Monday, August 11, 2008

Not A Chance Of A Serious SEC Investigation of the Bear Stearns Collapse

As I have written before, an insider at the CBOE told me that the government killed the CBOE's involvement in investigating who bought put options on airline stocks just prior to 9-11. Records were destroyed.

If the SEC didn't have the balls to step up to the plate and do a legitimate investigation of an attack on America, they sure as hell are not going to stick their necks out trying to take down the Wall Street establishment.

Bloomberg is featuring a story today on the semi-suspicious trading in Bear Stearns put options, and supposed investigations:

On March 11, the day the Federal Reserve attempted to shore up confidence in the credit markets with a $200 billion lending program that for the first time monetized Wall Street's devalued collateral, somebody else decided Bear Stearns Cos. was going to collapse.

In a gambit with such low odds of success that traders question its legitimacy, someone wagered $1.7 million that Bear Stearns shares would suffer an unprecedented decline within days. Options specialists are convinced that the buyer, or buyers, made a concerted effort to drive the fifth-biggest U.S. securities firm out of business and, in the process, reap a profit of more than $270 million...``Even if I were the most bearish man on earth, I can't imagine buying puts 50 percent below the price with just over a week to expiration,'' said Thomas Haugh, general partner of Chicago-based options trading firm PTI Securities & Futures LP. ``It's not even on the page of rational behavior, unless you know something.''...

During the next four days, New York-based Bear Stearns unraveled in the swiftest investment-banking failure in Wall Street history. Speculation about a cash shortage proved self- fulfilling, causing customers and lenders to demand their money back. Bear Stearns's stock sank 47 percent to $30 on Friday, March 14. That's when the Fed moved to stave off a panic by helping the U.S. Treasury arrange JPMorgan Chase & Co.'s purchase of the company for $2 a share, a price unimaginable to the firm's 14,000 employees and more than 500 shareholders.

In the aftermath, Bear Stearns Chief Executive Officer Alan Schwartz told Congress that the firm was toppled by rumor- mongering and abusive trading. Regulators have begun peeling back trading records, hunting for suspects...

Evidence of any scheme to bring down Bear Stearns is most likely buried in options data...

But even further, there was an important meeting at the Fed on March 11, where Wall Street's top players were represented, except for Bear Stearns.The s#@*t really hit the fan for Bear after that meeting broke.

Eric Salzman lists the participants at that meeting and suggests questions that should be asked of them:

[S]ubpoena the following individuals and have them testify what the subject of their meeting in New York Citiy was on March 11, 2008

Ben Bernanke - Federal Reserve
Tim Geithner - NY Fed
Lloyd Blankein - Goldman Sachs
Dick Fuld - Lehman Brothers
James Gorman - Morgan Stanley
John Thain - Merrill Lynch
Robert Rubin - Citigroup
Steve Schwarzman - Blackstone
Ken Griffin - Citadel

Cox should directly ask each of these individuals;

Was Bear Stearns liquidity situation discussed?
If so, what was revealed?
If so, what action did each participants take, with regard to their relationship with Bear Stearns, immediately following the meeting?

Further, it should be asked, why wasn't Bear Stearns at the meeting?

But take a look at that list again: Ben Bernanke, Tim Geithner, Lloyd Blankein and Robert Rubin are on it, and you can be sure Hank Paulson was somewhere lurking in the background. That group against the SEC's Chris Cox. It's like Russia against South Ossetia, and Cox is South Ossetia.

Maybe, Cox nails some fall guy, but that's not even likely, maybe we will hear it was just a hedged position some trader put on to protect his other positions.

The Bear Stearns takedown was done at top, top levels. A hedge fund couldn't possibly have done it on its own. Stay tuned

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