Knock the Hustle
Posted on May 17, 2012
By Robert Scheer
How did we end up with such smart scoundrels? Even after
it was known that Jamie Dimons bank blew more than
$2 billion on the same suspect derivatives trading that
has bankrupted the worlds economy, Barack Obama
still had praise for the intellect of his political
backer and the integrity of the bank he heads:
JPMorgan is one of the best-managed banks there is,
the president told the hosts of ABCs The
View in an interview televised Tuesday, adding,
Jamie Dimon, the head of it, is one of the smartest
bankers we got. And they still lost $2 billion and
A lesser bank would have gone under and needed to be
bailed out, Obama argued: Thats why Wall
Street reform is so important. But even when fully
implemented, Obamas tepid reforms would not have
stopped this scam and will not stop the others that are
sure to follow. Being one of the smartest bankers means
you are among those who best know how to skirt the law or,
if that cannot be done, how to successfully lobby to gut
Dimon understands and performs this drill well, for he
was in cahoots with his mentor, Sandy Weill, in
engineering a series of mergers and acquisitions that
would have violated the Glass-Steagall law, which for
decades had prohibited commingling investment and
commercial banking. The two business executives were able
to get Congress and President Bill Clinton to reverse
Glass-Steagall, a change that made legal the creation of
Citigroup, the too-big-to-fail bank that eventually was
saved from bankruptcy only through an immense taxpayer
The best and the brightest in this case are the bane of
the nation because their genius lies in outwitting all
efforts to hold them accountable. Dimon, the most recent
in a parade of now-disgraced Wall Street golden boys, was
nonetheless just awarded $24 million in compensation for
2011 by JPMorgan. Like his mentor Weill, who ran
Citigroup into derivative trading hell, Dimon will no
doubt suffer little legal unpleasantness or social
ostracism stemming from his dodgy behavior. Weill will
soon be inducted into the American Academy of Arts &
Sciences as an outstanding business leader and
The fact that Dimon first rose to banking prominence as
he worked alongside Weill to reverse Glass-Steagall did
nothing to tarnish his reputation in Obamas eyes.
Although Dimon was instrumental in establishing Citigroup,
he had a falling out with Weill and left the bank before
the great crash. In his subsequent reincarnation at
JPMorgan, now the countrys biggest financial
conglomerate, Dimon was a major supporter of Democrats
and had more access to the president than any other Wall
Dimon was not shy about turning to Obama, whom he had
backed with campaign contributions, to complain about the
Dodd-Frank regulations. With the JPMorgan CEO exercising
his easy access to the president and his Treasury
secretary, Tim Geithner, the new regulations concerning
bank derivatives trading were rendered meaningless. What
did Obama think would happen when he appointed
Dimons chief Washington lobbyist, William Daley,
who served as presidential chief of staff through 2011,
when the Dodd-Frank regulations were being promulgated?
As an Associated Press investigative report documented,
Dimon led the Wall Street pack in the number of personal
meetings and telephone calls with Secretary Geithner
while the Obama administration was calibrating its
response to the banking meltdown. Dimon has been a Class
A director of the New York Fed since 2007, when Geithner
was president of that institution, and the two worked
closely then on details of JPMorgans takeover of
Bear Stearns with a $55 billion Fed loan. Thats in
addition to the $25 billion in TARP funds JPMorgan
Dimons close ties to Obama, whom he knew well when
both were based in Chicago, were at moments tested by
Obamas feints into populism, but fellow Chicagoans
Daley and Rahm Emanuel, who preceded Daley as chief of
staff, made it clear that disagreements between the White
House and Dimon were merely rhetorical. How much more
influence could Dimon have wanted than having his former
lobbyist controlling the presidents schedule?
It was a charade: Dimon pretended to welcome some banking
regulation and Obama responded with the weakest of
Crunch time came this past February when JPMorgan
executives, including Ina Drew, the recently resigned
head of the banks unit that was behind the billions
in losses, met with Federal Reserve officials to secure
guarantees that the portfolio trading that later got the
company into trouble was in fact legal. That so-called
portfolio hedging, which Sen. Carl Levin, D-Mich., said
is a license to do pretty much anything and
violates the intent of the law, has now in fact been
accepted by both the Treasury Department and the Fed as
legal. As a result, there is a regulatory loophole that
Levin called big enough ... that a Mack truck could
drive right through it. Evidently one did.
Accidentally Released - and
Documents Show How Goldman et al Engaged in 'Naked Short
By Matt Taibbi
May 16, 2012 "Rolling Stone" - It doesnt
happen often, but sometimes God smiles on us. Last week,
he smiled on investigative reporters everywhere, when the
lawyers for Goldman, Sachs slipped on one whopper of a
legal banana peel, inadvertently delivering some of the
banks darker secrets into the hands of the public.
The lawyers for Goldman and Bank of America/Merrill Lynch
have been involved in a legal battle for some time
primarily with the retail giant Overstock.com, but also
with Rolling Stone, the Economist, Bloomberg, and the New
York Times. The banks have been fighting us to keep
sealed certain documents that surfaced in the discovery
process of an ultimately unsuccessful lawsuit filed by
Overstock against the banks.
Last week, in response to an Overstock.com motion to
unseal certain documents, the banks lawyers,
apparently accidentally, filed an unredacted version of
Overstocks motion as an exhibit in their
declaration of opposition to that motion. In doing so,
they inadvertently entered into the public record a sort
of greatest-hits selection of the very material
theyve been fighting for years to keep sealed.
I contacted Morgan Lewis, the firm that represents
Goldman in this matter, earlier today, but they
havent commented as of yet. I wonder if the poor
lawyer who FUBARred this thing has already had his organs
harvested; his panic is almost palpable in the air. It is
both terrible and hilarious to contemplate. The bank has
spent a fortune in legal fees trying to keep this
material out of the public eye, and here one of their own
lawyers goes and dumps it out on the street.
The lawsuit between Overstock and the banks concerned a
phenomenon called naked short-selling, a kind of high-finance
counterfeiting that, especially prior to the introduction
of new regulations in 2008, short-sellers could use to
artificially depress the value of the stocks theyve
bet against. The subject of naked short-selling is a)
highly technical, and b) very controversial on Wall
Street, with many pundits in the financial press for
years treating the phenomenon as the stuff of myths and
Now, however, through the magic of this unredacted
document, the public will be able to see for itself what
the banks attitudes are not just toward the
mythical practice of naked short selling (hint:
they volubly confess to the activity, in writing), but
toward regulations and laws in general.
Fuck the compliance area procedures,
schmecedures, chirps Peter Melz, former president
of Merrill Lynch Professional Clearing Corp. (a.k.a.
Merrill Pro), when a subordinate worries about the
company failing to comply with the rules governing short
We also find out here how Wall Street professionals
manipulated public opinion by buying off and/or
intimidating experts in their respective fields. In one
email made public in this document, a lobbyist for SIFMA,
the Securities Industry and Financial Markets Association,
tells a Goldman executive how to engage an expert who
otherwise would go work for our more powerful
enemies, i.e. would work with Overstock on the
He should be someone we can work with, especially
if he sees that cooperation results in resources, both
data and funding, the lobbyist writes, while
resistance results in isolation.
There are even more troubling passages, some of which
should raise a few eyebrows, in light of former Goldman
executive Greg Smith's recent public resignation, in
which he complained that the firm routinely screwed its
own clients and denigrated them (by calling them "Muppets,"
among other things).
