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Posted by: WordBomb

The discourse on Mantanmoreland's RfAr has veered into the realm of importing real world fights into WP. I thought it would be useful to review how things actually began.

Gary Weiss started his blog on January 19, 2006.

His first few posts were about general business topics, but on January 22, he changed course.

http://garyweiss.blogspot.com/2006/01/baloney-blitzkrieg-marches-on-since.html, Weiss's blog transformed into a vehicle for attacking critics of the Depository Trust & Clearing Corporation's (DTCC) role as an enabler of illegal naked short selling -- Patrick Byrne in particular.

I can tell you with certainty that prior to that time, Byrne had never even heard of Gary Weiss.

On January 26, 2006 http://en.wikipedia.org/wiki/Special:Contributions/70.23.85.112 made sweeping changes to the article on Naked short selling.

• http://en.wikipedia.org/w/index.php?title=Naked_short_selling&diff=prev&oldid=36906412 removed several external links to media sources that cast Byrne in a positive light (including podcast interviews created by me).
• http://www.businessweek.com/magazine/content/03_49/b3861105_mz020.htm added a link to a two-year-old BusinessWeek column, espousing the virtues of naked short selling, written by...guess who...Gary Weiss.
• http://en.wikipedia.org/w/index.php?title=Naked_short_selling&diff=next&oldid=37001756 added a link to a press release issued by the DTCC three days before...the same release that, three days before, http://garyweiss.blogspot.com/2006/01/baloney-continues-bob-obrien-bravely.html.
• http://en.wikipedia.org/w/index.php?title=Naked_short_selling&diff=prev&oldid=37087011 claimed that Patrick Byrne is the subject of "widespread derision" for his stance against naked short selling.
• http://en.wikipedia.org/w/index.php?title=Naked_short_selling&diff=prev&oldid=37090969 added a link to a press release issued by the DTCC the day before...http://garyweiss.blogspot.com/2006/01/baloney-chronicles-staid-wall-street.html.
• http://en.wikipedia.org/w/index.php?title=Naked_short_selling&diff=next&oldid=37091161 added a link to the DTCC page dedicated to obfuscating that organizations' responsibility for empowering criminal naked short sellers.

After edit waring with a handful of IPs and encountering 3RR trouble, Weiss discards 70.23.85.112 and http://en.wikipedia.org/w/index.php?title=Special%3ALog&type=newusers&user=Mantanmoreland&page=. That account's first act was not to delete vandalism, as he claims, but to revert the article to how 70.23.85.112 left it.

From that day forward, roughly 90% of Weiss's blogging has focused on attacking Patrick Byrne and Overstock.com, while defending illegal naked short selling and promoting Weiss himself. Similarly, 90% of edits by Mantanmoreland, Samiharris, Tomstoner and Lastexit have attacked Patrick Byrne and Overstock.com, while defending naked short selling and promoting Weiss himself.

And to think...there are people out there who claim that I am responsible for bringing a real-world conflict to Wikipedia.

At this point, the obvious question is how to explain Weiss's motive.

http://en.wikipedia.org/w/index.php?title=University_Parish_of_St._Joseph_in_Greenwich_Village&offset=20070323023043&limit=8&action=history. Keeping in mind the substance of Weiss's first several edits on Wikipedia, I challenge you to look for yourselves and tell me what you can deduce from it.

Posted by: jorge

Is the fact that the anon ip that edited that article traces to :

The Depository Trust Company
55 Water Street 19th Floor
New York
NY 10041
US

of relevance?

Posted by: Proabivouac

So it does:
http://www.networksolutions.com/whois/results.jsp?ip=207.45.43.68

Posted by: WordBomb

Bingo.
09:38, 22 January 2007 Mantanmoreland
09:36, 22 January 2007 Mantanmoreland
11:39, 19 January 2007 Mantanmoreland
11:38, 19 January 2007 Mantanmoreland
10:57, 19 January 2007 207.45.43.68 <-- I believe this was an unintended IP edit by Mantanmoreland
09:05, 25 December 2006 Mantanmoreland
09:04, 25 December 2006 Mantanmoreland
09:03, 25 December 2006 Mantanmoreland

That Weiss was using a DTCC computer might not immediately strike anybody as telling, but you need to know that the place is secure like Fort Knox, and not the kind of place an unauthorized person is going to be able to access...much less use a computer.

I asked the DTCC about this, but was told (in a really strange way) that nobody there had even met Gary Weiss.

Well, one of the things we know from the 1,800 emails is that indeed, they've certainly met Gary Weiss.

I believe I can prove that Gary Weiss's blogging and Wikipedia editing were motivated primarily by a professional relationship with the DTCC.

Posted by: jorge

I http://en.wikipedia.org/wiki/Depository_Trust_Company#Naked_short_selling.3B_Litigation_.26_proposed_Senate_hearings.....

