Naked Short Sales Hint Fraud In Bringing Down Lehman

by Gary Matsumoto - March 19th, 2009 - Bloomberg News

As Lehman Brothers Holdings Inc. struggled to survive last year, as many as 32.8 million shares in the company were sold and not delivered to buyers on time as of Sept. 11, according to data compiled by the Securities and Exchange Commission and Bloomberg. That was a more than 57-fold increase over the prior year’s peak of 567,518 failed trades on July 30.

The SEC has linked such so-called fails-to-deliver to naked short selling, a strategy that can be used to manipulate markets. A fail-to-deliver is a trade that doesn’t settle within three days.

“We had another word for this in Brooklyn,” said Harvey Pitt, a former SEC chairman. “The word was ‘fraud.’”

From the ascendancy of Robert Rubin in the Clinton Days, the growing use of government rules to empower the most egregious crimes by Wall Street has ended free enterprise and turned it in to legal stealing. For 70 years naked short selling was a crime. Then that was ended. Why is anyone surprised that the trigger for our huge financial meltdown was naked short selling by corrupt members of Wall Street? Anyone suspect the master of market manipulation (the man who brought down the British Pound), George Soros, was behind it?