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(Boing Boing) Scary Evidence suggests that the 2008 financial crisis was triggered by a "Bear Raid" market manipulation by short sellers against Citygroup late in 2007   (boingboing.net) divider line 154
More: Scary, market manipulation, short sales, Citygroup, crisis  
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12092 clicks; posted to Main » on 21 Dec 2011 at 9:23 PM   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»   |    Get this fabulous T-Shirt and impress the methane out of your friends! shirt it!



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2011-12-21 06:19:43 PM
ftfa: "Bear raids" have been considered a risk to markets since the Great Depression, and a financial regulation called the "uptick rule" was instituted in 1938 to prevent the tactic. The uptick rule was repealed in in July, 2007, and the alleged bear raid took place in November, 2007.

from wiki: "The SEC eliminated the uptick rule on July 6, 2007.[9] The SEC concluded from the study cited above: "The general consensus from these analyses and the roundtable was that the Commission should remove price test restrictions because they modestly reduce liquidity and do not appear necessary to prevent manipulation. In addition, the empirical evidence did not provide strong support for extending a price test to either small or thinly-traded securities not currently subject to a price test."[6] Commenting on the scrapping of the uptick rule, The Economist reported that "short-sellers argue [it] was largely symbolic, and it remains in place at only a few of the world's big stock exchanges."[10]

once again the SEC proves that it has everything under control...
 
2011-12-21 06:31:28 PM
thomps: ftfa: "Bear raids" have been considered a risk to markets since the Great Depression, and a financial regulation called the "uptick rule" was instituted in 1938 to prevent the tactic. The uptick rule was repealed in in July, 2007, and the alleged bear raid took place in November, 2007.

from wiki: "The SEC eliminated the uptick rule on July 6, 2007.[9] The SEC concluded from the study cited above: "The general consensus from these analyses and the roundtable was that the Commission should remove price test restrictions because they modestly reduce liquidity and do not appear necessary to prevent manipulation. In addition, the empirical evidence did not provide strong support for extending a price test to either small or thinly-traded securities not currently subject to a price test."[6] Commenting on the scrapping of the uptick rule, The Economist reported that "short-sellers argue [it] was largely symbolic, and it remains in place at only a few of the world's big stock exchanges."[10]

once again the SEC proves that it has everything under control... been completely captured by the industry it is charged with regulating
 
2011-12-21 06:44:43 PM
But, but overregulation!
 
2011-12-21 06:46:05 PM
In before "short selling is evil"
 
2011-12-21 07:08:25 PM
I wanna know how the extra buyers on the 1st knew to buy on the 1st so they could profit on the 7th, the day after the rule is lifted.
 
2011-12-21 07:11:12 PM
downstairs: In before "short selling is evil"

did you read the article?

short selling + intentional manipulation.


exactly what all the people who generally just say "short selling is evil" without their justification were concerned about.


it's almost like the regulations created after the great depression exist for a reason, and that the slow process of destroying them over the last 30 years had plenty of immediate warnings of the negative effects after each individual one is stripped.


you might not pay attention to history, but some of us do.
 
2011-12-21 07:12:01 PM
Sh*ttyGroup? Why dey have such sh*tty financial fire-wall!
 
2011-12-21 07:17:00 PM
dtdstudios.com
 
2011-12-21 08:07:13 PM
GAT_00: But, but overregulation!

There was a guy on the Kudlow Report on CNBC tonight saying exactly that - that the collapse in 2008 was because of too much regulation. That all those regulations created the appearance that nothing could ever go wrong, and therefore nobody was looking out for what actually happened. Sort of like we have too many laws about killing people, so the police can't ever stop anyone from killing anyone else. The logic had more twists than an M. C. Escher painting.

He went on to say that the regulators were those people that couldn't make it on wall street, and would never be able to understand the workings of the vastly superior intellects that work in the big investment banks.

The sheer stupidity disingenuous evil of the man was astounding.
 
2011-12-21 08:36:27 PM
Dinki: GAT_00: But, but overregulation!

There was a guy on the Kudlow Report on CNBC tonight saying exactly that - that the collapse in 2008 was because of too much regulation. That all those regulations created the appearance that nothing could ever go wrong, and therefore nobody was looking out for what actually happened. Sort of like we have too many laws about killing people, so the police can't ever stop anyone from killing anyone else. The logic had more twists than an M. C. Escher painting.

He went on to say that the regulators were those people that couldn't make it on wall street, and would never be able to understand the workings of the vastly superior intellects that work in the big investment banks.

The sheer stupidity disingenuous evil of the man was astounding.


IOW, "The 2008 collapse occurred because f*ck you, that's why."

And they wonder why people are so angry...
 
2011-12-21 08:39:17 PM
Dinki: There was a guy on the Kudlow Report on CNBC tonight saying exactly that

I can't watch that cokehead anymore. My brain finally told me no.
 