Posted by: WordBomb

Aye, and then, a week after http://online.wsj.com/public/article/SB118359867562957720-5Yb1Y_mpcl9a2nKbc0IaV0tDHyk_20070712.html was published that was rather critical of the DTCC's role in naked short selling, http://en.wikipedia.org/w/index.php?title=Depository_Trust_%26_Clearing_Corporation&diff=144434653&oldid=142998784.

Six days later, http://en.wikipedia.org/w/index.php?title=Depository_Trust_%26_Clearing_Corporation&diff=next&oldid=144542536, heading straight for the section on naked short selling, and http://en.wikipedia.org/w/index.php?title=Depository_Trust_%26_Clearing_Corporation&diff=next&oldid=145740451.

Then, on Christmas day, the article sees some mild editing action, but Samiharris is outnumbered, so he gets http://en.wikipedia.org/w/index.php?title=Depository_Trust_%26_Clearing_Corporation&diff=180155934&oldid=180155740.

Now, here's where it gets strange:
When Beback protected, he did so to a version other than the one Samiharris was working for. So, JzG arrives just before the original two weeks are up to http://en.wikipedia.org/w/index.php?title=Depository_Trust_%26_Clearing_Corporation&diff=183274806&oldid=182992944, and http://en.wikipedia.org/w/index.php?title=Special%3ALog&type=protect&user=&page=Depository+Trust+%26+Clearing+Corporation!

In the comment he left when extending protection, JzG said he did it "per talk."

Indeed? If you look at all the activity on the talk page from that time, you see that with one inconsequential exception, http://en.wikipedia.org/w/index.php?title=Talk:Depository_Trust_%26_Clearing_Corporation&dir=prev&offset=20080101062520&limit=20&action=history.

Has anybody ever seen an article protected for six weeks following a few hours' worth of active editing?

Yep...there's something rotten going on there.

Posted by: Moulton

A little backstory please...

What is DTCC and what is its role and function, vis-a-vis the financial markets?

Posted by: jorge

See the http://en.wikipedia.org/wiki/Depository_Trust_Company, particularly, http://en.wikipedia.org/wiki/Depository_Trust_Company#Naked_short_selling.3B_Litigation_.26_proposed_Senate_hearings.

Posted by: Moulton

Would I be correct in believing that GW is a critic of DTCC for not being vigilant enough in watchdogging illegal naked short-selling?

Posted by: WordBomb

You would be correct; if this were not Bizarro World. But it is, so you're not correct.

Instead, Weiss's position is summed up nicely in http://garyweiss.blogspot.com/2006/01/baloney-debunked-today-depository.html:
In case it isn't obvious, Weiss calls any claim that illegal naked short selling is a problem "baloney."

Posted by: Moulton

Color me confused. I thought GW was firmly against naked short-selling, since it creates long-term disturbances in the financial markets.

Posted by: No one of consequence

No, Bagley and Overstock are anti-naked short selling (and have filed suit, along with other companies). Weiss is either for it or thinks it is no big deal. (I think)

Posted by: Moulton

Would I at least be correct in believing that naked short-selling creates long-term instabilities in the financial markets?

Posted by: WordBomb

The best explanation to date of the DTCC's role in the process is found at http://www.businessjive.com. The presentation that starts when you enter the site is an hour long, but you'll understand what's going on after 10 minutes and you can drop out then.

Here's my much less elegant explanation:

Because the volume of stock trading grew so high in the 1970s, the major brokerages decided to simplify things by jointly creating a central "stock vault" where about 30% of all traded shares are now kept and the "clearing" (delivery of purchased shares) portion of the transaction is handled much more efficiently than if each trade were cleared individually among the web of brokerages.

This stock vault is the Depository Trust & Clearing Corporation (DTCC) and given its proximity to the clearing process, it knows with precision who is responsible for many of the millions upon millions of failed trades that stock manipulators create to drive down the price of a targeted company's stock.

Patrick Byrne and others criticize the DTCC for keeping this information confidential and allowing the practice to happen at all.

But keep in mind...the DTCC is owned by the largest broker/dealers, who make a lot of money off of the mega-hedge funds in the course of naked short selling.

Overstock.com is suing these broker/dealers, both to bring an end to the practice, and to get at their records and learn what the DTCC won't reveal.

Posted by: One

What the hell?

Here's an excerpt from Weiss' book: "Suffice to say ... there's no question that naked shorting bends, or even breaks, the rules that govern short-selling. That is not because naked shorting is wrong. It is because the rules are wrong....Naked shorting breaks a window that lets in some fresh air and lets out the stench."

These "rules," due to the FTC's delegated power, are properly called "administrative law."

Posted by: WordBomb

You are 100% correct.

