More Hedge Funds Face Indictments As Federal Wiretaps Uncover Insider Trading Rings

It is about time the Feds started tracking some of the more eyebrow raising examples of insider trading. Whenever there is new, you see a spike in the volume and the options ahead of the announcement these days.

This is most likely the tip of the iceberg, and the hedge funds are not the only culprits.

Its a step in the right direction. Let's hope it is not diversion to placate people because of the lack of serious market reform from Washington.

Bloomberg
U.S. Plans to Charge 10 More After Rajaratnam Arrest
By Joshua Gallu and David Scheer

Oct. 19 (Bloomberg) -- Federal investigators plan to charge at least 10 securities professionals with insider trading, some linked to the criminal case against billionaire hedge-fund manager Raj Rajaratnam that shook Wall Street last week, people familiar with the matter said.

The pending crackdown, more than two years in the making and among the biggest undercover operations into insider trading, may yield charges against hedge-fund managers and their associates as early as this week, the people said, declining to be identified because the cases aren’t public. Authorities had planned to arrest Rajaratnam this week as part of a broader sweep, expediting it after learning he had bought a plane ticket to travel to London on Oct. 16, one person said.

The case against Rajaratnam, built on recorded conversations within a web of alleged conspirators, offers a glimpse of how U.S. investigators are using more aggressive tactics to identify illegal trades hidden within a blizzard of hedge-fund investments. Additional probes stem from a secret Securities and Exchange Commission data-mining project set up to pinpoint clusters of people who make similar well-timed stock investments. Some probes, like the one against Rajaratnam, rely on wiretaps.

“If you’re going to shoot the king, you better shoot to kill,” said Bradley Bennett, a law partner at Baker Botts LLP in Washington who formerly focused on insider-trading cases as an SEC investigator. “If they’re going to take on a billionaire, they need to have the strongest possible cases. The defendant’s own words are the strongest possible evidence....”

The US Needs to Get Less Competitive

"The whole aim of practical politics is to keep the populace alarmed, and hence clamorous to be led to safety, by menacing it with an endless series of hobgoblins, all of them imaginary." H. L. Mencken

The hobgoblin that is often used by the Wall Street banks is that if this or that reform is introduced, it will lessen their competitiveness, and their craftiest and most clever employees will leave the country to work for foreign banks.

Is that supposed to be a threat? That sounds like a plan. And let them deduct the price of a one way coach class ticket.

It should be painfully obvious by now, that despite his recent crocodile tears and phony fist waving, that Larry Summers and crew Obama are being bossed around by the banks, for whatever reasons that charity might prevent one from saying.

It is time for a real change, in most cases bringing back what was taken apart over the past twenty years.

If you are a bank, and you take deposits and obtain access to the Fed window and FDIC, you should do nothing other than traditional commercial on balance sheet banking. Period.

If you are an investment bank, you are a no better than a hedge fund. There should be strict limits on the quality and levels of the capital which you employ. And your partners should be exposed to the full extent of your losses. Yes, the full extent.

In the markets there needs to be position limits. If you exceed the position you get fined and surrender 100 percent of any gains. If you do it again your trader gets his license suspended. A third time and your trading license is revoked until you can prove you have gotten your internal controls together.

As for naked short selling. Forget about it. If you fail to deliver within 24 hours you are forced to cover on a market order, like a margin call.

If you receive an exemption for legitimate commercial hedging, your position is published with your name on it on a weekly basis. After all, your hedging decisions are based on information which should be disclosed, sooner rather than later.

The timely disclosure of pricing and volume information in any market is public information and should be disseminated to all parties at the same time, without predatory pricing that inhibits access by the average investor. Or better yet, just make the information feed free, and take the costs as a part of doing business as a licensed exchange.

There are criminal penalties on the books for white collar crimes. When corporations engage in fraud, those penalties should apply to the perpetrators within the firm. The current regime of wrist slap fines from the SEC to be absorbed by shareholders makes the risk-reward ratio an incentive for breaking the law. There needs to be a section of the FBI that deals only and specifically with white collar crime, not as a task force, but as part of its organizational structure.

Corporations, including non-profits, foundations and trusts, are not people, and they do not vote. Only voters should be able to contribute to political campaigns. If this creates a financial problem for politicians who rely on millions of dollar to fund elaborate media and public persuasion campaigns, well then, too bad. There is always the option to pursue public campaign funding. They might actually have to say things and stand on a genuine record actually reported by a legitimate news media.