2011-12-21 08:51:32 PM
NewportBarGuy: Dinki: There was a guy on the Kudlow Report on CNBC tonight saying exactly that

I can't watch that cokehead anymore. My brain finally told me no.


Yeah Kudlow wasn't there which is why I watched it. But they still managed to dial the free market capitalist derp up to 11. oh well.
 
2011-12-21 09:27:08 PM
Naked shorts!
 
2011-12-21 09:31:27 PM
We all know what was up.

www.strangecosmos.com
 
2011-12-21 09:33:16 PM
Or... maybe a lot of investors realized all those junk assets were about to drag the system down, and frontran it.

Seriously, "bear raids" didn't cause the banks to pump subprime mortgages up 70 to 1.
 
2011-12-21 09:34:40 PM
How can this be a bear raid when the stock went on to lose another 50%?

If anything, these short sellers should have covered much later and made even more money.
 
2011-12-21 09:35:18 PM
 
2011-12-21 09:35:25 PM
thomps: ftfa: "Bear raids" have been considered a risk to markets since the Great Depression, and a financial regulation called the "uptick rule" was instituted in 1938 to prevent the tactic. The uptick rule was repealed in in July, 2007, and the alleged bear raid took place in November, 2007.

from wiki: "The SEC eliminated the uptick rule on July 6, 2007.[9] The SEC concluded from the study cited above: "The general consensus from these analyses and the roundtable was that the Commission should remove price test restrictions because they modestly reduce liquidity and do not appear necessary to prevent manipulation. In addition, the empirical evidence did not provide strong support for extending a price test to either small or thinly-traded securities not currently subject to a price test."[6] Commenting on the scrapping of the uptick rule, The Economist reported that "short-sellers argue [it] was largely symbolic, and it remains in place at only a few of the world's big stock exchanges."[10]

once again the SEC proves that it has everything under control...


/facepalm
 
2011-12-21 09:36:21 PM
thomps: ftfa: "Bear raids" have been considered a risk to markets since the Great Depression, and a financial regulation called the "uptick rule" was instituted in 1938 to prevent the tactic. The uptick rule was repealed in in July, 2007, and the alleged bear raid took place in November, 2007.

from wiki: "The SEC eliminated the uptick rule on July 6, 2007

once again the SEC proves that it has everything under control...


Gee, who was the Chairman of the House Committee on Financial Services starting in 2007?

No wonder he announced that he "retired".
 
2011-12-21 09:37:15 PM
Can we start hanging these bastiges yet?
 
2011-12-21 09:37:43 PM
Erebus1954: Naked shorts!

3.bp.blogspot.com

Culprit identified.
 
2011-12-21 09:38:10 PM
southernplanner.files.wordpress.com
 
2011-12-21 09:39:02 PM
WTF are you guys talkin about. Fark told me that Bush and Bush alone caused the financial collapse.
 
2011-12-21 09:39:44 PM
www.jewishworldreview.com
 
2011-12-21 09:39:57 PM
downstairs: In before "short selling is evil"

Short selling without returning profits is illegal, I know that.
 
2011-12-21 09:40:27 PM
downstairs: In before "short selling is evil"

You're too late. It is.
 
2011-12-21 09:41:39 PM
Is there a way conservatives can blame this on Obama and his time machine?
 
2011-12-21 09:42:43 PM
Wait until they decide to short the US$.
 
2011-12-21 09:43:31 PM
Doesn't matter what triggered, with the total irresponsible way the banks were handling their business, it was inevitable sooner or later.
 
2011-12-21 09:44:41 PM
imontheinternet: Or... maybe a lot of investors realized all those junk assets were about to drag the system down, and frontran it.

Seriously, "bear raids" didn't cause the banks to pump subprime mortgages up 70 to 1.


no, removing the regulation that prevented them from doing that did.

the bear raid was just the step that started the avalanche.
 
2011-12-21 09:49:05 PM
Come on, was the [OBVIOUS] tag on a beer run or what?

Also:

www.maximumawesome.com

Be afraid.
 
2011-12-21 09:51:48 PM
Farxist: Gee, who was the Chairman of the House Committee on Financial Services starting in 2007?

No wonder he announced that he "retired".


Who was the SEC Chairman?

Oh it was a republican?

fark you.
 
2011-12-21 09:54:10 PM
Oh for Fark's sake! If only it were really this simple. Of course, the short sellers that day may have precipitated it, but the system was primed and ready with the trillions of dollars of naked counter-party risks that AIG and others had created in the unregulated environment. nothing this simple can be blamed. That would serve the interests of the free marketeers much too handily.
 