Here, the plaintiffs motion refers to an
exhibit 96, which refers to an email
from [Goldman executive] John Masterson that sends
nonpublic data concerning customer short positions in
Overstock and four other hard-to-borrow stocks to
Maverick Capital, a large hedge fund that sells stocks
Was Goldman really disclosing nonpublic data
concerning customer short positions to its big
hedge fund clients? That would be something its smaller,
Muppet customers would probably want to hear
When I contacted Goldman and asked if it was true that
Masterson had shared nonpublic customer information with
a big hedge fund client, their spokesperson Michael
Duvally offered this explanation:
Among other services it provides, Securities Lending at
Goldman provides market color information to clients
regarding various activity in the securities lending
marketplace on a security specific or sector specific
basis. In accordance with the group's guidelines
concerning the provision of market color, Mr. Masterson
provided a client with certain aggregate information
regarding short balances in certain securities. The
information did not contain reference to any particular
clients' short positions.
You can draw your own conclusions from that answer, but
it's safe to say we'd like to hear more about these
Anyway, the document is full of other interesting
disclosures. Among the more compelling is the specter of
executives from numerous companies admitting openly to
engaging in naked short selling, a practice that, again,
was often dismissed as mythical or unimportant.
A quick primer on what naked short selling is. First of
all, short selling, which is a completely legal and often
beneficial activity, is when an investor bets that the
value of a stock will decline. You do this by first
borrowing and then selling the stock at its current price,
then returning the stock to your original lender after
the price has gone down. You then earn a profit on the
difference between the original price and the new, lower
What matters here is the technical issue of how you
borrow the stock. Typically, if youre a hedge fund
and you want to short a company, you go to some big-shot
investment bank like Goldman or Morgan Stanley and place
the order. They then go out into the world, find the
shares of the stock you want to short, borrow them for
you, then physically settle the trade later.
But sometimes its not easy to find those shares to
borrow. Sometimes the shares are controlled by investors
who might have no interest in lending them out. Sometimes
theres such scarcity of borrowable shares that
banks/brokers like Goldman have to pay a fee just to
borrow the stock.
These hard-to-borrow stocks, stocks that cost money to
borrow, are called negative rebate stocks. In some cases,
these negative rebate stocks cost so much just to borrow
that a short-seller would need to see a real price drop
of 35 percent in the stock just to break even. So how do
you short a stock when you cant find shares to
borrow? Well, one solution is, you dont even bother
to borrow them. And then, when the trade is done, you
dont bother to deliver them. You just do the trade
anyway without physically locating the stock.
Thus in this document we have another former Merrill Pro
president, Thomas Tranfaglia, saying in a 2005 email:
We are NOT borrowing negatives
I have made
that clear from the beginning. Why would we want to
borrow them? We want to fail them.
Trafaglia, in other words, didnt want to bother
paying the high cost of borrowing negative
rebate stocks. Instead, he preferred to just sell
stock he didnt actually possess. That is what is
meant by, We want to fail them. Trafaglia was
talking about creating fails or failed
trades, which is what happens when you dont
actually locate and borrow the stock within the time the
law allows for trades to be settled.
If this sounds complicated, just focus on this: naked
short selling, in essence, is selling stock you do not
have. If you dont have to actually locate and
borrow stock before you short it, youre creating an
artificial supply of stock shares.
In this case, that resulted in absurdities like the
following disclosure in this document, in which a Goldman
executive admits in a 2006 email that just a little bit
too much trading in Overstock was going on: Two
months ago 107% of the floating was short!
In other words, 107% of all Overstock shares available
for trade were short a physical impossibility,
unless someone was somehow creating artificial supply in
Goldman clearly knew there was a discrepancy between what
it was telling regulators, and what it was actually doing.
We have to be careful not to link locates to fails
[because] we have told the regulators we cant,
one executive is quoted as saying, in the document.
One of the companies Goldman used to facilitate these
trades was called SBA Trading, whose chief, Scott
Arenstein, was fined $3.6 million in 2007 by the former
American Stock Exchange for naked short selling.
The process of how banks circumvented federal clearing
regulations is highly technical and incredibly difficult
to follow. These companies were using obscure loopholes
in regulations that allowed them to short companies by
trading in shadows, or echoes, of real shares in their
stock. They manipulated rules to avoid having to disclose
these failed trades to regulators.
The import of this is that it made it cheaper and easier
to bet down the value of a stock, while simultaneously
devaluing the same stock by adding fake supply. This
makes it easier to make money by destroying value, and is
another example of how the over-financialization of the
economy makes real, job-creating growth more difficult.
In any case, this document all by itself shows numerous
executives from companies like Goldman Sachs Execution
and Clearing (GSEC) and Merrill Pro talking about a
conscious strategy of failing trades
in other words, not bothering to locate, borrow, and
deliver stock within the time alotted for legal
settlement. For instance, in one email, GSEC tells a
client, Wolverine Trading, We will let you fail.
More damning is an email from a Goldman, Sachs hedge fund
client, who remarked that when wanting to short an
impossible name and fully expecting not to receive
it he would then be shocked to learn that [Goldmans
representative] could get it for us.
Meaning: when an experienced hedge funder wanted to trade
a very hard-to-find stock, he was continually surprised
to find that Goldman, magically, could locate the stock.
Obviously, it is not hard to locate a stock if
youre just saying you located it, without really
As a hilarious side-note: when I contacted Goldman about
this story, they couldn't resist using their usual P.R.
playbook. In this case, Goldman hastened to point out
that Overstock lost this lawsuit (it was dismissed
because of a jurisdictional issue), and then had this to
say about Overstock:
Overstock pursued the lawsuit as part of its longstanding
self-described "Jihad" designed to distract
attention from its own failure to meet its projected
growth and profitability goals and the resulting sharp
drop in its stock price during the 2005-2006 period.
Good old Goldman -- they can't answer any criticism
without describing their critics as losers, conspiracy
theorists, or, most frequently, both. Incidentally,
Overstock rebounded from the 2005-2006 short attack to
become a profitable company again, during the same period
when Goldman was needing hundreds of billions of dollars
in emergency Fed lending and federal bailouts to stave
Anyway, this galactic screwup by usually-slick banker
lawyers gives us a rare peek into the internal mindset of
these companies, and their attitude toward regulations,
the markets, even their own clients. The fact that they
wanted to keep all of this information sealed is not
surprising, since its incredibly embarrassing stuff,
if you understand the context.
More to come: until then, heres the motion, and pay
particular attention to pages 14-19.
UPDATE: Well, I guess I shouldn't feel too badly for the
lawyer who stepped on this land mine. For Morgan Lewis
counsel Joe Floren, karma, it seems, really is a bitch.
Copyright ©2012 Rolling Stone; Jann S. Wenner, editor
Can A Bank act like this and not be
Wells Fargo Has Blood on Its Hands:
Desperate Man Commits Suicide After Shocking Foreclosure
By Dave Johnson
May 16, 2012 "AlterNet" --- Norman and Oriane
Rousseau were one more couple pushed by a huge, greedy
bank to the brink of homelessness. On Sunday, desperate
and with nowhere to go, Norman Rousseau shot himself.
This is the story
of what happens when an average couple is up against a
giant, wealthy, powerful bank. Unfortunately the result
is what the result always is when people are on their own
against the wealthy and powerful: the bank ends up with
all of their money, takes their house to sell and throws
them out onto the street. In this case the bank is Wells
The quick version of this terrible story is that Norman
and Oriane Rousseau of Newbury Park, California were
scammed into a predatory mortgage. But they made their
payments anyway, always paying with a cashiers
check in person at the same branch. Then one day the bank
misapplied their payment and said they still owed the
money. This started a long, nasty process that led to the
bank evicting the Rousseaus from their home.