Time to break up the media conglomerates. Period. The news organizations cannot be controlled by a few corporations. There were limitations on news outlet ownership for many years which were repealed. Bring them back. Diversity of ownership brings checks and balances.

And the financial activity of lobbyists should be limited, recorded, and disclosed on a monthly basis, and in detail. You or any member of your staff go to lunch with a lobbyist, the amount which you accept is reported along with the subject matter discussed. You are a registered lobbyist, and all your lobbying related phone calles and text messages become a matter of public record. The public deseves to hear your case as well as their representatives.

The revolving door between lawmakers, regulators, and the businesses with they oversee must be slammed shut for a period of no less than five years. Time to bone up on a trade besides influence peddling, congressman.

Would this prohibit the best minds from serving the public? Are you kidding me? Look at the government in Washington now. If those are the 'best minds' then the US is in real trouble.

If the US wants to get back on its feet, it is going to have to get serious about restoring its liberty and an even playing field for all its people.

This would be a start. Next up, tax code reform. You want a flat tax? I'll give you a flat tax....

ALBA Gives Nod for Regional Currency SUCRE in Central and South America

This is not the first time ALBA has discussed plans for a regional currency, and the proposal does not yet seem to be concrete to us. The countries have agreed in principle to proceed, with the details to be worked out over the next year.

Nevertheless, it does start to chip away at Wall Street's usual answer to any dollar challenge, "Where else will they put their reserves, what else will they use for trade if not the US Dollar?" This has always seemed to be among the most arrogant, self-centered observations of an empire in recorded history. "Without us, who will tell them what to do, who will lead them, who will manage their money?" Were even the British at the turn of the 19th century that self-deluded, so blineded by the rationale of the white man's burden to manage other people's affairs?

Ecuador’s currency was called the sucre before it shifted to the US dollar nearly a decade ago. Jose Antonio de Sucre was an early 19th century South American Independence leader who fought alongside Simon Bolivar. Sucre is also the capital of Bolivia.

In this proposal, it is known as the Sistema Único de Compensación Regional (SUCRE), a new currency for intra-regional trade, to replace the US dollar in trade among several countries: Venezuela, Bolivia, Cuba, Ecuador, Nicaragua, Honduras, Dominica, Saint Vincent and Antigua and Barbuda.

Most of these countries have already withdrawn their participation with the World Bank, and it's Center for International Trade disputes, which had sought to arbitrate disagreements among the countries and several western energy firms.

This may be important because Venezuela is a major source of oil imports to the US market. Will Chavez start demanding payment for his oil in the SUCRE? Will the US begin to discover the nuclear threat from Venezuela? Or merely encourage its neighbors and internal groups to challenge its sovereignty?

The exact composition of the SUCRE has not yet been disclosed, if it has been decided. Until that happens, and a firm timeline is disclosed, this is merely a proposal that has been discussed before.

The proposed sucre does not affect any discussions (if any are still continuing) with regard to the amero, which as we understand it is a potential North American regional currency amongst Mexico, the US, and Canada. If we were Canadian, we would resist that proposal with all the resources at our disposal.

But make no mistake, there are alternatives to the dollar and they are being discussed around the world. A broader based alternative that would include China and Russia among others would have more 'teeth.' Some composition including gold and silver backing of some sort, if it is sufficiently revalued higher, would give any regional currency a greater international acceptibility.

It made an impression, by the way, that this news story was first picked up here out of China, and not from any US mainstream news outlets.

And speaking of strategic moves, the US recently sought to obtain seven military bases in Colombia, strategically located in the midst of the ALBA countries.

CCTV China
ALBA member states plan new currency
2009-10-18 11:44 BJT

A meeting of the Bolivarian Alternative for the Americas, or ALBA, has announced plans to create a new single currency to replace the US dollar. The organization's 7th Summit has concluded with an aim to stop using the greenback for trade between member states next year.

ALBA groups Bolivia, Cuba, Ecuador, Nicaragua, Venezuela and other regional governments. A Russian delegation also attended the two-day meeting. Leaders announced a plan to eventually create a single regional currency, the SUCRE.

They also decided to explore creating state-sponsored food and mining multinationals.

The summit also touch the Honduras issue. The ousted Honduran Foreign Minister called on the Organization of American States to implement new measures to increase pressure on the de facto government of Honduras to end the political crisis.