption of state enforcement of bucket shop laws by including a line that reads, “This Act shall SUPERSEDE and PREEMPT the application of any state or local law that PROHIBITS OR REGULATES GAMING OR THE OPERATION OF BUCKET SHOPS."
With the stroke of a pen, President Clinton and Congress used their regulatory authority to completely deregulate a large market. In fact, it was a market that had been considered so important to financial stability that a century earlier IT HAD BEEN REGULATED OUT OF EXISTENCE ENTIRELY. …
Google Archive News results for "BUCKET
IMPLICATIONS: See below.
MEDIA BLACKOUT: The Federal Reserve’s activities in derivative markets, especially its use of enormous quantities of PUT OPTIONS.
The Federal Reserve publishes, after a five year delay, the minutes of the Federal Open Market Committee Meetings. Normally, these transcripts are censored and the word “unintelligible” is inserted in the place of any sensitive material. However, during the middle of 2008 in the middle of the financial crisis, a mistake was made.
The transcript from Minutes of the Federal Open Market Committee Meeting on June 24-25, 2003 contains some of the most damning evidence of government fraud available anywhere. In this transcript, the Federal Reserve irrefutably admits extensive activities in derivative markets.
The Federal Reserve reports that Minutes of the Federal Open Market Committee Meeting on June 24-25, 2003.
(if this link goes dead, I will replace it)
of the Federal Open Market Committee Meeting on June 24-25, 2003
CHAIRMAN GREENSPAN. Without objection they are approved. We turn now to Mr. Reinhart and Mr. Kos.
MR. REINHART. Thank you, Mr. Chairman. I’ll be referring to the material called “Conducting Monetary Policy at Very Low Short-term Interest Rates” which was on the table when you came in. It’s the same as the material I sent to you electronically last week. …
The Committee could SANCTION THE USE OF VARIOUS DERIVATIVE INSTRUMENTS on conventional Desk operations as a way to influence longer-term yields, which is outlined in exhibit 8. Options of some form are a possibility, as are forward operations. For example, we could sell a sequence of options on term RPs, covering interlocking time segments that collectively extend as far into the future as desired. In this way, longer-term yields could be influenced and a visible signal of the Fed’s desired path of interest rates could be demonstrated. Forward operations in term RPs could be structured in a similar fashion. Alternatively, we could sell PUT OPTIONS on longer-term Treasury securities at strike prices associated with desired longer-term yields. …
The sale of any OPTIONS, or forwards for that matter, would not affect the domestic portfolio immediately and, in the case of options, may never do so. Auctioning derivatives is something we already have experience doing. In the event that options were ever exercised, the impact on the portfolio would be profound, …
Of course, a successful program would be one in which any options sold would never be exercised. … options … could be structured to correspond directly with a policy commitment on the path of future short-term rates… For these same reasons, options on Desk RPs could be structured to correspond directly with a policy commitment on the path of future short-term rates, and they could be effective through one of several channels. First, even a relatively small program would undoubtedly add symbolic weight. Second, they would represent a monetary cost to the Federal Reserve of deviating from the implied path of future short-term rates, which might be seen as further binding the Committee to that path. For this effect, THE MORE OPTIONS SOLD THE BETTER. Third, A LARGE VOLUME OF OPTIONS SOLD could reduce risk premiums embedded in longer-term rates, independent of the level of credibility about any policy commitment. Here too, THE MORE SOLD THE MORE EFFECTIVE. … ultimate success would hinge on THE QUANTITY OF OPTIONS SOLD—that is, how big a bet the Federal Reserve were willing to make. The more options sold, the greater the chance they would have the desired effect on longer-term rates even if not associated with any policy commitment, either by raising the costs to the Fed associated with options being exercised, or by lowering risk premiums on longer-term rates. But of course the risks to the portfolio, to reserve levels, and of capital losses would rise in equal measure. And an exit strategy for options may not be as straightforward as it seems, even apart from the possibility of their being exercised. Of course, the Desk could stop auctioning new options at any time. But a decision to stop selling more options or not to issue new contracts with later expiration dates as time passes likely would be interpreted in the market as a statement about future policy intentions. The resulting rush to unwind market positions would likely be very disruptive and send yields sharply higher.
The following is a slide used by Reinhart during meeting.
(if this link goes dead, I will replace it)
Google Archive News results for FED OTC DERIVATIVE threat
IMPLICATIONS: The US is selling insurance on its own debt to lower its interest rates! The Federal Reserve also admits that “Auctioning derivatives is something we already have experience doing.”
Try searching Google archive news for derivatives financial crisis, and you wouldn’t find a single article covering this story!