Heres the shocker: right at the start the Rousseaus
came up with proof that the bank had received the payment
and had cashed the check. But the bank continued to claim
it had missed the payment, gave the Rousseaus the
runaround, started applying fees, and used it as an
excuse to foreclose on the house anyway.
The Rousseaus fought back, the bank dragged it out for so
long and pulled so many tricks, getting its way every
step of the process, until this last Sunday Norman
Rousseau finally gave up and shot himself in despair
two days before the scheduled eviction, Tuesday,
May 15. (The Rousseaus lawyer just said he was able
to win a 2-week delay.)
It is a tragic story, but when you dig into the details
it becomes much worse.
See for yourself. The court case filed by the Rousseaus
puts on the record the facts as they state them. The
complaint reads as one more story like so many others
that we have been hearing about the abuses by banks and
banksters and the tricks they pulled on people. Never
mind the big National Mortgage Settlement
this story shows that the abuses are still going
on, with the same tragic consequences.
The following describes the facts in the lawsuit filed in
Norman Rousseau and Oriane Rousseau vs. Wells Fargo Bank
in the Superior Court of California, County of Ventura.
In March 2000, Norman and Oriane Rousseau put 30 percent
down to buy a house at 580 Wilshire Place, Newbury Park,
CA. In the following years they were solicited to
refinance their loan. In October 2007 they met with the
loan officer and stated that they were only
interested in obtaining a conventional 30-year, fixed-rate
loan, and explained their desire to have consistent
payments over the life of the loan.
They were assured
that they could
significantly reduce their monthly payments, by more than
$600 per month, with a lower interest refinance loan.
The bank assured them that the Payment Option ARM was
the new industry standard that had
historically low rates that were continuing to
decrease and in the worst case scenario [they
were] assured that historical data for the index
indicated that changes in interest rate were slight, and
if an increase should occur it would have a negligible
effect on their monthly payments of no more than a few
They should expect to refinance within the next two
years to take advantage of even more favorable interest
rates and as the steadily rising housing values increased
the amount their equity in the property.
There were lots of assurances, smiles, dont worry,
were taking care of you, etc.
In May 2009 the bank claimed the couple had missed their
April payment. They proved they had made a payment in
person at the bank, using a cashiers check and that
the check had been cashed by the bank. The bank then
claimed they had ordered a stop payment on the check,
even though a cashiers check payment cannot be
The runaround began. The bank began harassing them for
payment, sometimes as many as six-eight calls per day,
sometimes even late at night. On August 3, 2009 the bank
claimed the Rousseaus hadnt paid June or
Julys payments either, demanding $3,406.50. But
then on August 8 the bank assured them they were current
on payments. Then the bank again claimed it had not been
paid and that the bank had been trying to contact them
without success, and that they now owed $3,478,25.
The Rousseaus hired a lawyer. From the lawyer the
Rousseaus learned that the loan they received was not the
loan they were promised, including, the 7.2%
interest rate for the
loan was actually higher
than the 2006 loan and greater than the 6.8% quoted,
had enormous fees, and the bank had increased the income
the Rousseau had stated, from $76,000 to $136,800.
In other words, the lender had scammed them to get those
fees, which was a widespread practice at the time.
This continues, with the bank scamming, lying,
obfuscating, ignoring, contradicting, even producing
signatures it claimed were the Rousseaus but were
not, every step of the way. And, of course, adding late
fees to the amount it claimed was due.
In September the bank stopped accepting payments at the
branch, saying checks had to be mailed. About the same
time the Rousseaus applied for a loan modification. They
were told they were accepted for review in the loan
modification program, were told the pre-foreclosure
notices were routine and not to worry about
them. Their lawyers were handling getting documents to
the bank, the bank kept claiming it never received them,
On and on this went, with the bank telling them they were
in the loan modification program while demanding money
then refusing to accept money and demanding documents
while saying it had received them, and all the while
proceeding with foreclosure notices. Then they were told
they were denied their loan modification, went through a
process to reinstate the loan, back and forth, late fees,
loan fees, unspecified additional fees, more fees, then
some fees, then some non-payment fees, and then given ONE
HOUR to send payments to TEXAS and it goes on and on.
Read the court case the Rousseaus filed. Its all
there, and is even worse than this summary.
This is a story of what happens when, as Senator Dick
Durbin said of the Senate during the effort to pass
legislation to get the banks under control, Frankly
they own the place.
This last Sunday the bankers claimed one more victim.
Norman Rousseau shot himself at 10 in the morning. Oriane
Rousseau doesnt even have the money to bury her
husband, she is looking to the VA for help. If you want
to help, please contact their attorney, Chris Gardas:
Martin Mandelman broke this story yesterday at Mandelmann
Matters: Husbands Suicide Yesterday, Wells Fargo to
Evict Wife Tomorrow Anyway.
Dave Johnson is a
fellow at Campaign for America's Future and a senior
fellow at Renew California.
© 2012 Independent Media Institute. All rights reserved.*
"The terrible, cold, cruel part is Wall Street.
Rivers of gold flow there from all over the earth, and
death comes with it. There, as nowhere else, you feel a
total absence of the spirit: herds of men who cannot
count past three, herds more who cannot get past six,
scorn for pure science and demoniacal respect for the
present. And the terrible thing is that the crowd that
fills the street believes that the world will always be
the same and that it is their duty to keep that huge
machine running, day and night, forever." - Federico
Garcia Lorca - Spanish Poet and Playwright
"Formula For Fraud" How To Become A Billionaire
William K. Black from the first Italian economic Summit
on Modern Money Theory in Rimini, Italy.
How to become a billionaire - the four necessary
ingredients in the recipe for fraud; the three sure
consequences of banking control fraud; gutting of the
underwriting process; Gresham's Law; The Business
Roundtable; hyperinflation of a bubble.
Guns and Butter, Broadcast April 4, 2012
And heres the key question: How many of you
are bankers? Not many, right? How much brains does it
take to make a bad loan? I think we could all do that. So,
all the mediocre bankers have no way to make money with
honest competition. But they have a sure thing, if
theyre willing to follow the fraud recipe.
William K. Black
Im Bonnie Faulkner. Today on Guns and Butter:
William K. Black. Todays show: 'Formula For Fraud.'
William Black is Associate Professor of Law and Economics
at the University of Missouri, Kansas City. He is a
lawyer and former bank regulator and author of The Best
Way to Rob a Bank is to Own One: How Corporate Executives
and Politicians Looted the S&L Industry.
According to William Black, the current crisis is
70 times larger than the collapse of the savings and loan
industry in the late 1980s. Todays programme
includes two of Bill Blacks presentations on
Saturday, February 25th in Rimini, Italy at the first
Italian grassroots economic Summit on Modern Money Theory
produced by Italian Journalist Paolo Barnard, which
featured speakers Stephanie Kelton, William Black,
Marshall Auerback, Michael Hudson, and Alain Parguez.
In todays show, Black deconstructs the
elements that constitute the recipe for fraud.
William Black (c. 2:05): Its difficult to
follow such a raging optimist. [Applause] But I can
assure you, its actually far worse than they say.
First, there are no 'technocrats,' especially the
genius technocrats. I suggest a new rule of
thumb for judging a 'genius technocrat.' They have to be
right at least two out of ten times. And theres not
a single economist in Europe, who calls himself a
technocrat, that could do the equivalent of making two
penalty kicks out of ten. So, Im going to pick up
on some of the things that Michael [Hudson] has talked
about. He quoted Balzacs famous phrase that behind
every fortune lies a great scandal. And Im going to
explain how that works. So, you will now learn how to
steal 10 billion euros. [Applause] The purpose of
this is not so that you will steal 10 billion euros.