Gary Weiss, on the other hand, subscribes to the anarcho-capitalist school of thought, which is that the role of regulating the public equity markets is too big for the government to handle alone, resulting in the need for "alternative" means of bringing down "bad companies".

In other words, we should trust the mega-hedge funds -- not the market -- to know which companies should survive and which should not. Those deemed unworthy may then be buried under an avalanche of counterfeit shares that overwhelm demand and drive a stock to penny-land. Once that happens, they can no longer raise money, credit costs skyrocket, and a death-spiral results.

That may or may not be ok when it comes to some of these mining companies that issue billions of shares and no product, but I'm certain it's wrong when the target is Martha Stewart, Delta Airlines, Sirius, Taser, USANA, Take Two Interactive, and many more.

Paradoxically, Weiss also claims to be a believer in the Efficient Markets Hypothesis, which says that a company's share price represents the sum of all information available to the market about the company. Well, one key bit of information should be the number of shares issued and in circulation. One of the results of naked shorting is that huge amounts of "counterfeit" shares are produced and traded as if they were the real thing. As a result, very few know the actual amount of shares out there, meaning, the rest of the market is operating with flawed information, which in turn creates very inefficient markets.

Posted by: Moulton

It occurs to me that this whole sector of the economy could use a crash course in ethics.

Posted by: Timp

Efficient market hypothesis always sounds a lot to me like trickle down economics: nice theory if you're there for the first round, not so much for the rest.

That's without getting to journalists who are willing to pass along whatever the hedge fund tells them.

Posted by: WhispersOfWisdom

"Shortselling" is as important to free markets as is buying. My ability to hedge or adjust risk for my own benefit or the benefit of my company is as important as is the transaction of a grain elevator shorting wheat that was just taken in at the mill.

The main difference in stocks is the "old guard rule" that short selling must be done with "borrowed" stock. If there is not stock to borrow...not a soul can, legitimately, sell short that particular stock.

Here's the rub...whoever controls, the vast majority of shares deposited (of any one particular company,) can, in fact, and indeed does, control the ability, or lack thereof, of somebody being able to sell short any particular stock (shares thereof.)

Now here comes the DTC of New York. They are THE primary depository of all stock shares in the U.S.A. (Once all paper; now both paper and electronic.)

It is a long story, but most of this whole topic stems from someone getting burned very badly by someone selling stock short. That is the name of this tune. Bagholders or burned investors have a gripe with short sellers. Many times, however, short sellers are right about the ultimate direction of a particular company, albeit, further, many times they are wiped out because of an inability to get stock to cover their short position because of games being played at the DTC.

The invest business is founded on people buying shares of companies from ready sellers...the owners of those companies.

Posted by: Moulton

To my mind, there is something basically improper about selling something that doesn't exist. The problem with naked short-selling is that there is no guarantee the seller can lay hands on the commodity being sold when and if the time comes to deliver the goods.

Posted by: WordBomb

That's an excellent point. Securities are completely unique in the universe of things bought and sold, in that they are the one thing that a buyer cannot perform some sort of "test" on to establish authenticity. You cannot turn a share "on" to see if it works. You cannot taste or smell or otherwise assay it. You cannot weigh it. You cannot hold it up to the light to check for a watermark.

The DTCC can tell you, in many cases, whether the credit applied to your brokerage account represents a real share or an IOU, but they don't feel it's incumbent upon them to do so, since that would reveal the trading strategies of the criminals behind the practice.

Posted by: Moulton

It's interesting how the terms 'security' and 'trust' are used in these financial markets.

Trust is fragile and easily broken.

And in a competitive culture, security is a dicey conceit.

Posted by: WordBomb

There are two natural checks on the (good and legitimate) act of legal short selling:
1- a limit on the number of "shortable" shares (which is, in theory, the number of shares issued)
2- the risk that short selling entails (which is, in theory, infinite, compared to the risk of long buying, which is only as much as the original share cost).

Naked shorting subverts both of these checks, in that it:
1- results in more shares being shorted than actually exist, and
2- creates, by its very nature, artificial downward pressure on share price, often eliminating the risk of the "short squeeze" that long buyers love and short sellers fear.

Posted by: Moulton

Someone should go into the business of marketing fig leaves to all those naked short sellers.

Posted by: WordBomb

I'd rather see them all wearing bright orange jumpsuits.

Posted by: Moulton

Fat chance. The government has been short-selling the future of mankind far too long for it to turn around and become responsible for regulating the activities of our species with any kind of insight or ethics.

Posted by: Disillusioned Lackey

That's assuming that it is a commodity (tangible item) which is the point of contention or trade.

You know that over 3/4 of GDP is generated by intangible "products", aka services, right?

Services being intangibles (telecomms, IT services, legal services, etc etc).



Which is why full and as-transparent-as-possible information is crucial in securities valuation.