2011-12-21 09:55:15 PM
What a bear raid may look like

www.yousuckatcraigslist.com
 
2011-12-21 09:59:25 PM
rugmannm: Oh for Fark's sake! If only it were really this simple. Of course, the short sellers that day may have precipitated it, but the system was primed and ready with the trillions of dollars of naked counter-party risks that AIG and others had created in the unregulated environment. nothing this simple can be blamed. That would serve the interests of the free marketeers much too handily.

Still, it's interesting if you can identify the "trigger". The Mohamed Bouazizi, or Franz Ferdinand, if you will.
 
2011-12-21 10:01:18 PM
A bear raid event is an act seeking profit from the short. That's fine, it wasn't a trivial sum of money. It would have yielded more to sit on it though. It was also a considerable risk at the volume without broader coordination for such a short term performance.

Of course, if you happened to know who held what cards...say for instance insured the bond you knew to be junk... Then this isn't about the profit from the raid. You go in, you grab, you smash, you leave. Why? Because you weren't trying to earn profit off the short, you were trying to challenge solvency.

Suddenly it's all-in or fold. Terrifying position...unless you know who's holding what. Then you're just laughing your way to the bank.
 
2011-12-21 10:01:31 PM
Kazan: imontheinternet: Or... maybe a lot of investors realized all those junk assets were about to drag the system down, and frontran it.

Seriously, "bear raids" didn't cause the banks to pump subprime mortgages up 70 to 1.

no, removing the regulation that prevented them from doing that did.

the bear raid was just the step that started the avalanche.


By 2007, I think it was already too late for the pebbles to vote.

If you read The big Short, there were way too many CDOs that had bad mortgages in them for the system to not melt down. The only conspiracy was the banks collectively deciding that there was short term money to be made securitizing not just mortgages, and no one gave a damn about the long term consequences so long as it meant that they were going to see a fat bonus at the end of the year (or, on the flip side, creative financing allowed people to buy that McMansion they could not afford).
 
2011-12-21 10:01:47 PM
JerkStore: Is there a way conservatives can blame this on Obama and his time machine?

I thought it was because Clinton forced private lenders to lend money to nig...I mean, bl...uh...min...nope, won't work either...uh, welfare queens. The only way banks could hope to return a profit was to offer adjustable-rate mortgages, and when those, uhh, individuals who aren't smart or educated enough to handle their own money couldn't pay, Clinton had already changed the rules so Fannie and Freddie had to buy all that bad debt to protect the welfare queens.

So naturally, it was because of Clinton. And Fannie and Freddie, who were set up and ran by democrats to play favorites with ethnic groups to fool them into voting democrat. And if those people had just gone to school instead of sitting around listening to oogity-boogity jungle music and smoking crack, they'd have gotten jobs from real Americans and cared enough to pay for home loans instead of eating up wh...I mean, taxpayer, money.
 
2011-12-21 10:02:19 PM
FTA: "...the alleged bear raid took place in November, 2007."

Citigroup's share price had been dropping since early June, and was in a virtual free fall by the middle of October.

NOTHING that the private sector can do can cause the entire economy to crash. Despite all the bull heaved up by the government worshipers, this was ENTIRELY caused by the government. Inflated currency, artificially low interest rates, and lowered reserve requirements crashed the economy. Even if a bear raid occurred (and this article offers no proof that this was anything other than the market realizing what dog Citigroup was), and Citigroup's price was driven down, the WORST that would happen was that a bunch of investors would have gotten a good deal on an undervalued stock. In reality, was a bad investment even at the ~$375 price in early November.

"Adjusted for the dividend issued on November 1, 2007, Citigroup stock closed on November 1 down $2.85 from the previous day, a drop of 6.9%."

And it kept on dropping like a brick, finally settling in the $35-45 range by January '08.
 
2011-12-21 10:02:59 PM
Dinki: GAT_00: But, but overregulation!

There was a guy on the Kudlow Report on CNBC tonight saying exactly that - that the collapse in 2008 was because of too much regulation. That all those regulations created the appearance that nothing could ever go wrong, and therefore nobody was looking out for what actually happened. Sort of like we have too many laws about killing people, so the police can't ever stop anyone from killing anyone else. The logic had more twists than an M. C. Escher painting.

He went on to say that the regulators were those people that couldn't make it on wall street, and would never be able to understand the workings of the vastly superior intellects that work in the big investment banks.

The sheer stupidity disingenuous evil of the man was astounding.


=====================

I never tried to get a job on Wall St. but I did take the Federal test to become a bank examiner. I was offered a job as bank examiner trainee back in 1987 or 88, just after I got out of college. I was living in Jersey and the job was located in Brooklyn. The starting pay was something like $19K which very low even in 1988 dollars. I didn't take the job. Soon after I was hired by the State of New Jersey with the Department of Labor, Division of Wage and Hour Compliance. My job would have been to investigate employers who had been accused by their employees of violating state labor laws. I was in training for less than a week and laid-off. The Republican governor cut the guts out of the Wage and Hour Compliance Division.

