Wall Street's Naked Swindle - Matt Taibbi

[Fredkc]

If you have read Matt Taibbi's previous works The Bubble Machine, etc on Rolling Stone, then this new one is more great stuff on our farce of an economy

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

By Matt Taibbi

Posted Oct 14, 2009 9:30 AM

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 their value in nine days or less. It was madness — "like buying 1.7 million lottery tickets," according to one financial analyst.

But what's even crazier is that the bet paid.

At the close of business that afternoon, Bear Stearns was trading at $62.97. At that point, whoever made the gamble owned the right to sell huge bundles of Bear stock, at $30 and $25, on or before March 20th. In order for the bet to pay, Bear would have to fall harder and faster than any Wall Street brokerage in history.

The very next day, March 12th, Bear went into free fall. By the end of the week, the firm had lost virtually all of its cash and was clinging to promises of state aid; by the weekend, it was being knocked to its knees by the Fed and the Treasury, and forced at the barrel of a shotgun to sell itself to JPMorgan Chase (which had been given $29 billion in public money to marry its hunchbacked new bride) at the humiliating price of … $2 a share. 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?

[the rest...]

[Steve_A]

Hi Fredkc,

Good find. Interesting article. The more we know (the middle class "Let me invest my money with someone honest" type) the more difficult it is for this sort of thing to carry on.

The interesting thing is that the whole of not only Wall Street, but the investment markets world wide could collapse if this practice is used.

Yesterday an Indonesian man (probably a scapegoat) was arrested for insider trading on Wall Street. What will come next?

Best regards,

Steve

Originally Posted by Fredkc

If you have read Matt Taibbi's previous works The Bubble Machine, etc on Rolling Stone, then this new one is more great stuff on our farce of an economy

[no caste]

Originally Posted by Fredkc

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 their value in nine days or less.

Thanks for the heads-up Fred. Matt Taibbi writes interesting stuff

Who all profited by the Bear Stearns fail? That mystery person must be associated with it somehow. Knew what was going down...