Sunday, October 4, 2009

DTCC - Wall Street's Untouchable Bookie


If my hunch is right, you're going to be hearing a lot about naked short selling in the coming weeks. That's because Rolling Stone is about to release a new article by Matt Taibbi on this controversial subject. And hopefully all that buzz will shed some light on one of Wall Street's most shadowy institutions - the DTCC (Depository Trust & Clearing Corporation). Read on!

[UPDATE] Here's a preview of Taibbi's upcoming article courtesy of the gang of idiots on MSNBC's Morning Joe. (BTW, how is it that racist Pat Buchanan is still allowed to appear on nationwide TV?)

Beware the Ides of March

As usual my best stories are the ones that I stumble upon accidentally. I was trying to find out if anyone had posted online excerpts from Matt Taibbi's latest Rolling Stone article titled "Wall Street's Naked Swindle". (OK, I wouldn't have been disappointed to find someone had uploaded the whole story, but so far that hasn't happened as far as Google knows. Maybe that's because the November issue of Rolling Stone hasn't hit the newsstands yet.)

I eventually found some excerpts on a site called Deep Capture. That wasn't too surprising because this site is well known for its battle against naked short selling, which is also the topic of Taibbi's latest article. For your benefit here's the link and an extended excerpt from the article.
Taibbi writes:

“On Tuesday, March 11th, 2008, somebody – nobody knows who – made one of the craziest bets Wall Street has ever seen. The mystery figure spent $1.7 million on a series of options, gambling that shares in the venerable investment bank Bear Stearns would lose more than half of their value in nine days or less. It was madness – “like buying 1.7 million lottery tickets,” according to one financial analyst.”

Bear’s stock would have to drop by more than half in a matter of days for the mystery figure to make a profit. And that is what happened.

As Taibbi explains, “the very next day, March 12, Bear went into a free fall…Whoever bought those options on March 11th woke up on the morning of March 17th having made 159 times his money, or roughly $270 million. This trader was either the luckiest guy in the world, the smartest son of a bitch ever or…Or what?”

Taibbi speculates (as has Deep Capture) that these options might have been purchased by somebody who was abusing the options market maker exemption to engage in illegal naked short selling. And Taibbi goes beyond speculation to state, as an obvious fact, that illegal naked short selling helped bring Bear Stearns to its knees.

Presumably operating under that assumption, the SEC issued more than 50 subpoenas to Wall Street firms in the wake of Bear’s collapse, but “it has yet to indentify the mysterious trader who somehow seemed to know in advance that one of the five largest investment banks in America was going to completely tank in matter of days.

Taibbi continues: “The SEC’s halfhearted oversight didn’t go unnoticed by the market. Six months after Bear was eaten by predators, virtually the same scenario repeated itself in the case of Lehman Brothers – another top-five investment bank that in September 2008 was vaporized in an obvious case of [naked short sellers engaging in] market manipulation. From there, the financial crisis was on, and the global economy went into full-blow crater mode.”
What caught my attention was the March 11th date that Taibbi highlighted as the day the crazy $1.7 million option "bet" was placed. This is the same date Goldman Sachs sent out a killer memo saying that Goldman would no longer honor counterparty claims from Bear Stearns as I pointed out in my article "How Goldman Sachs whacked Bear Stearns".
That morning Goldman Sachs's credit derivatives group sent its hedge fund clients an e-mail announcing another blow [...] on March 11, Goldman told clients it would no longer step in for them on Bear derivatives deals.
"Goldman told Wall Street that they were done with Bear, that there was [effectively] too much risk. That was the end for them."
I speculate in my article that this may very well have been the fatal blow that led to the demise of Bear Stearns. So lets assume that whoever took out the options knew that the GS memo was going to come out the very same day. Then it's not such a "crazy" bet after all.

Virtual Spy vs. Spy

But that's just the beginning of this story - as if that wasn't enough - because things got really interesting when I decided to catch up on the latest stories from Deep Capture. One story captured my attention. [Pun intended.]

The title of the story was innocuous enough, "The Register weighs in on our crusade". The write up hinted at a strange game of cat and mouse played in the virtual world of the world wide web, so I decided to take a look at the Register article that was mentioned.