The clearance and settlement system of the U.S. securities markets has been SO
BADLY CORRUPTED AND IS CURRENTLY DYSFUNCTIONAL.
A comment letter to the SEC explaining the abysmal failure of Regulation SHO to date.
File No. S7-12-06
Subject: File No. S7-12-06
September 15, 2006
Ms. Nancy M. Morris, Secretary
Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549-0609
Re: Amendments to Reg SHO Release No. 34-54154
File No. S7-12-06
Thank you for the opportunity to comment on the abysmal failure of Regulation SHO to date, and specifically on the amendments the SEC is proposing to fix it.
As other commenters have pointed out, Section 17A of the 1934 Securities Exchange Act is very clear in mandating "prompt and accurate clearance and settlement of securities transactions, including the transfer of record ownership…"
Wall Street has become very adept at the "clearance" part of the transaction — that is, the taking of a customer’s money for the purchase of securities and the charging of commissions and fees for the purchase of securities. But Wall Street has more and more ignored its fiduciary duty in completing the "settlement" part of the transaction that is, delivering the securities the customer has paid for…even though non-delivery of stock is expressly forbidden by Section 9 of the Securities Exchange Act. More often than not, what is "delivered" is an electronic entry in the customer’s account representing an IOU for the security they purchased — an IOU the customer is completely unaware he holds, and which too often is unsupported by any underlying share certificate.
This delinking of the clearance and settlement of transactions has resulted in hundreds of millions of undelivered equity securities being outstanding on any given day in the U.S. equities markets. THIS IS BLATANT AND OUTRIGHT FRAUD — the taking of money for a product which is never delivered.
As far as elimination of the Grandfather Exception to Reg SHO, I find it ironic that the SEC would even ask for comment on something which is so clearly illegal and in such obvious violation of Section 17A of the 1934 Securities Exchange Act to begin with. The SEC does not now, nor has it ever, had the authority to exempt illegal behavior. Period. What on earth was the SEC thinking when it allowed implementation of the Grandfather Exception? Section 36 of the 1934 Act specifically prohibits the SEC from creating any exceptions to the 1934 Act except "…to the extent that such exemption is necessary or appropriate in the public interest, and is consistent with the protection of investors."
Allowing Wall Street firms to continue to NOT deliver the securities their customers have already paid for – which is what the Grandfather Exception to Reg SHO does — is nothing more than condoning and institutionalizing fraudulent activity and theft which has already taken place. The Grandfather Exception must be eliminated. DTCC participants and options market makers have had well over a year and half to close out the fails which existed when Reg SHO was first implemented. If they have not done so by now, they obviously don’t intend to, and these fails should be immediately bought-in. That the grandfathered fails have not been closed out by now is testament to the confidence naked short sellers and their facilitators have that their powerful allies at the DTCC will continue to protect them from any enforcement of SEC delivery rules.
It is noted that this blatantly illegal "grandfathering" provision was NOT part of the proposed Reg SHO language which was originally put out for public comment prior to Reg SHO implementation. No wonder. I guess even the SEC was too embarrassed to risk doing that.
One can only assume that the SEC was convinced by DTCC participants–i.e., powerful Wall Street interests–that the fail-to-deliver problem was SO PERVASIVE AND SO SYSTEMIC in the U.S. markets that THERE WAS RISK OF A MARKET MELTDOWN if they were actually forced to deliver all the securities they had fraudulently created out of thin air and "sold" to their unsuspecting customers over the years. And as they so often have over the last 35 or so years, the SEC caved in and did what Wall Street wanted …
… the 11,000 DTCC participants are able to loan out over and over and over again the same shares, and are able to sell shares which don’t exist, much of the time never delivering to buyers the securities they thought they had bought, but instead are allowed to DECEITFULLY MARK THEIR CUSTOMER ACCOUNT STATEMENTS AS IF THEY HAD DELIVERED THE SHARES … to the clear detriment of investors’ retirement and investment accounts.
By whatever name you call it — market manipulation, naked short selling, failing to deliver, or stock counterfeiting [selling imaginary shares] — it all describes FRAUDULENT STOCK TRADES THAT HAVE BECOME A SPREADING CANCER IN THE SYSTEM — a malignancy that threatens to bring down the entire U. S. equity market.
As a long-time observer and investor in the U.S. markets, it appears to me that the "…prompt and accurate clearance and settlement of security transactions…" mandate of the 1934 Securities Exchange Act began to unravel about the time of the formation of the DTC and the NSCC–and later, the DTCC. These organizations, formed in response to the paperwork crisis of the late Sixties, were staffed and advised by people who had Wall Street’s best interests at heart — not investors. …
For the SEC to remain true to its Congressionally mandated mission, it must realize that the DTCC is not its friend. It is not the friend of investors. Its sole motivation is to increase and protect the profits of its 11,000 participant firms. Asking–or assuming–that this organization will adhere to the investor protection mandates of the 1933 and 1934 Securities Exchange Act on the "honor system" will not work.