The purpose is so that you can be an intelligent lion
because they feed on sheep.
(c. 3:40) Weve been asked to do our talks in
four parts. So, unlike Gaul, my speech is divided in four
parts. This talk will be about why we suffer recurrent,
intensifying, financial crises. Then, Ill explain
how theoclassical economic dogma produces these disasters.
The third part will be to explain why our response to the
crisis has made it worse. And I actually will end on an
optimistic note. The fourth part is how we have succeeded
in some places at some times and why you can do the same.
(c. 4:29) Part one sounds like one question: Why do
we have recurrent, intensifying, financial crises? But
its really two questions. The first one asks: What
is the cause of these crises? The second one says: Well,
wait a minute. We keep on suffering crises. Why
dont we learn the right lessons from these crises?
So, part one will focus on what caused the crises.
(c. 5:05) Part two will focus on why ideology
prevents us from learning the right lessons.
Santayanas famous phrase, of course, is that
those that forget the mistakes of the past are condemned
to repeat them. But, even if we remember the mistakes
weve made, the new policy we pick could be another
mistake. So, part three discusses that, in part.
But part four says the real tragedy is when you
forget the successes of the past, when you have something
that you know works and that you refuse to use. Because,
as Michael [Hudson] said, theres not an economics
textbook in the world that warns you that elite CEOs
often become wealthy through fraud. And there is a
primitive, tribal, taboo in economics in English against
using the five-letter eff-wordfraud. When I go and
talk to groups of economists who are traditional, I start
out the meeting by asking them each to say out loud the
word fraud. You cant believe how difficult it is
for them, even, to utter the word.
(c. 6:42) So, as I said, the lessons of success,
its a real tragedy to forget them. And Im
going to quote from George Akerlof and Paul Romers
famous article, or, at least, an article that should be
famous where the title says it all: 'Looting: The
Economic Underworld of Bankruptcy for Profit.' So, the
bank fails or, in the modern era, is 'bailed' out, but
the CEO walks away wealthy. And this is what Akerlof and
Romer wrote about 20 years ago:
Neither the public, nor economists foresaw
that savings and loan deregulation was bound to produce
looting, nor, unaware of the concept, could they have
known how serious it would be. Thus, the regulators in
the field who understood what was happening from the
beginning found lukewarm support, at best, for their
cause. Now, we know better. If we learn from experience,
history need not repeat itself.'
(c. 8:22) George Akerlof was awarded the Nobel
Prize in Economics in 2001. So, you might think
economists would pay attention. You might think, since
this article was written nearly 20 years ago, that the
textbooks would mention fraud and looting. They
dont just ignore everyone here. They ignore Nobel
Prize winners in Economics.
So, what, again, was this lesson? It was the
regulators in the field, the little people, not the fancy
people, who understood from the beginning that
deregulation would lead to massive looting. And it was
the economists that ignored them. And after we had proven
that it was fraud, after we had sent over a thousand
elite bankers and their cronies to prison, after a Nobel
Prize winner warned about it, after all those things,
they ignored it and produced crisis after crisis,
including the one we experience now.
(c. 9:59) So, what did we know out of that savings
and loan crisis, that was widely described at the time as
the worst financial scandal in U.S. history? And we have
a history rich in scandal. Here is what the national
commission that investigated the causes of the crisis
"'The typical large failure [grew] at an extremely
rapid rate, achieving high concentrations of assets in
risky ventures... [E]very accounting trick available was
used... Evidence of fraud was invariably present, as was
the ability of the operators to 'milk' the organisation.'
(c. 11:04) "That means to loot the organisation. But,
speaking of milk, [Applause] the frauds Im
describing are in no way limited to the Unites States;
they exist in every country. And they are common enough
to explain; and they are old enough to explain what
Balzac was saying because many of the wealthy become rich
through precisely the scandals, the fraud, I will
In criminology, we call them financial super
predators when were being lyrical. When were
writing journals, we call them control frauds,
which is boring. Control fraud occurs when the person who
controls a seemingly legitimate entity, like Parmalat,
uses it as a weapon to defraud. And they can often use
this weapon with impunity. In finance, accounting is the
weapon of choice. And these accounting frauds cause
greater losses than all other property crimes combined,
yet economics, again, never talks about it. Worse, when
many of these frauds occur in the same area, they
hyperinflate financial bubbles, which is what causes
financial crises and mass unemployment. It makes the CEOs
wealthy, produces Balzac scandals, and destroys democracy.
(c. 13:10) In criminology, we talk about
criminogenic environments, long words, simple concept.
When the incentives are extremely perverse, you will get
widespread fraud. So, what makes for perverse incentives?
The ability to steal a lot of money and not go to prison
and not having to live in disgrace. In practice that
means, in English, the three Ds: deregulation,
desupervision, and de facto decriminalisation.
Deregulation, you get rid of the rules. Desupervision,
any rules that remain, you dont enforce.
Decriminalisation, even if you sometimes sue them and get
a fine, you dont put them in prison. So,
thats the first areaderegulation. The second
area is executive compensation.
(c. 14:25) And what is ideal for accounting fraud?
Really high pay based on short-term reported income with
no way to claw it back, even when it proves to be a lie.
Those are the most important, but its also good, if
your assets dont have a readily verifiable market-value
cos then its easy to inflate the asset prices
and its easy to hide the real losses. And, if you
want a true epidemic of fraud, if entry into the industry
is very easy then youll get much more fraud.
Bonnie Faulkner (c. 15:15): Youre listening
to lawyer, academic, author, and former bank regulator
William K. Black. Todays show: 'Formula for Fraud.'
Im Bonnie Faulkner. This is Guns and Butter.
William Black: So, this is what you were waiting
for, at least from me. This is the recipe, only four
ingredients, that bankers in many parts of the world use
to become billionaires. And, again, its one that
Akerlof and Romer agreed with. So, first ingredient: grow
massively. Two: by making really, really crappy loans,
but at a higher interest rate. Third ingredient: extreme
leveragethat just means a lot of corporate debt.
Fourth ingredient: set aside virtually no loss reserves
for the massive losses that will be coming. By the way,
in Europe, this last ingredient is mandated by
international accounting rules, which are incredibly
fraud-friendly. And everybody knows that, in accounting;
and nobody has changed it. If you do these four things,
you are mathematically guaranteed to report record short-term
income. This is why Akerlof and Romer referred to it as a
sure thingits guaranteed.
(c. 17:11) There are actually three sure things.
The bank will report record profits. The profits, of
course, are fictional. The CEO will promptly become
wealthy and, down the road, the bank will suffer
catastrophic losses. Again, if many banks do this, you
will hyperinflate a bubble. This recipe helps explain why
bankers hate markets, why bankers hate capitalism, why
they hate anything like an effective market.
So heres a thought exercise: What if you were
a CEO of a bank and you wanted to grow exceptionally
rapidly? The first ingredient to the fraud recipe, that
means 50% a year. And thats realistic; thats
what the banks in Iceland, thats what many of the
banks in Europecontinental Europeand the U.S.
also did. How would you do that if you were honest?
Youre in a market thats competitive. The only
way to grow that rapidly is to charge far less money, a
lower interest rate, for your loans. But if theyre
a real market what would your competitors do? They would
match your price reduction. You wouldnt end up
making anymore loans; and all the banks would be loaning
at a lower interest rate. So, heres the question?
Is that a good way to make money as a bank? Its a
terrible thing for a bank, right? So, all the bankers
would lose. And thats why they hate markets. And
thats why banks are the biggest proponents of crony
capitalism and the leaders worldwide in crony capitalism.