The main story was intriguing enough, a security hole in the Yahoo message boards that allowed someone to insert javascript into the comments which could then be used to trace the IP of people posting messages, but the real jewel was contained in the last paragraph of the story.
A single Wikipedia edit links the Mantanmoreland account to a PC inside the Depository Trust & Clearing Corporation (DTCC). Owned by Wall Street investment banks that may have benefited from naked shorting schemes, the DTCC oversees the delivery of stocks on Wall Street. In other words, it is in a prime position to observe abusive naked shorting schemes. DTCC denies it has ever had any involvement with Gary Weiss.
Now if you've read my article "Phantoms of the Stock Market", you will understand my excitement at finding this link. The DTCC (Depository Trust & Clearing Corporation) is the key IMHO to unlocking the fraud that goes on in Wall St. Why? Because DTCC is the bookie for the banksters!

Remember how the feds finally took down Al Capone by getting hold of his books and charging him with avoiding paying Federal Income Taxes? The DTCC has all the records on naked short selling, but it's a private corporation owned by the Wall St. banks. You know, the very same banks that own that other "private corporation"that Ron Paul keeps trying to audit - The Federal Reserve. Maybe Ron Paul should shift his attention to auditing the DTCC, because that's where the bodies are buried.

OK, I got a little ahead of myself, so let me do some backtracking at this point.

Who is Gary Weiss?

This whole case revolves around the figure of Gary Weiss. So, who is he and why should we care? Well if your Patrick Byrne of Deep Capture you care a lot. It turns out that Gary Weiss has been hiding behind various internet aliases to attack Byrne and defame him. That's what he discovered once his associate, Judd Bagley, uncovered the IP that was placing fake posts in the Yahoo financial boards.

Gary Weiss it turns out has been leading a one man campaign against anyone who dares to question the validity of naked short selling. He has been hiding behind various internet alibis in order to maximize the impact of this campaign. You can get all the sordid details at Judd Bagley's blog if your really interested, so I won't repeat them here.

Where it gets interesting is that Gary Weiss has now been linked to the DTCC. So the question naturally arises - what's the nature of the relationship between Weiss and the DTCC? To put it more bluntly - is Weiss being paid by the DTCC to slander anyone that attacks the validity of naked short selling? Is Weiss a Hit Man for the DTCC?

Weiss goes after corruption on Wall St. - of the Italian variety

Weiss wrote an article back in December 1996 which appeared in Business Week titled "The Mob on Wall Street". Now with all the talk of Wall St. banksters these days, a title like this would be par for the course if written today. And you might think that the article would start with pictures of Hank Paulson, Ben Bernanke and Goldman Sachs CEO Lloyd Blankfein.

But this article was written back in 1996. Back in the 90s greed was still good. And the mob that Weiss was referring to was actually the Italian Mafia. It seems that the Mafia was moving in on the traditional Wall St. Bankers turf - and they didn't like it.

Along comes Gary Weiss to out the Mafiosos on Wall Street. Now I'm not taking sides, but it seems to me that this is a typical case of a criminal gang turf war. One side outs the other to the authorities and comes out the winner. It reminds me of the case in Boston where Whitey Bulger's Irish Mob outed the local Mafia to the FBI, while gaining the protection of the FBI to conduct their own criminal enterprise - including engaging in murder.

Was this the beginning of a new career for Gary Weiss as an economic Hit Man for hire? Weiss followed up his 1996 article with a book in 2003 titled "Born to Steal", with the subtitle of "When the Mafia Hit Wall Street". You get the picture.

With all of that interest in dirty dealing on Wall Street, how did Weiss miss a big fish like Bernie Madoff? Could it be because Madoff wasn't Italian enough? As Gerald Celente has frequently commented... if the names of the people on Wall St. were all Italian, we would immediately say that the Mafia has taken over Wall Street and insist that the government begin a criminal investigation. But because the names are Paulson, Geithner, Bernanke the public somehow assumes that there is not a criminal operation going on.

Look, organized crime is a organized crime! It shouldn't matter whether the names of the people involved are Luciano or Lansky. Nobody should get a free pass to rob the American people.

Weiss and the DTCC

The DTCC "denies it has ever had any involvement with Gary Weiss". But that just doesn't jibe with the pattern of coordinated attacks by Weiss and the DTCC on outspoken critics of the practice of naked short selling. Again, the authority on this subject is Judd Bagley of Deep Capture.
Possibly the biggest single “a-ha!” moment I’ve had while writing this blog came in late January of 2007, when I discovered that one week earlier, Gary Weiss had edited Wikipedia while logged in to a computer on the network of the Depository Trust & Clearing Corporation (DTCC).
This may not seem like a big deal to most, but it turned out to be a huge deal to those of us who had spent a full year enduring Weiss’s attacks without any clear understanding of his motivation.

