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Economic corruption US style Joel S. Hirschhorn looks at the phenomenon of "naked shorting" on the stockmarket and explains how American shareholders are being freely and systematically defrauded with counterfeit shares The latest
semantic chicanery of the Bush administration is to talk about the “ownership
society” as part of its attempts to privatize social security. Give Americans
“personal” accounts and make them owners through investments in the stock
market. Who says you can’t fool most of the people all of the time? This slice
of Bush boloney sparked some attention to a largely unknown means of cheating
regular, small investors. Forget playing by the rules on a level field and
winning with your smarts in the stock market. Just when you think you have heard
it all about corruption American-style, comes the obscure status quo phenomenon
of “naked shorting.” Company
stocks can be sold short. Shares are borrowed from brokers who actually have
them (or can get them), transferred to the purchaser, and then returned to the
lender by the short seller. The short seller sees a relatively high price in the
stock market and bets that the price will decline significantly. Then the stock
can be bought and returned to the original lender within three days. But
“naked shorting” is different. No
actual stock is borrowed and delivered to the purchaser, even though the
purchaser pays the short seller. The
investor believes that real stock has been delivered to their account. Naked
short selling has been illegal since 1933, but it has still flourished. As many
experts have observed, naked short shares are counterfeit shares; they do not
exist and were not created by the real company. In
effect, an artificial and fraudulent number of shares are created when demand
for them is high. Naked short sellers are not just pessimists; they are
predators, motivated to ensure a stock price drop, through planted stories about
imminent financial problems, for example. Innocent small investors lose
incalculable amounts of money from inflated stock prices and then through
manipulated reductions in stock prices. The
winners are hedge funds that sell non-existent shares, and the brokerage houses
and the clearing company that make money on transactions of phantom shares. The
stock exchanges and the Securities and Exchange Commission impose no meaningful
penalties. As Bob
O’Brien summed up: “A couple of hundred guys in New York are robbing the
system and investors blind.” Recently, the National Coalition Against Naked
Shorting said: The losers…are the shareholders and the companies who are
defenseless against this systemic grift. …There
is no excuse for allowing a group of predators to fleece the public and
victimize sound companies for their own profit.
…Where is the consideration for the millions of unsuspecting investors
seeking to supplement their retirement income – people who innocently rely on
a “level playing field?” Where is the Congressional Oversight Committee?
Where is the media? What a
country. You can put your trust in god, but little else and certainly not the
stock market (remember the Enron share owners and several cheating mutual
funds), nor Bush’s social security plan. A nation
with too much freedom to cheat and ineffective government protection of its
citizens is not a great democracy. America’s wealthy power elite feast off
corporate welfare, tax loopholes, tax cuts, stock market shenanigans, offshore
banking, military spending, desperate illegal immigrants offering cheap labor,
crippling consumer debt, exporting of jobs and technology, unending federal
budget deficits, and skyrocketing trade deficits. The rest of us remain economic
slaves, workers, not owners. Karl Rove’s (aka George W. Bush) righteous
right-wing zealots are either part of the ruling class, striving for membership
in it, or unknowing victims of it. Who else has
real power now? The many foreign banks and investors who own our national debt
and reap profits from our imports. They can pull the plug, take their money and
put it elsewhere, or just threaten such action. Bush
wants Americans to buy stocks in private social security accounts,
coincidentally when foreign investors are getting pretty nervous about our
economic future. Here’s the
dirty little secret of our economy. Wealth is leaving our country faster than
economic growth is creating more of it. Like
they say, follow the money. Poor nations become richer because the United States
becomes poorer. For nations, the
rich get poorer and the poor get richer as they exploit their biggest asset –
low-cost workers, from child laborers to Ph.D.’s. Foreign workers earn more as
Americans work harder and earn less. We
also export our money through trade and then borrow it back, at increasing
interest rates as our economic future looks bleaker. We’re on the losing side
of the global market. We are
completely out of balance. We and
future generations are being sold out. Globalization is cannibalization. Within
nations, economic inequality is mounting. With our money, in developing nations
the poor are doing better and super-rich are multiplying. But here, poor
Americans stay poor, the unemployed stay unemployed, the homeless stay homeless,
the prison population increases, housing and college become less affordable,
personal bankruptcies increase, and millions without health insurance get
sicker. Here, it is their ownership society. You know who – the likes of Dick Cheney,
Rupert Murdoch, and Bill Gates. Prosperity
is for the ruling class. With
Bush-blindness, you fear Islamic terrorists, ignoring the greater threat –
America’s ruling class and the international, free-trade hyping financiers.
When we send our wealth overseas, we also send our future there.
When you buy cheap stuff at Wal-Mart, you give China more jobs and
greater control over our destiny. With
low Wal-Mart prices, come more Americans desperate for them. Wal-Mart does not
spread prosperity here; it exports it to China and elsewhere. They tell
you: Don’t sell America short. But if you could sell shares in America short,
you would make money, because our worth is declining. You may have heard more
about the declining value of the dollar than about our declining democracy. Yet
millions of time-blind Americans still have faith in the Bush administration.
Perhaps their solace is that it is all god’s will. Actually, it is the
will of the rich and powerful; it is a case of the means not justifying the
ends. When will mainstream media call our political leaders what they really are, liars – and call those sucking the lifeblood from our corrupt economic system (including the Bush dynasty) crooks? When more citizen-victims wake up and demand a fair-shake. Until then, we the people – distracted economic slaves – will not get even a small piece of power in the ownership society. It is already owned. Bought and paid for by the privileged that have corrupted our society, politics and economy. Note: This article was first published by JUST Response on February 24 2005. Joel S. Hirschhorn’s current book is Sprawl Kills – How Blandburbs Steal Your Time, Health and Money, his next one is Fake Democracy – Status Quo Busting to Save Our Republic. He can be reached through www.sprawlkills.com.
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