- Editorial Commentary -

“A small group of thoughtful people could change the world. Indeed, it’s the only thing that ever has.” ~Margaret Mead

August 12, 2009 (FinancialWire) (By Mark Faulk) — It began when Bear Stearns began to fall apart at the seams in March of 2008, triggering the SEC’s first emergency weekend meeting in over 30 years. Over the next few months, all of America, in fact, the entire world, watched in trepidation as our financial markets unraveled like a slow motion train wreck, one that the vast majority of Americans had been oblivious to until it was too late. Over the next few months, the train wreck began to pick up speed, prompting SEC chairman Christopher Cox to invoke a one-month ban on July 15, 2008 against naked short selling in 19 battered financial stocks, including Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), Citigroup (NYSE: C), Lehman Brothers (OTC: LEHMQ.PK), Credit Suisse (NYSE: CS), Merrill Lynch (DOA, as in dead on arrival), Bank of America (NYSE: BAC), J.P. Morgan Chase (NYSE: JPM), Fannie Mae (NYSE: FNM), and Freddie Mac (NYSE: FRE). The emergency rule, designed to eliminate the illegal downward manipulation of those companies’ stock prices, stated that no one could short sell stock in those companies unless they had “borrowed or arranged to borrow the security” and that they settle the trade on the required settlement date. Of course, as usual, even that rule imposed absolutely no penalties for anyone who violated the rule.

It proved to be too little, and decidedly too late. On September 15, 2008, our economy officially imploded: Lehman Brothers filed for Chapter 11 bankruptcy (its stock now trades for less than a nickel a share), Bank of America took over troubled Merrill Lynch, and AIG (NYSE: AIG) sought $40 million from the federal government under the guise of being “too big to fail” (the following day they received $85 billion from the fed, setting off what would become the largest government bailout of private sector businesses in history).  And Washington Mutual was teetering on the brink of collapse.

What a difference a day makes. On September 19, the SEC enacted another temporary ban, this one prohibiting short selling of 799 financial firms. Why short selling was considered a crisis in those particular firms but was deemed okay in other publicly-traded companies remains a mystery, but it didn’t matter. The markets continued to tank, with the Dow eventually losing over 60% of its value by March of this year.

But as is generally true with any collapse, the cracks that first began to appear in our financial system in early 2008 were simply the physical manifestation of serious structural problems that began long before. For years, a handful of stock market reform activists, as varied in background as they were in geographic location, have preached a singular message, one repeated like a mantra. Although the message evolved as more and more people joined the cause, exposing an ever-growing circle of greed and corruption, the mantra remained the same: our financial system is rigged, and left unchecked, our nation is headed for a financial collapse of epic proportions.

Sometimes it hurts to be right.

The “small group of thoughtful people” who sounded the alarm about a financial system consumed by its own rampant greed came from all walks of life. Some were experts, Wall Street insiders or economists who had seen the warning signs. Some were political activists or writers covering a cause that the major media ignored. Some were small publicly-traded company owners or CEOs, and while were simply investors who had watched their money disappear down a sinkhole that more closely resembled a cesspool.

Look for the concluding Part Two of Mark Faulk’s “Financial Armageddon In Retrospect”, coming soon via FinancialWire(tm).

Mark Faulk, author of “The Naked Truth: Investing in the Stock Play of a Lifetime”, (http://www.thenakedtruthbook.com) has been covering financial fraud and naked short selling on his website since early 2004, and has written over 150 articles on the topic of financial reform. For over five years, he and a small group of dedicated activists have been educating investors, Congress, the SEC, and even the President about the imminent danger of allowing rampant fraud to continue. In his very first article on The Faulking Truth website on March 19, 2004, he coined the phrase “financial terrorism”, which has come to epitomize the culture of greed and manipulation that dominates Wall Street. His articles have been reprinted or excerpted in numerous major publications, including The Huffington Post and Financial Wire, and financial journals such as the prestigious Capco Journal of Financial Transformation. In the fall of 2008, he worked on a yet-to-be released major documentary about financial fraud. He has made numerous appearances on television and logged hundreds of hours in radio interviews.

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