So how's that elimination of regulations working out for everyone?
 
2011-12-21 10:06:37 PM
GoodyearPimp: We all know what was up.

[www.strangecosmos.com image 450x385]


img846.imageshack.us
 
2011-12-21 10:07:38 PM
Meh, I'm underwhelmed by the evidence of collusion. I need more data, like how the stock was trending, what news was released, etc. On all dates mentioned to get any feel at all. It's quite possible short selling was way up for a reason. To be fair, from a strictly financial perspective, it was the right call.
 
2011-12-21 10:10:47 PM
socodog: WTF are you guys talkin about. Fark told me that Bush and Bush alone caused the financial collapse.


The Bush administration pushed hard to repeal that regulation, just as the smaller mortgage companies and the multinational banks had done with mortgage and securities regulations just a few years before. So, yeah, they are responsible. It was their friends and their banking criminal buddies that paid for them to run for office that benefited. I'm willing to bet it would be the same folks that were short-selling and buying up airline stock in the weeks before 9/11.
 
2011-12-21 10:11:36 PM
I used to work in that industry, and was a pariah in the mid-nineties because i was opposed to the repeal of Glass-Steagal. The thing that really pisses me off is that the investment banks are still doing it... still creating huge leverage in the system that will eventually collapse again. We need to break up the banks and force them to be either lending banks or investment banks, and then regulate both to prevent anyone from creating so much leverage that they can collapse the system.
 
2011-12-21 10:21:17 PM
Too much money is being made doing non-productive paper/information shuffling, and less and less is being made actually producing goods and services of actual value

As long as our society treats these financial conjurers and their puppet politicians like entitled kings we'll never get out of this economic rut.

Farkin' greedy pigs, In suits.
 
2011-12-21 10:21:44 PM
CruJones: It's quite possible short selling was way up for a reason. To be fair, from a strictly financial perspective, it was the right call.

If I remember reports from the time correctly, shorts among pretty much every financial firm were increasing at the same time. Some more than others, but smart people could see what was going on and were looking to make a buck on it. Some people figured out how to simply bet against the credit defaults and others shorted the stocks outright.

That was about the time I bought a lot of ammunition and canned goods.
 
2011-12-21 10:24:06 PM
Mad_Radhu: By 2007, I think it was already too late for the pebbles to vote.

If you read The big Short, there were way too many CDOs that had bad mortgages in them for the system to not melt down. The only conspiracy was the banks collectively deciding that there was short term money to be made securitizing not just mortgages, and no one gave a damn about the long term consequences so long as it meant that they were going to see a fat bonus at the end of the year (or, on the flip side, creative financing allowed people to buy that McMansion they could not afford).


oh definitely, nice kosh quote btw.

i expected an economy collapse by 2008 the moment bush was declared president by fiat in 2000, i was sadly not disappointed in my expectations.
 
2011-12-21 10:31:06 PM
So 3 years after the fact, this freaking genius figures this out.
I think there were a lot of people who knew the day it was happening and a lot more the day after.
There has been evidence of market manipulation for years. It isn't freaking news to anyone that follows the market and pulls up the data. To sit there and say the SEC is too stupid to figure this out is just , well stupid. Just because a graph indicates that something is wrong, doesn't tell you who did it and with what intention. You have to prove it. And when someone can cover a spread like this they are usually someone large like a much The other scenario, is that maybe a number of these people involved weren't heavy hitters. They were small and knew that one of these banks was going to get decimated. The only thing they were waiting for was the start of the storm, just a little bit of a wave and a number of people jumped on it.

Yes, the short selling created instability. But what really made it fail was the underlying foundation was smoke and mirrors. The short selling broke the mirrors.

The regulation would not have prevented a fall, it would just have delayed a freefall.

If this guy really wants to be a freaking know it all genius, then he should sign up with the SEC and show us how smart he is.

Yes the regulations on short selling should be put back and regulations should be enforced. What happened was a push against all ethical and moral boundaries. Basically the story told us that there are a significant number of people who if not threatened with a significant penalty, they will pilfer money and say fark you to everyone else.

//Sorry, just tired of these assholes that say they are experts and call the rest of society stupid. Not //just the individuals, I mean every cable news outlet that calls itself an expert in wall street and //finance. The whole bunch of them are what people in my part of town call pussies. I have more //respect for OWS than the group of whores on cable.
 
2011-12-21 10:35:31 PM
I just hope that congress has the foresight and moral strength to put social security funds into private accounts that move with the market.

Oh please, please.
 
2011-12-21 10:36:49 PM
Don't GIS "naked shorts" unless you like balls.
 
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