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Microcap & Penny Stocks : Naked Shorting-Hedge Fund & Market Maker manipulation?
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To: The Ox who wrote (4235)2/27/2009 7:29:51 AM
From: rrufff   of 5034
 
That's a great article and I urge all to read. It's broader than our topics here and covers much of the financial turmoil that we see, routed in incompetence and greed, in government and our markets.

Here's a bit more from it, on topic, in the sense that derivatives are just another way of doing what amounts to naked short selling, transforming free markets from vehicles of capital formation and hedging, into race cars of virtually endless unregulated gambling greed:

The US government should never have used billions of taxpayers' dollars to pay off swap bets as it did when it bailed out the insurance company AIG. This was a stunning waste of a vast sum of money. The federal government should declare all swap agreements to be fraudulent contracts, except for a single swap held by the owner of the asset. Simply wiping out these fraudulent contracts would remove the bulk of the vast overhang of "troubled" assets that threaten financial markets.

The billions of taxpayers' dollars spent buying up subprime derivatives were also wasted. The government did not need to spend one dime. All government needed to do was to suspend the mark-to-market rule. This simple act would have removed the solvency threat to financial institutions by allowing them to keep the derivatives at book value until financial institutions could ascertain their true values and write them down over time.

Taxpayers, equity owners, and the credit standing of the US government are being ruined by financial shysters who are manipulating to their own advantage the government's commitment to mark-to-market and to the "sanctity of contracts." Multi-trillion dollar "bailouts" and bank nationalization are the result of the government's inability to respond intelligently.
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