I note with shame–as should the SEC–the comment letter from Research Capital Corporation (RCC), a Canadian brokerage firm that has tried to "buy-in" failed deliveries of Overstock.com on 39 separate occasions. In each attempted buy-in, the failed delivery has simply been replaced by another delivery commitment which also fails. [a "buy-in" is basically a process to force delivery of securities.]
This brokerage firm also states it has requested proxies for its clients which it is not receiving — which reveals another problem engendered by naked shortselling. That is, the massive over-voting of proxies. A number of independent studies, as well as work done by the Securities Transfer Association, has revealed that over-voting has taken place in every single company studied. Such over-voting means only one thing: That there are far more people and institutions who think they own shares than there are legitimate shares to go around, and that there are millions of "phantom" or "counterfeit" shares in clients’ accounts — IOU’s with no underlying stock certificates supporting them. ADP actually has an algorithm that "adjusts" shareholder votes by throwing out votes, MAKING A MOCKERY OF THE SHAREHOLDER RIGHTS which are supposed to attach to share ownership.
As Frank Partnoy, law professor at the University of San Diego, has noted, "It might seem incredible, but shareholder voting in developed countries is more tainted than voting in undeveloped ones. Some shareholders’ votes are counted, others are not."
Since the clearance and settlement system of the U.S. securities markets has been SO BADLY CORRUPTED AND IS CURRENTLY DYSFUNCTIONAL, RCC suggested in its comment letter that the SEC review the buy-in rules of other countries, including those used in Canada. They could also have suggested Australia, Japan, Euronext, the London Stock Exchange, Singapore, Austria, and Germany. All of these countries and exchanges have strict share delivery requirements, and all function very well without the numerous delivery "exceptions" allowed by the SEC for certain favored Wall Street groups.
Is it not embarrassing that the capital markets of all these other countries are more honest in their clearing and settlement processes than the United States? [DTCC is bringing the America’s “clearing and settlement processes” to Europe through its subsidiary, the EuroCCP]
Unfortunately, RCC is not the only foreign company to see the U.S. securities market for the way it is. While Wall Street/DTCC interests have been successful in having most New York financial publications–which they largely control– DOWNPLAY THE MAGNITUDE OF THE FAIL-TO-DELIVER PROBLEM, a perusal of foreign media and investor message boards and internet blogs, all with an international audience, clearly shows that the perception is growing all over the world that the U.S. equity securities markets are as crooked, corrupt and manipulated as those of any third world country…and that the SEC is doing nothing about it.
[Read entire letter here]
Florence Harmon Acting Secretary Securities and Exchange Commission 100 F.
Street, NE Washington, DC 20549-9303 Re: Release No. 34-58773; File No.
87-30-08 Amendment to Regulation SHO Interim Final Temporary Rule
THE CRITICAL ROLE OF THE “BUY-IN”
As many of you know the single most important deterrent to abusive naked short selling crimes is the FEAR of an untimely buy-in. Qualifying as an “untimely” buy-in would be one executed in the midst of a “short squeeze”. The “buy-in” is also the ONLY cure available when the seller of securities absolutely refuses to deliver to the buyer that which he sold. The “buy-in” or the fear thereof is the ultimate provider of investor protection and market integrity when it comes to abusive naked short selling frauds.
Over the years the NSCC management has rather curiously attained a monopoly on 15 of the 16 sources of empowerment to execute buy-ins. The 16th source of empowerment belongs to the brokerage firm of the buyer that failed to get delivery of that which he paid for. Unfortunately for investors NSCC policies ESSENTIALLY "BRIBE” the buying brokerage firm into NOT opting to exercise his empowerment to execute a buy-in when he does not receive delivery of that which his client purchased. This is done via allowing the buying brokerage firm to earn interest off of the funds of the investor UNTIL delivery occurs. This makes the buying brokerage firm the last party in the world wanting to execute a buy-in of a fellow NSCC participant.
Further to this the NSCC has introduced a failsafe mechanism to further circumvent buy-ins. THEY EXPRESSLY FORBID THEIR PARTICIPANTS FROM EXECUTING OPEN MARKET BUY-INS ON FELLOW NSCC PARTICIPANTS. What they do is to mandate any NSCC participating brokerage firm contemplating executing a buy-in to file an “Intent to buy-in” with NSCC management. Management than has the right to deal with this “Intent” filing in any manner they so choose. … They could also opt to just sit on it and do nothing.
