Taibbi: Embarrassing Documents Surface Showing How Goldman, Other Mega-Banks Engaged in "Naked Short Selling"
Over at Rolling Stone, Matt Taibbi discusses how "[God] smiled on investigative reporters everywhere" last week, when one of the lawyers for Goldman Sachs and Bank of America/Merrill Lynch accidentally released documents airing some of the banks' dirtier laundry.
Taibbi writes about how the lawyers have been fighting with Overstock.com and publications like Rolling Stone and the New York Timesover some documents that were unearthed during a lawsuit filed by Overstock, which the banks want to keep sealed. Last week one of the lawyers appears to have accidentally filed the documents unredacted -- whoops! Taibbi writes that the lawyer "inadvertently entered into the public record a sort of greatest-hits selection of the very material they’ve been fighting for years to keep sealed."
What was so juicy about the documents? Taibbi:
The lawsuit between Overstock and the banks concerned a phenomenon called naked short-selling, a kind of high-finance counterfeiting that, especially prior to the introduction of new regulations in 2008, short-sellers could use to artificially depress the value of the stocks they’ve bet against. The subject of naked short-selling is a) highly technical, and b) very controversial on Wall Street, with many pundits in the financial press for years treating the phenomenon as the stuff of myths and conspiracy theories.
Now, however, through the magic of this unredacted document, the public will be able to see for itself what the banks’ attitudes are not just toward the “mythical” practice of naked short selling (hint: they volubly confess to the activity, in writing), but toward regulations and laws in general.
“Fuck the compliance area – procedures, schmecedures,” chirps Peter Melz, former president of Merrill Lynch Professional Clearing Corp. (a.k.a. Merrill Pro), when a subordinate worries about the company failing to comply with the rules governing short sales.
We also find out here how Wall Street professionals manipulated public opinion by buying off and/or intimidating experts in their respective fields. In one email made public in this document, a lobbyist for SIFMA, the Securities Industry and Financial Markets Association, tells a Goldman executive how to engage an expert who otherwise would go work for “our more powerful enemies,” i.e. would work with Overstock on the company’s lawsuit.
And that's not all! Read Taibbi's full article to get all the juicy details.