(c. 19:26) And that leads us to a discussion of why
bad loans are so perfect for bank fraud; you can charge a
much higher rate to people who cant get loans
because they cant repay the loans. And there are
millions, tens of millions, of such people. So, you can
grow very rapidly. You can charge a higher interest rate.
If your competitors do the same thing, its actually
good for you because it hyperinflates the
bubble. And the bad loans, you just refinance them and
you hide the losses for many more years.
(c. 20:22) So, the CEO takes no risk; all of this
is a sure thing. And heres the key question: How
many of you are bankers? Not many, right? How much brains
does it take to make a bad loan? I think we could all do
that. So, all the mediocre bankers have no way to make
money with honest competition. But they have a sure thing,
if theyre willing to follow the fraud recipe.
Im now gonna quote from the person, the economist [James
Pierce, NCFIRRE's Executive Director], who led the
national investigation of the savings and loan crisis.
And he called this dynamic Ive just explained, 'the
ultimate perverse incentive.' So, this is what he said:
(c. 21:28) "Accounting abuses also provided
the ultimate perverse incentive: it paid to seek out bad
loans because only those who had no intention of repaying
would be willing to offer the high loan fees and interest
required for the best looting. It was rational for
operatorsthats CEOsto drive
their banks ever deeper into insolvency, as they looted
(c. 22:12) That is how crazy a world that
theoclassical economics has built, where the best way,
the surest way, to become wealthy, as a bank CEO, is to
make the worst possible loans. And to make so many bad
loans, they have to gut the underwriting process.
Underwriting is what an honest bank does to make sure
that its going to get repaid. But, if you want to
make bad loans, you have to get rid of your effective
underwriting. So, this is the key, if you get rid of
(c. 23:01) We already established youre not
bankers. So, imagine all of you run Competent Honest Bank
and you do underwriting. And you can tell can tell high-risk
and low-risk borrowers. Low risk borrowers you charge 10%.
High-risk borrowers you charge 20%. I run Bills
Incompetent Bank, I cant tell risk. So, I charge
everybody 15%. Which borrowers come to me? Only the
absolute worst borrowers. No good borrower would come
because they could borrow at your bank at 10%. So, this
is not like a usual risk. In economics, we call this
adverse selection. And it means that a bank that makes
loans this way must lose vast amounts of money. No honest
banker would operate this way. And the banks that engage
in these frauds also create criminogenic environments
themselves to recruit fraud allies. For example, the
people that value homes, if they wont inflate the
value, the dishonest banks wont use them. Do they
need to corrupt every person that values homes? No. 5% of
the profession would be fine. They just send all their
business to the corruptwe call themappraisers
in America. And this is called a Greshams Dynamic;
and it means that cheaters prosper and bad ethics drives
good ethics out of the marketplace.
(c. 25:20) Well, what about compensation? In [the U.S.A.],
the largest corporations, the largest 100, created a
group to lobby called the Business Roundtable. And you
remember our Enron-era frauds, early 2000s? Well, they
got embarrassed. And, so, they appointed a task force to
look at the frauds. And they named a particular CEO as
head of their task force; and he was asked by Business
Week, why do we have all these frauds? This is the answer
Dont just say: 'If you hit this revenue
number, your bonus is going to be this.' It sets up an
incentive thats overwhelming. You wave enough money
in front of people; and good people will do bad things.
(c. 26:28) And that was Franklin Raines, the head
of Fannie Mae, which is now insolvent by about $500
billion dollars. How did Frank Raines know about this
perverse incentive? Because he used it at Fannie Mae to
produce the frauds that made him wealthy.
How about Ireland? This is a report by a
Scandinavian banker hired to do an investigation, not a
real investigation, of course. He reported:
Bonus targets that were intended to be
demanding through the pursuit of sound policies and
prudent spread of risk were easily achieved through
volume lending to the property sector.
(c. 27:25) Now, that requires a translation, not
because its written in English, but because
its written to be not understood. So, what is he
really saying? The bank CEO sets a target for income that
is hugethree times the current income. How can you
triple income safely? Wow, if somebody could really do
that safely, wed be happy to pay them a very big
bonus, right? But what does he say?
You dont have to do it safely. And it
isnt hard. You just follow the fraud recipe and
its a sure thing. Its easily achieved.
Whats wrong with his sentence, though?
He says the targets were intended to be difficult,
demanding. And they were intended to be met through
(c. 28:34) Seriously, you think that? The CEO is
deciding how much money he is going to make. Do you think
he intended a demanding target or a target that was
easily achieved and would make him wealthy?
So, I will end on this. We need a coast guard for
our banks. We can no longer allow CEOs to desert their
posts after running their banks aground and causing such
great destruction. The cruise ship's captains
career is over. But the elite bank CEOs that destroyed
the global economy remain wealthy, powerful, and famous
because they looted. They were bailed out.
They did not leave in a lifeboat in the dark of night.
They left in their yachts, yachts that the governments
paid for. And no official anywhere in the world has
demanded of those bank CEOs who deserted their vessels
[...] [Applause] Grazie.
Bonnie Faulkner (c.30:30): Youre listening to
lawyer, academic, author, and former bank regulator
William K. Black. Todays show: Formula for
Fraud. Im Bonnie Faulkner. This is Guns and
William K. Black: Someone called on the Black
Plague? Im here. [Laughter, Applause]
In this part two, Im going to talk about why
we have recurrent, intensifying crises, why we dont
learn the right lessons from our past crises. And then
were going to discover something that, of course,
youve been hearing. The dominant economists are
truly terrible at one thing. They are terrible at
economics. But occasionally they go beyond economics and
they are abysmal on ethics. And they are the leading
opponents and dangers to democracy throughout the EU, in
particular, but in America as well.
(c. 31:40) Economists tell us they want to be
judged on their predictive ability. We welcome their
admission because their record in prediction is pitiful.
But, of course, it is precisely the fact that they've
been wrong about everything important for three decades
that makes them unwilling to admit their error and
evermore insistent on continuing their worst policy
(c. 32:12) As I said economics is particularly
awful when it gets into the concept of morality. In my
first talk, I read you a quotation from the economist who
conducted the investigation of the savings and loan
crisis. And he pointed out that it was
rational for looters to make bad loans. Well,
here is the reaction of one economist, Greg Mankiw, to
hearing the work of that national commission and of that
Nobel Prize winner-to-be, George Akerlof. He listened to
their story and he saidand this is not an off-hand
comment; he was the official discussant; he had the paper
a week in advance; he thought about these remarkshe
"[...] it would be irrational for savings and
loans [CEOs] not to loot.
So, note that he goes from simply a statement about
how you maximise fraud by making bad loans to the ethical
proposition that it would be rational action, it must be
the appropriate action, even though the rational action
is to defraud.
(c. 33:40) Now, theres a very interesting
book called Moral Markets that had the unfortunate timing
to come out in 2008 because it is a triumphal book about
capitalism and about how capitalism makes markets more
moral. But even it contains this statement:
Homo economicus is a sociopath. Homo
economicus is what happens if people behave the way
economists predict that they will behave.
And these scholars, who love capitalism, said: if
you do that, you will create a nation of sociopaths.
Greg Mankiw was not a random economist. [Then-]President
Bush made him Chairman of the Presidents Council of
Economic Advisers, the most prominent economic position
in [the U.S.A.] after he had said these things.
(c. 34:48) The next two gentlemen are the leading
law and economics scholars on corporate law. And Im
quoting from their treatise in 1991; so, an entire
generation of U.S. lawyers have been taught this next
A rule against fraud is not an essential or
[...] an important ingredient of securities markets.
