A Solution to NSS? Cramer & Senator Kaufman

ty 144r...

By: elvis-is-here
30 Jun 2009, 01:56 PM EDT

"a belief that naked short selling played a major role in the current financial crisis.

www.politico.com/news/stories/0609/24341.html#ixzz0Jw9w7MjI&D

Ted Kaufman to SEC: Do your job
By VICTORIA MCGRANE
6/30/09 4:38 AM EDT

Kaufman listens during a hearing.
Ted Kaufman says the SEC is not moving fast enough to prevent naked short selling, a practice which some think played a major role in the financial crisis. Photo: AP


The junior senator from Delaware is not happy with the Securities and Exchange Commission.

“I would like [SEC Chairwoman] Mary Schapiro and the folks over there to do their job. I just would like them to do their job,” Democratic Sen. Ted Kaufman told POLITICO.

Kaufman and several other lawmakers say that the SEC has failed to curb abusive, so-called naked short selling, in which a person sells a stock short — betting the price will fall — without borrowing the shares beforehand and then failing to give them to the buyer within the customary three days.

This practice contrasts with conventional short selling, in which a trader sells a stock borrowed from a third party with the expectation of buying it back at a lower price.

In April 2007, the SEC got rid of the uptick rule, a measure designed to stop abusive short selling by blocking the practice when a stock’s price declines in the most recent trade.

The SEC is considering ways to curb naked short selling, including reinstating a version of the uptick rule. An agency spokesman declined to comment on Kaufman’s concerns.

But Kaufman and his allies on the issue say the SEC is not moving fast enough. Their sense of urgency is rooted in a belief that naked short selling played a major role in the current financial crisis.

“This short selling brought down Lehman Brothers and Bear Stearns,” said Kaufman, referring to two investment banks that collapsed at the start of the financial meltdown.

In the case of Bear Stearns, Kaufman cites reports that substantially more than 100 percent of the company’s stock was traded in the days leading up to its collapse — proof that short sells were happening without players actually securing the stocks they were selling, he said.

“What I’m worried about — the economy’s turned around, ... but if we get into another bear market, [or] if this is a bear market trap instead of a bull market and this thing starts up again, we can knock down other companies. We knock out one of those companies we have TARP money invested in,” Kaufman said.

He’s been joined in his crusade by a bipartisan group of senators including Sens. Johnny Isakson (R-Ga.) and Jon Tester (D-Mont.). Rep. Carolyn Maloney (D-N.Y.) is also working on the issue with Kaufman.

After pushing the SEC for months, Kaufman and Isakson wrote a letter to Schapiro in early April also signed by Tester, Democratic Sen. Carl Levin of Michigan, now-Democratic Sen. Arlen Specter of Pennsylvania and Republican Sen. Saxby Chambliss of Georgia. The letter urged the SEC to move more quickly on the naked short-selling issue.

“Naked or abusive short selling has gone unaddressed for too long and simply must end if the SEC is to restore investor confidence in the markets. In the absence of a strong message from the SEC, we believe Congress will need to consider legislation that directs the SEC to do so,” the senators wrote.

Shortly thereafter, Kaufman and Isakson introduced legislation requiring the SEC to write regulations within 60 days to curb abusive short selling.

Kaufman says he would prefer that Congress not have to do the SEC’s job for it.

But he’s clearly riled up, taking to the Senate floor Thursday to blast the agency’s lack of action.

“I have been writing the SEC and talking about this issue on the Senate floor since March 3. It is now June 24, and the SEC still has done nothing,” Kaufman said. “It is time for the SEC to act.”

ragingbull.quote.com/mboard/boards.cgi?board=CLB01293&read=1676