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Faulking Opinions - Nov 7, 2008 - Printable Version
- Feed me, Seymour!
by Mark Faulk
On June 26, 2004, stock market reform activist Dave Patch of www.investigatethesec.com received an email from lobbyist Jack Wynn, who was at the time representing the Small Public Company Capital Formation Club and trying to educate Congress and the White House on the issues of naked short selling and related issues plaguing our stock market. Wynn asked Patch if he could send him "all of your naked short selling memos" with the intent of "organizing a policy paper on this issue for distribution to the White House (which has requested it) and Members of Congress (who support us)." In a comment posted on The Sanity Check website, Patch later described his exchanges with Wynn:
"In 2004 Jack Wynn held a fundraiser for Congressman Rick Renzi (AZ) in which members of the small business council attended. I was extended an invitation to the $2,000/head event. Beyond Renzi, Watters out of California, and Kelly out of NY also supported the event as did members of the White House staff. Naked shorting was one of the subjects discussed and the White House staffers promised to stay in touch with the subject. Five months later these staff members asked Wynn for a White Paper on the subject and claimed 'Bush was concerned'."
In fact, in the infamous June 26, '04 email, Wynn ended by saying exactly that: "Hang in there. Bush is aware of this issue and is concerned." Patch at the time had already been pushing for reform in the stock market for over a year.
Over four years later, Patch and other advocates for stock market reform are still "hanging in there".
In the meantime, neither the SEC, Congress, or our current president have taken any serious action to fix the problems or close the loopholes in our system. Instead, they recently took the unprecedented action of voting to pump over $700 billion into the black hole that our financial markets have become (a number that exceeds one trillion dollars when the government's various individual bailouts are included). In the movie Little Shop of Horrors the main character is forced to commit unspeakable acts to placate the ravenous appetite of his Venus Flytrap, which has taken on human characteristics and is threatening to devour everything in its path, constantly imploring the timid shop owner to "Feed me, Seymour!"
And so it with the monster that we call Wall Street. The scope of the failed delivery of stocks and bonds has become so massive that it must be fed constantly or else it will devour everything in its path, and when that isn't enough to feed the best, it devours itself. Is our government so reactive and short-sighted that they would choose to ignore the blatant warnings and instead wait to respond only when the damage is already done? They knew, and yet they did nothing. And when they did finally react, it was to throw money into the mouth of the ravenous beast.
"Feed me, Seymour!"
We have a new incoming President, and he faces a monumental challenge trying to stem the flow of our nation's wealth into the black hole of Wall Street. Barack Obama received a mandate on Election Day, and the voters sent a clear message to our leaders in Washington: Fix the economy. Fixing the economy doesn't mean putting more Wall Street cronies in positions of power in our next administration, and it especially doesn't mean putting the foxes from Goldman Sachs in charge of the henhouse yet again.
President Bush might have been aware of the issue of stock market fraud and naked short selling, but President-elect Obama is being advised on it on a daily basis. His economic transition team is headed by economist Rob Shapiro, who is one of the most knowledgeable economists on the serious issues that plague our financial markets. Shapiro, the former Undersecretary of Commerce for President Bill Clinton, has done extensive research on the topic of stock market fraud, and has been calling for tighter regulations for years. In a comment on a proposed short selling rule change in December of 2003, he had this to say:
"To have a genuine impact on the efficiency and competitiveness of the equity markets, the regulations should provide much stronger disincentives for naked short sales. The integrity of the capital markets demands much stricter regulation than those currently proposed, much greater industry compliance than has occurred of late, and much tighter enforcement than has been seen thus far."
After years of the systemic problems in the financial market being ignored, maybe a marketwide meltdown is what had to happen finally bring closer scrutiny to the flaws in our financial system. Until the system itself is fixed, any money pumped into it is simply feeding the beast.
And that, as always, is the Faulking Truth.
(Mark Faulk’s first book, entitled The Naked Truth: Investing in the Stock Play of a Lifetime, is now available at www.thenakedtruthbook.com. Tune in with Mark and Paul Faulk every Saturday from 1-2 PM CST on The Faulking Truth X2 Show at www.toginet.com)
Contact Mark Faulk at faulkingtruth@gmail.com
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