The key economist therewho is not really an
economist, hes a lawyeris Daniel Fischel. He
worked for three of the worst control frauds, including
the absolute worst savings and loan 'control fraud,'
praised them as the best firms in [the U.S.A.], and then
wrote this two years later without ever admitting in his
book that he had tried his theories in the real world and
they had led him to praise the worst frauds. So, this is
rank academic dishonesty on top of getting everything
wrong. And what happened to Fischel after he got
everything wrong? He was made Dean of the University of
Chicago Law School, one of the most prominent academic
positions in [the U.S.A.]
(c. 36:15) Alan Greenspan also worked for the worst
fraud in the savings and loan crisis. Charles
Keatings Lincoln Savings. And he personally
recruited, as a lobbyist for this worst fraud, the five [bipartisan]
U.S. Senators who would intervene with us to try and
prevent us from taking enforcement action against the
largest violation in the history of our agency because
that violation was by Charles Keating and Lincoln Savings.
And those five senators became known and ridiculed as the
Keating Five. By the way, [Republican Senator] John
McCain was one of those senators who met with us. [The
other four were Democrats.]
Alan Greenspan then wrote a letter saying we should
allow Lincoln Savings to do these terrible investments
because they posed no foreseeable risk of loss to
the federal insurance fund. Lincoln Savings proved
to be the largest cost to the insurance fund. After he
had gotten it as wrong, as it is possible to get
something wrong, we made him Chairman of the Federal
Reserve. So, here you have a record of we promote and
honour, in economics, the people who get it spectacularly
wrong, as long as they get it wrong for powerful banks
that are frauds.
(c. 37:59) So, what did they predict? This is the
short list. Neoclassical economists predicted that
because markets were efficient they were self-correcting,
fraud was automatically excluded, and financial bubbles
could not occur.
"They assured us that because of bankers
interest in their reputations and auditors and appraisers,
that they would never commit a fraud and never assist a
"They predicted that massive financial derivatives
would stabilise the economic system.
"They told us, even when the bubble had reached
proportions larger than any in the history of the world,
that there was no housing bubble in the United States,
that there was no housing bubble in Ireland, that there
was no housing bubble in Japan, that there was no housing
bubble in Spain.
"They told us that if we paid CEOs massive amounts
of money based on short-term performance that was
fictional, it would align the interests of the CEO with
the shareholders and the public and be the best possible
(c. 39:30) Every one of these predictions proved
utterly false. Actually, every single one of these
predictions had been falsified before the economists ever
said them; and they did not change.
"What did they do back in the day? They looked at
Europe. This is Cato, named, of course, after a famous
Romana very conservative anti-think tank in the
United States. Cato, in 2007, as Iceland was collapsing
in massive fraud, said these words:
Icelands economic renaissance is an
impressive story. Supply-side reformsthat
means tax cutsalong with policies, such as
privatisation and deregulation, have yielded predictable
"Remember, were making predictions.
"Incomes are rising, unemployment is almost
non-existent, and the government is collecting more
revenue from a larger tax base.
"So, they cut taxes, but overall tax revenue grows
because the country is growing at a massive rate. Why?
Because the big three banks in Iceland are all accounting
control frauds. They are growing at an average rate of 50%
every year. And by the time they collapse in 2008, they
are ten times the GDP of Iceland. And they suffer 60%
losses on their assets. That was their prediction of
proof-positive that deregulation, low taxes,
privatisation produce economic booms.
(c. 41:36) They said something very similar about
Ireland in an article entitled 'Its Not Luck':
"Ireland [...] boasts the fourth highest gross
domestic product per capita in the world. In the mid-1980s,
Ireland was a backwater with an average income level 30%
below that of the European Union. Today, Irish incomes
are 40% above the EU average.
"'Was this dramatic change the luck of the Irish?
Not at all. It resulted from a series of hard-headed
decisions that shifted Ireland from big government
stagnation to free market growth.'
"And they wrote this in 2007, a year after the Irish
bubble had popped and Ireland was going into freefall.
And what are we being told now is the answer? Hard-headed
decisions that shift the governments from big government
stagnation to free market growth. They have learned
absolutely nothing from their past failed
predictions. In fact, Trichet came to Ireland
in 2004 and said Ireland should be the model for nations
joining the European Union.
Bonnie Faulkner (c. 43:20): Youre listening
to lawyer, academic, author, and former bank regulator
William K. Black. Todays show: Formula for
Fraud. Im Bonnie Faulkner. This is Guns and
William K. Black: But we have seen this movie many
times before in many countries. We had seen it in the
savings and loan crisis. But then came the Enron-era
crisis and WorldCom. And Ill focus on just one
aspect. Again, we had accounting control fraud that drove
an immense crisis. But what people forget is that most of
the worlds largest banks eagerly aided and abetted
Enrons frauds. They knew Enron was engaged in fraud;
and they thought that was a good thing because they would
get more deal flow, as we say, more volume. These frauds
were documented extensively by investigations, hundreds
of pages about it. Not a single one of the large
conventional bankers were prosecuted. There was a
prosecution about Merrill Lynch, which the courts
obstructed. Indeed, the U.S. Supreme Court ruled that
only the government could bring civil suitsagainst
an enforcement action, of courseagainst banks that
aided and abetted fraud. Think of that! You could have
indisputable proof that the bank had aided Enron,
knowingly done so, caused you billions in losses, and you
could not sue the bank. Thats how bad the law has
become in the United States.
(c. 45:26) "So, that left us with could the
government sue? Well, the Federal Reserve, we now know
from recent testimony in front of the national commission
that investigated this current crisis, the leadership
actively resisted bringing any action against the banks,
even what we call a slap on the wrist. And it was only
when the Securities and Exchange Commission took a slap
on the wrist that the Federal Reserve was embarrassed
into taking any action. We also know, from this
extraordinary testimony by the long-time head of
supervision at the Federal Reserve that he was deeply
disturbed by the fact that most of the largest banks in
the world had aided Enrons fraud. So, he put
together a comprehensive briefing for the leadership of
the Federal Reserve. At that meeting, the senior
officials of the Federal Reserve and the senior
Economists of the Federal Reserve did not criticise Enron
and they did not criticise the banks that aided
Enrons frauds. They were enraged at the Supervisor.
How dare he criticise banks? And this was the
eraand continuesin the United States to be
the era of reinventing government, which is a
neoclassical, neoliberal, be soft on bankers. And I
witnessed, personally, when our Washington staff came at
a training conference and instructed us that we were to
refer to banks as our clients. We were the regulators.
And we were, not only, supposed to refer to them as
clients, we were supposed to treat them as clients. Being
a quiet type, I stood up and began protesting; and they
simply shouted us down. [Applause]
(c. 47:59) So, this was occurring in 2001, 2002,
2003, 2004. At that point, Italy enters the picture. And
Italy enters the picture because of Parmalat. And it
enters the picture because, again, you have a massive
accounting control fraud where the CEO is looting
Parmalat and taking the money out of Italy to tax havens
where he can hide it in a wave of special complex
corporate forms designed to hide the fraud. And what does
the Federal Reserve say about all of this? Well, first
they brag about their enforcement action.
Note that they wont name the large institutions:
"'In these enforcement actions, certain large
institutions were required to revise their risk
management practices where examiners found failures by
these institutions to identify those transactions that
presented heightened legal and reputational risk,
particularly, in cases where transactions were used to
facilitate a customers accounting or tax objective
that resulted in misrepresenting the companys true
financial condition to the public and regulators.'