We knew his aim was to discredit and marginalize high profile opponents of illegal naked short selling. Yet his book, which seemed to be the launch pad of Weiss’s campaign, was quite critical of both hedge fund and prime broker culture: the two obvious sides of the naked shorting equation.

So who was paying Weiss to spend all day, most every day, publishing his attacks via his blog, message boards, and Wikipedia?

Nobody had ever considered the DTCC.

But once we knew Weiss had used a DTCC computer – given the uniquely Fort Knox-like nature of the institution, and the fact that it could not have happened unless Weiss had official access – everything fell into place.

Suddenly, we noticed a very striking set of coincidences, commencing January 22, 2006.
You can read Bagley's whole account in an article titled "Gary Weiss: his DTCC ties and lies". The evidence is pretty convincing to me.

DTCC - Wall Street's bookie

Lately there's been a lot of talk about auditing the Fed. But the Fed is an open book compared to the shadowy DTCC. The Fed at least has some responsibility to go before Congress periodically and report on its activities. The DTCC in contrast answers to no one but the cabal of Wall Street banks that own it.

Now one of the unanswered questions about the Lehman Brothers meltdown that rocked the financial world in September 2008 is the amount of outstanding obligations that Lehman owed to the world's financial institutions. Just look at the way that the collapse of Bernie Madoff's Ponzi scheme wreaked havoc on various individuals and institutions. Its fair to say that Lehman had an exponentially much larger effect on the world markets.

This gets further complicated by the use of CDS (Credit Default Swaps). And who keeps track of CDS transactions in the US? Well none other than the DTCC. So DTCC knows where the bodies are buried. Maybe that's why the Department of Justice recently subpoenaed the DTCC in regards to an investigation into the Credit Default Swap market.

And then there is the whole issue of naked short selling and the role that it played in the downfall of Lehman Brothers. Again, the DTCC is Wall Street's bookie for tracking stock transactions. And they have the records of who exactly was perpetrating the massive naked short selling of Lehman that accompanied its downfall. According to Bloomberg, "as many as 32.8 million shares in the company were sold and not delivered to buyers on time as of Sept. 11". And yet the DTCC has never been required to account for these huge discrepancies that occurred in unison with the collapse of Lehman.

If the Wall Street Bankers are the equivalent of a serial murderer, then DTCC is the equivalent of the Hudson River where the bodies are dumped. So why aren't the authorities dredging DTCC's records for criminal evidence. Maybe because the so-called authorities such as the Fed, the Treasury Departmenat and the SEC are all part of the criminal conspiracy. And Congress, well they've been bought off or intimidated into silence.

America is one big mob controlled town. Where's Eliot Ness when you need him?

Related Posts


Anonymous said...

Very well summarized !When DTCC will open their books, Wall Street will be cleaned.Time to Justice to force this entity which isn`t above the Law.
A group of individuals shareholders and a CEO from a public company, began to fight indepedently, through a recent Press release (, and with the shareholders
Yes Justice must prevail, and feel free to support this Dvaid versus Goliath case !

Frank Hope said...


Thanks for your comment. I was unfamiliar with the story of BCIT. This appears to be a case that demonstrates how the quasi-public role of the DTCC can be abused to destroy a company.

As I understand the situation, it doesn't appear to me that the main issue here is naked short selling. In this case there has been a literal counterfeiting of stock. And after being informed of this situation DTCC has done nothing to keep this counterfeit stock from trading.

(I want to emphasize again that this is my summary of what I understand of the BCIT situation judging strictly by the material on the website. As always, there are two sides to any story and I have no information about this story from any other perspective. Also note that BCIT has changed its name to Energy Source Inc.)

Maybe one day the DTCC will be as familiar to the average American as the SEC. DTCC power derives in part from the the way that this behemoth operates in the shadows - far away from the glare of public scrutiny.

Here are the links that are mentioned in the previous comments where you can get more information on the David and Goliath case of BCIT vs. DTCC:

Anonymous said...

Matt Taibbi's article came out in the October issue of Rolling Stone.

Back to Wall Street's Naked Swindle
Wall Street's Naked Swindle
A scheme to flood the market with counterfeit stocks helped kill Bear Stearns and Lehman Brothers — and the feds have yet to bust the culprits
Posted Oct 14, 2009 9:30 AM
Watch Matt Taibbi break down short-selling vs. naked short-selling on his blog, Taibblog."