Why is this THEORETICAL “securities cop” known as the NSCC management so obsessed with circumventing buy-ins? The 2003 study of Evans, Geczy, Musto and Reed revealed that only one-eighth of 1% of even mandated buy-ins ever occurs on Wall Street. …
Another consequence of this heinous behavior is that U.S. corporations SELECTIVELY have become singled out as the targets for worldwide abusive naked short selling attacks as the clearance and settlement systems in use in other countries have not yet been “captured” by the insatiable greed of their Wall Street “bankster” counterparts to the degree that ours has. The clearance and settlement systems in almost every other country still follow the foundational tenet recommended by IOSCO and the Bank for International Settlements (BIS) namely that the seller of securities is not allowed to access the funds of the purchaser of securities UNTIL “good form delivery” has been accomplished. This is also referred to as “delivery versus payment” or “DVP”.
The foundation for the DTCC-administered clearance and settlement system in use in the U.S. has been illegally converted to one based upon mere “COLLATERALIZATION VERSUS PAYMENT” or “CVP” wherein THE SELLER OF SECURITIES IS ONLY ASKED TO COLLATERALIZE THE MONETARY AMOUNT OF THE FAILED DELIVERY OBLIGATION ON A DAILY MARKED TO MARKET BASIS. This policy invites abusive naked short selling activity in that the failures to deliver shares results in the procreation of what are referred to as “securities entitlements” that are allowed to be readily sellable as if they were legitimate “shares” of a corporation due to the wording unfortunately incorporated into the text of UCC Article 8-501.
As these readily sellable “securities entitlements” invisibly accumulate in the share structure of U.S. corporations targeted for destruction then the share price by definition must tumble due to the interaction of supply and demand forces. This drop in share prices then results IN A LESSENING OF THE COLLATERALIZATION REQUIREMENTS which in turn UNCONSCIONABLY ALLOWS THE INVESTMENT FUNDS OF UNKNOWING U.S. INVESTORS TO FLOW INTO THE WALLETS OF THOSE THAT SOLD NONEXISTENT SECURITIES and of course refused to deliver that which they sold.
The net result is that the share prices in certain U.S. corporations deemed to be an easy prey unfortunate enough to have been targeted for an abusive naked short selling attack have been essentially “rigged” to go nowhere but down. …
One problem common to both equity and bond market settlement failures is the use of customer funds between the settlement date and the date when securities are eventually delivered (the close-out date). Fleming and Garbade (2004) explain it this way in the case where the trading is among dealers:
“Because the buyer does not pay the seller until the seller delivers the securities, the seller loses (and the buyer gains) the time value of the transaction proceeds over the fail interval. … The prospect of losing the time value of the transaction proceeds provides an incentive for the seller to make delivery on the settlement date or as soon as possible thereafter.
Unfortunately, individual investors (customers) are not included in this reciprocal arrangement. Retail investors are charged the cash portion of their transaction on settlement date REGARDLESS OF WHETHER OR NOT THE SELLER FAILS TO DELIVER SECURITIES TO THE BUYER’S BROKER (Alsin 2006). The vast majority of bond trades involve non-dealers (customers). According to SEC (2004). 87.5% of trades in municipal bonds in 2000 involved customers. While the buyer’s broker may enjoy the proceeds of investing the purchase price of the bonds, the individual investor does not. Furthermore, industry practice, supported by the Uniform Commercial Code, allows the executing broker to credit the customer account with an “entitlement” so that THE INVESTOR IS NOT INFORMED THAT THE BROKER IS USING THE PROCEEDS OF THE TRADE WITHOUT COMPENSATION. Unlike securities lending, THIS DOES NOT REQUIRE THAT THE INVESTOR HAS A MARGIN ACCOUNT AGREEMENT, whereby they are made aware when the account is opened that the broker may profit from funds and/or securities left in their account. EVERY CUSTOMER ACCOUNT IS VULNERABLE TO THIS PRACTICE.
IMPLICATIONS: I know it is complicated, but there are millions of “securities entitlements” (stock IOUs) floating around the system. These “securities entitlements” are collateralized by US treasuries.
It is essensial to note that the more “securities
entitlements” are created, the more US treasuries need to be bought
for use as collateral. There are currently hundreds of billions,
if not trillions in treasuries serving as collateral for “securities
entitlements”. (remember media blackout on the government’s
incentive for financial fraud? This is where it becomes relevant.)
Also, if brokers were forced to buy-in, the collateral would need to be liquidated, and it is doubtful that the treasury market would survive the avalanche of treasuries that would need to be sold…