The Road to Riches: Financial Short-selling

George W. Bush ushered in the new republican revolution with visions of moral clarity and integrity (and a few other nouns) when he entered office in January of 2001.  Allan Greenspan promptly lowered interest rates to record lows and the Fed, under his leadership, flooded the market with freshly printed dollars.  Homes increased in value to such an extent that homeowners borrowed on the rising equity of their homes, preferring to view them not as domiciles, but ATMs.  Then Bush promptly headed to his ranch in Texas and vacationed until September 11, 2001. 

In the weeks, and days, before September 11, 2001, the stock market registered some unusual activity in "Short Selling"- or "Put Option"- contracts.  Short-selling is simply investors borrowing stock at a certain price, and then buying those stocks later at lower price.  One is simply betting the stock price per share will go down, instead of going up in per share price.  Some of these transactions have a limited period in which to consummate the deal.  Some individuals, or more likely, some very big banks were moving on some very credible esoteric insider-information, and were carefully selecting, or parsing, through a variety of airline stocks and selecting only those airline companies who would ultimately be affected by 911.  The insider trading scandal of 911 made billionaires out of millionaires.  To this date, not one person has been charged with any financial crime associated with 911. 

Fast forward to August of 2007--again, the market is nervous about the news and rumors of "Bin Laden"- trades, and "short selling"- and "option contracts"- hitting the financial wires.  These option contracts, in the billions, and in worldwide markets, had an expiration date of September 21, 2007, and required a large downward movement of the Dow in order to generate profits.  Someone, or some organization, whether public or private, was betting large.  Of course, the markets did not move substantially downward in this period, and the individuals involved lost their shirts, so to speak.  One should be aware that the financial turmoil that is rocking Wall Street began in August of 2007. 

Reality strikes:  Reuters reported on Thursday September 18, 2007, that New York is starting a probe into illegal short-selling of shares on Wall Street.  Attorney General Andrew Cuomo said his office was concerned about the destabilization of financial markets, which are suffering their worst crisis since the great depression of the 1930s.  He also believes that the SEC should freeze short-selling on a temporary basis.  This implies, from a legal standpoint, that individuals were conspiring to spread false rumors, thereby bringing down a company's stock price, to profit from the same.  One must analyze the nature of individuals who would stoop so low as to profit from the failure of some of the biggest financial institutions on Wall Street, with the ramifications reverberating around the world causing financial ruin and pain for millions of people. 

On this same day, as reported by the AP, Britain's financial regulator announced (FSA) that is was temporarily banning short-selling of shares on the London Stock Exchange.  The article claims that the "aggressive forms of short-selling were being blamed in part for the rapid downfall of Lehman Brothers Holdings Inc."-  Britain's Financial Services Authority (FSA) announced it would also require investors to disclose publicly existing large bets made against financial companies.  If these rules had been in place before 911, the criminals involved in the insider trading scam would never had succeeded in their crime of the new century.

Since both Wall Street and the London Stock Exchange are beginning to have a blurred vision of moral clarity, perhaps some individuals will be honest enough to come forward and expose members of both governments, and their associates, who profited from 911, and participated, willingly, in the sick-profit taking on the failure of Wall Street's venerable financial institutions.