(c. 49:42) So, this is another passage that
requires translation, not because its in English,
but because its in gobbledygook. So, what are they
really saying? First, they are bragging about an
enforcement action that they tried very hard not to bring
and which was utterly useless. Second, note what their
concern is. Their concern is heightened legal and
reputational risk. Theyre worried that when the
bank aids Enron or Parmalats frauds theyll
get caught and then their reputations will suffer.
Theyre not worried about Enrons shareholders.
Theyre not worried about the 12,000 Enron employees
who lose their jobs. Theyre not worried about
Parmas economy. None of that matters. They
dont even discuss it. And theyre not worried
about morality. Call me old school, but I thought, when I
was a regulator, if the banks I was regulating were
engaged in fraud, first, my job was to stop it. Second,
my job was to remove the CEO from office. Third, my job
was to help prosecute him and put him in prison. And,
fourth, my job was to sue him, so that he walked away
with not a lira or a euro or a dollar. But all of that is
(c. 51:25) But you know this because you have
probably seen a gem of a film. And you know, probably,
what Citicorp called this special vehicle it created to
facilitate the looting of Parmalat. Somehow, I think this
means black hole; thats what they called it. And
this is so wonderful. Citicorp eventually said it
regretted one thing, calling it bucanero. The only thing
it was honest about is the only thing it regretted. What
it did to Italy in Parma, not so much.
(c. 52:15) So, what did people find in this crisis?
This is the National Commission Report on our crisis:
"'We conclude widespread failures in financial
regulation and supervision proved devastating to the
stability of the nations financial markets. The
sentries were not at their posts [...] due to the widely-accepted
faith in the self-correcting nature of the markets and
the ability of financial institutions to effectively
"It specifically blames Greenspan and his
deregulatory ideology. That could have helped to avoid a
(c. 53:05) But those are words. Here is an image.
The personyes, this manhe is 'Chainsaw
Gilleran.' That translates very well into Italian, I see.
He was the head of the agency I used to work for. He is
standing next to the leading bank lobbyists in America
and the guy who will be his successor. They are poised
and posed over a pile of federal regulations. And, if
thats too subtle, they are tied up in red tape. And
the message is: We will work with our clients, the banks,
to destroy all regulation. And the reason we bring a
chainsaw is to make clear that everything will be
(c. 54:00) "Well, what about Europe? There was a
conservative dissent to the conclusions Ive just
read. They claimed that deregulation could not have been
a major cause of the crisis in [the U.S.A.] because the
crisis also occurred in Europe. Thats all they said.
They implicitly assumed that Europe must have been tough
on bank regulation.
I will conclude with these words from the report on
the Irish Crisis. There were 'generic weaknesses in EU
regulation and supervision.' So, the dissent has it
exactly wrong. Theyre right; its important to
look at Europe and the same causal
mechanismderegulation, desupervision, and this
absurd executive compensationswept Europe and
America. And the economists got what they wanted and
predicted it would be wonderful. It produced a
Bonnie Faulkner (c. 55:30): Youve been
listening to William K. Black. Todays show has been
Formula for Fraud. William Black is Associate
Professor of Law and Economics at the University of
Missouri, Kansas City. He is a lawyer, academic, and
former bank regulator and the author of The Best Way to
Rob a Bank is to Own One: How Corporate Executives and
Politicians Looted the S&L Industry.
Please visit the University of Missouri, Kansas
City New Economic Perspectives blog at www.NewEconomicPerspectives.org Visit the website for the first
Italian Summit on Modern Money Theory at www.DemocraziaMMT.info
Insider trading 9/11
... the facts laid bare
By Lars Schall
March 20, 2012 "Asia Times" - -Is there any truth in
the allegations that informed circles made substantial
profits in the financial markets in connection to the
terror attacks of September 11, 2001, on the United
Arguably, the best place to start is by examining put
options, which occurred around Tuesday, September 11,
2001, to an abnormal extent, and at the beginning via
software that played a key role: the Prosecutor's
Management Information System, abbreviated as PROMIS. [i]
PROMIS is a software program that seems to be fitted with
almost "magical" abilities. Furthermore, it is
the subject of a decades-long dispute between its
inventor, Bill Hamilton, and various people/institutions
associated with intelligence agencies, military and
security consultancy firms. 
One of the "magical" capabilities of PROMIS,
one has to assume, is that it is equipped with artificial
intelligence and was apparently from the outset
able to simultaneously read and integrate any
number of different computer programs or databases,
regardless of the language in which the original programs
had been written or the operating systems and platforms
on which that database was then currently installed."
And then it becomes really interesting:
What would you do
if you possessed software that could think,
understand every major language in the world, that
provided peep-holes into everyone elses
computer "dressing rooms", that could
insert data into computers without peoples
knowledge, that could fill in blanks beyond human
reasoning, and also predict what people do - before
they did it? You would probably use it, wouldn't you?
capabilities sound hardly believable. In fact, the whole
story of PROMIS, which Mike Ruppert develops in the
course of his book Crossing the Rubicon in all its
bizarre facets and turns, seems as if someone had
developed a novel in the style of Philip K Dick and
William Gibson. However, what Ruppert has collected about
PROMIS is based on reputable sources as well as on
results of personal investigations, which await a jury to
take a first critical look at.
This seems all the more urgent if you add to the PROMIS
capabilities "that it was a given that PROMIS was
used for a wide variety of purposes by intelligence
agencies, including the real-time monitoring of stock
transactions on all the world´s major financial markets".
We are therefore dealing with a software that
a) Infiltrates computer and communication systems without
b) Can manipulate data.
c) Is capable to track the global stock market trade in
Point c is relevant to all that happened in connection
with the never completely cleared up transactions that
occurred just before September 11,  and of which the
former chairman of the Deutsche Bundesbank Ernst Weltke
said "could not have been planned and carried out
without a certain knowledge". 
I specifically asked financial journalist Max Keiser, who
for years had worked on Wall Street as a stock and
options trader, about the put option trades. Keiser
pointed out in this context that he "had spoken with
many brokers in the towers of the World Trade Center
around that time. I heard firsthand about the airline put
trade from brokers at Cantor Fitzgerald days before."
He then talked with me about an explosive issue, on which
Ruppert elaborated in detail in Crossing the Rubicon.
There are many aspects concerning these option
purchases that have not been disclosed yet. I also
worked at Alex Brown & Sons (ABS). Deutsche Bank
bought Alex Brown & Sons in 1999. When the
attacks occurred, ABS was owned by Deutsche Bank. An
important person at ABS was Buzzy Krongard. I have
met him several times at the offices in Baltimore.
Krongard had transferred to become executive director
at the CIA. The option purchases, in which ABS was
involved, occurred in the offices of ABS in Baltimore.
The noise which occurred between Baltimore, New York
City and Langley was interesting, as you can imagine,
to say the least.
here is the fact that Alex Brown, a subsidiary of
Deutsche Bank (where many of the alleged 9/11 hijackers
handled their banking transactions - for example Mohammed
Atta) traded massive put options purchases on United
Airlines Company UAL through the Chicago Board Option
Exchange (CBOE) - "to the embarrassment of
investigators", as British newspaper The Independent
On September 12, the chairman of the board of Deutsche
Bank Alex Brown, Mayo A Shattuck III, suddenly and
quietly renounced his post, although he still had a three-year
contract with an annual salary of several million US
dollars. One could perceive that as somehow strange.
