Five Years Late and a Trillion Dollars Short

On Tuesday, the SEC issued an emergency rule in an attempt to curb naked short selling in 19 major financial institutions, including Goldman Sachs, Morgan Stanley, Citigroup, and JP Morgan Chase and Company.

SEC Chairman Christopher Cox heralded the new rules: “The SEC’s mission to protect investors, maintain orderly markets, and promote capital formation is more important now than it has ever been. Today’s Commission action aims to stop unlawful manipulation through ‘naked’ short selling that threatens the stability of financial institutions. We will continue our vigorous commitment to investors by working within the SEC and in close cooperation with our regulatory counterparts to promote the continued health and vibrancy of our markets.”

Are you faulking kidding me? After years of efforts to bring attention to the rampant corruption in our financial system by advocates for stock market reform, now this is an emergency? Five years ago we were voices in the wildness, wild-eyed conspiracy theorists who were first ignored, and then reviled by the SEC, Congress, and the major media.

In its most fundamental form, naked short selling is simply stock counterfeiting. In legal short selling, a trader (usually from secretive and barely regulated hedge funds, whose investors were traditionally multi-millionaires) “borrows” shares of stock from shareholders of a company and then sells it, betting that the price will go down. The original concept was that short sellers would help to balance the market by preventing stocks from becoming overvalued. Instead, hedge funds have grown over the past decade at an exponential rate, with total assets of over $3 trillion and growth of nearly $500 billion last year alone. Hedge fund managers become instant millionaires, with the top five managers earning over one billion dollars each in 2007.

Rather than wait for stocks to fall based on fundamentals or evaluation, they found ways to actually manipulate the prices of stocks, using either loopholes that allowed them to sell shares without ever borrowing them, or simply relying on the SEC’s lax enforcement to get away with blatant violations of existing rules. Throw in a steady stream of often unsubstantiated rumors leaked to financial “journalists” who dutifully reported them as news, and a company’s stock could be either manipulated to unrealistic highs, or driven down to almost nothing. In many cases, companies were actually forced into bankruptcy, costing America jobs, tax revenue, and destroying the wealth of our country. Although manipulation of our financial system has been way of life for decades, it has reached critical mass in the past few years. It is, as I titled it in my very first article on the topic in March of 2004, Financial Terrorism in America. It has been estimated that the manipulation of our financial market has cost America trillions of dollars.

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This recession could easily tip into a depression

In the past few years, the same hedge funds that have decimated our financial markets have used loopholes in the oil futures trading market to drive oil prices to levels that have little to do with supply and demand, just as they manipulated stock prices.

By manipulating gas prices in a neverending upward spiral, they are also negatively affecting the price of every single necessity of every single American. Gas prices rise, food prices follow, as do retail prices of other staples…clothes, building materials, and on and on. Meanwhile, the squeeze caused by the lack disposable cash is felt by industries who rely on recreational dollars…hotels, reaction resorts, airlines, and again…on and on.

The rampant corruption that has always existed to facilitate the flow of wealth from the middle class to the ultra-wealthy is now reaching down into the already nearly empty pockets of the lower class and taking their last few dollars.

So who owns these hedge funds who have been systematically destroying our country’s economy, aided and abetted by a system that promises to protect investors and promote integrity, but does neither? The largest hedge fund manager in the world is none other than JP Morgan Chase, one of the same companies that the SEC has suddenly decided needs to be protected from the very same predatory behavior that they have used to rob investors blind for years. Among the other top hedge fund managers is Goldman Sachs, another company that the SEC now sees as a helpless victim of naked short selling. Goldman Sachs and Morgan Stanley are the two leading traders in the oil futures market, followed closely by Citigroup and JP Morgan Chase, all of whom are among the so-called victimized companies now receiving preferential treatment from the SEC.

Not only do they control the hedge funds (and apparently our federal regulatory agencies as well), but this handful of corporate giants also sit on the boards of directors of every major media company. As a result, they control not only the flow of money from the middle and lower class into the pockets of the ultra-wealthy; they control the flow of information as well. It’s no wonder that the media feeds the public pointless fodder and distracts viewers with trivial issues that really have very little to do with the Big Picture. While we’re distracted by John McCain’s economic adviser’s “Americans are whiners” comments, Jesse Jackson’s castration faux pas, and The New Yorker’s decidedly disgusting Obama cartoon cover, our country is being dismantled dollar by dollar.
Oh, and one more thing. U.S. Treasury Secretary Henry Paulsen is the former CEO of Goldman Sachs. In this case, the proverbial fox is truly guarding the hen house.

Eventually, Congress will, with considerable fanfare, pretend deal with the issue of oil futures speculation, just at they have slowly begun to deal with our rigged stock market. They will close at least some of the loopholes that allow hedge funds controlled by Goldman Sachs, Morgan Stanley, Citigroup, and JP Morgan Chase to artificially inflate oil and gas prices and steal money from every single person in America. But as with the issue of stock market manipulation by naked short selling, corporate fraud, and the more recent issue of subprime mortgage manipulation, they will only deal with it after it’s too late. They will lock the vault after the robbery is done, after the scam has largely run its course. And of course, for every door they close, they will open two more.

Unless Americans speak out by the millions, our nation will be bankrupt. Unless we demand that action be taken now…before it’s too late…America risks falling into a depression triggered by the ruthless greed of the rich and powerful. We are truly at a crossroad in our nation’s history. It is up to us to decide whether we choose the road to prosperity or ruin.

And that’s the Faulking Truth.

(Mark Faulk’s first book, entitled The Naked Truth: Investing in the Stock Play of a Lifetime, is now available at Buy it now while you still have a few dollars in the bank. Tune in with Mark Faulk and DeWayne Reeves every Friday from 9-10 AM CST on The Faulking Truth Show, and join Mark and Paul Faulk every Saturday from 1-2 PM CST on The Faulking Truth X2 Show at

by Mark Faulk
Jul 16, 2008


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