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Do you believe that economic warfare can be an instrument of transnational organized crime?
In December 17, 2013, Dr. Patrick M. Bryne, the CEO of Overstock.com, had a presentation at the Institute of World Politics. He talked about “Naked Shorts, Bust-Outs, and The Once and Future Cataclysm: economic warfare as an instrument of transnational organized crime.”
During the early part of his presentation, Dr. Bryne discussed the topic of settlement in the financial system. Simply put, it is the time when stock changes hand between an investor and the hedge fund (both represented by their respective broker/dealer) through the Depository Trust & Clearing Corporation (DTCC). Dr. Bryne said that the system was set-up with fault tolerance, thus creating far more slop in the settlement system. He was referring to failure to deliver (FTD) issued when any of the parties in the transaction fails to meet their obligations. This practice of issuing FTD for stocks that are not owned, called naked short selling, dilutes the price of the underlying stock. Dr. Bryne claims that this practice had played a role in the failure of many financial groups in the US.
In his discussion, Dr. Bryne also discussed the pattern of bust-out in finance. It starts with leveraging the business up, then depleting the cash, after which you burn it down for more profit. According to him, this has been the pattern used by the mafia in using economic warfare in its transnational organized crime. He mentioned subprime mortgage fraud as the way of leveraging the business up. He then said that the synthetic collateralized debt obligations through the Princeton Advisory were used to deplete the cash. Finally, the naked short selling by the Tuco Trading, Penson, Wedbush Morgan and Madoff Securities were the ones that burned down the business for more profit.
This issue is a bit complex for me to expand fully so just watch the following video of Dr. Bryne’s presentation. Find out for yourself why Dr. Bryne believes that the enemy of the national security is the slop in the settlement system (which also equates to the prime brokers profit). Do you agree with Dr. Bryne that the transnational "mafia" are behind the stock market manipulation and other similar practices? After watching the video, please do not forget to share your own view in the Comments section below.