A few weeks later, the press spokesperson of the Central
Intelligence Agency (CIA) at that time, Tom Crispell,
declined all comments, when he was contacted for a report
for Ruppert´s website From the Wilderness, and had being
asked "whether the Treasury Department or FBI [Federal
Bureau of Investigation] had questioned CIA executive
director and former Deutsche Bank-Alex Brown CEO [chief
executive officer], A B 'Buzzy' Krongard, about CIA
monitoring of financial markets using PROMIS and his
former position as overseer of Brown's 'private client'
Just before he was recruited personally by former CIA
chief George Tenet for the CIA, Krongard supervised
mainly private client banking at Alex Brown. 
In any case, after 9/11 on the first trading day, when
the US stock markets were open again, the stock price of
UAL declined by 43%. (The four aircraft hijacked on
September 11 were American Airlines Flight 11, American
Airlines Flight 77 and UAL flights 175 and 93.)
With his background as a former options trader, Keiser
explained an important issue to me in that regard.
Put options are, if they are employed in a
speculative trade, basically bets that stock prices
will drop abruptly. The purchaser, who enters a time-specific
contract with a seller, does not have to own the
stock at the time when the contract is purchased.
Related to the issue of
insider trading via (put or call) options there is also a
noteworthy definition by the Swiss economists Remo
Crameri, Marc Chesney and Loriano Mancini, notably that
an option trade may be "identified as informed"
- but is not yet (legally) proven - "when it is
characterized by an unusual large increment in open
interest and volume, induces large gains, and is not
hedged in the stock market". 
Open interest describes contracts which have not been
settled (been exercised) by the end of the trading
session, but are still open. Not hedged in the stock
market means that the buyer of a (put or call) option
holds no shares of the underlying asset, by which he
might be able to mitigate or compensate losses if his
trade doesn't work out, or phrased differently: one does
not hedge, because it is unnecessary, since one knows
that the bet is one, pardon, "dead sure thing."
(In this respect it is thus not really a bet, because the
result is not uncertain, but a foregone conclusion.)
In this case, the vehicle of the calculation was "ridiculously
cheap put options which give the holder the right'
for a period of time to sell certain shares at a price
which is far below the current market price - which is a
highly risky bet, because you lose money if at maturity
the market price is still higher than the price agreed in
the option. However, when these shares fell much deeper
after the terrorist attacks, these options multiplied
their value several hundred times because by now the
selling price specified in the option was much higher
than the market price. These risky games with short
options are a sure indication for investors who knew that
within a few days something would happen that would
drastically reduce the market price of those shares."
Software such as PROMIS in turn is used with the precise
intent to monitor the stock markets in real time to track
price movements that appear suspicious. Therefore, the US
intelligence services must have received clear warnings
from the singular, never before sighted transactions
prior to 9/11.
Of great importance with regard to the track, which
should lead to the perpetrators if you were seriously
contemplating to go after them, is this:
Max Keiser: The
Options Clearing Corporation has a duty to handle the
transactions, and does so rather anonymously -
whereas the bank that executes the transaction as a
broker can determine the identity of both
But that may have
hardly ever been the intention of the regulatory
authorities when the track led to, amongst others, Alvin
Bernard "Buzzy" Krongard, Alex Brown & Sons
and the CIA. Ruppert, however, describes this case in Crossing
the Rubicon in full length as far as possible. 
In addition, there are also ways and means for insiders
to veil their tracks. In order to be less obvious, "the
insiders could trade small numbers of contracts. These
could be traded under multiple accounts to avoid drawing
attention to large trading volumes going through one
single large account. They could also trade small volumes
in each contract but trade more contracts to avoid
drawing attention. As open interest increases, non-insiders
may detect a perceived signal and increase their trading
activity. Insiders can then come back to enter into more
transactions based on a seemingly significant trade
signal from the market. In this regard, it would be
difficult for the CBOE to ferret out the insiders from
the non-insiders, because both are trading heavily."
The matter which needs clarification here is generally
judged by Keiser as follows:
My thought is that many (not all) of those who died
on 9/11 were financial mercenaries - and we should
feel the same about them as we feel about all
mercenaries who get killed. The tragedy is that these
companies mixed civilians with mercenaries, and that
they were also killed. So have companies on Wall
Street used civilians as human shields maybe?
According to a report
by Bloomberg published in early October 2001, the US
Securities and Exchange Commission (SEC) began a probe
into certain stock market transactions around 9/11 that
included 38 companies, among them: American Airlines,
United Airlines, Continental Airlines, Northwest Airlines,
Southwest Airlines, Boeing, Lockheed Martin Corp.,
American Express Corp., American International Group, AXA
SA, Bank of America Corp., Bank of New York Corp., Bear
Stearns, Citigroup, Lehman Brothers Holdings Inc., Morgan
Stanley, General Motors and Raytheon. 
So far, so good. In the same month, however, the San
Francisco Chronicle newspaper reported that the SEC took
the unprecedented step to deputize hundreds, if not even
thousands of key stakeholders in the private sector for
their investigation. In a statement that was sent to
almost all listed companies in the US, the SEC asked the
addressed companies to assign senior staff for the
investigation, who would be aware of "the sensitive
nature" of the case and could be relied on to "exercise
appropriate discretion". 
In essence, it was about controlling information, not
about provision and disclosure of facts. Such a course of
action involves compromising consequences. Ruppert:
What happens when
you deputize someone in a national security or
criminal investigation is that you make it illegal
for them to disclose publicly what they know. Smart
move. In effect, they become government agents and
are controlled by government regulations rather than
their own conscience. In fact, they can be thrown
into jail without a hearing if they talk publicly. I
have seen this implied threat time after time with
federal investigators, intelligence agents, and even
members of United States Congress who are bound so
tightly by secrecy oaths and agreements that they are
not even able to disclose criminal activities inside
the government for fear of incarceration. 
Among the reports about
suspected insider trading which are mentioned in Crossing
the Rubicon/From the Wilderness is a list that was
published under the heading "Black Tuesday: The
World's Largest Insider Trading Scam?" by the
Israeli Herzliyya International Policy Institute for
Counterterrorism on September 21, 2001:
Between September 6 and 7, the CBOE saw purchases
of 4,744 put options on United Airlines, but only 396
call options. Assuming that 4,000 of the options were
bought by people with advance knowledge of the imminent
attacks, these "insiders" would have profited
by almost $5 million. On September 10, 4,516 put options
on American Airlines were bought on the Chicago exchange,
compared to only 748 calls. Again, there was no news at
that point to justify this imbalance; again, assuming
that 4,000 of these options trades represent "insiders",
they would represent a gain of about $4 million. [The
levels of put options purchased above were more than six
times higher than normal.] No similar trading in other
airlines occurred on the Chicago exchange in the days
immediately preceding Black Tuesday. Morgan Stanley Dean
Witter & Co, which occupied 22 floors of the World
Trade Center, saw 2,157 of its October $45 put options
bought in the three trading days before Black Tuesday;
this compares to an average of 27 contracts per day
before September 6. Morgan Stanley's share price fell
from $48.90 to $42.50 in the aftermath of the attacks.
Assuming that 2,000 of these options contracts were
bought based upon knowledge of the approaching attacks,
their purchasers could have profited by at least $1.2
million. Merrill Lynch & Co, with headquarters near
the Twin Towers, saw 12,215 October $45 put options
bought in the four trading days before the attacks; the
previous average volume in those shares had been 252
contracts per day (a 1200% increase). When trading
resumed, Merrill's shares fell from $46.88 to $41.50;
assuming that 11,000 option contracts were bought by
"insiders", their profit would have been about
$5.5 million. European regulators are examining trades in
Germany's Munich Re, Switzerland's Swiss Re, and AXA of
France, all major reinsurers with exposure to the Black
Tuesday disaster. (Note: AXA also owns more than 25% of
American Airlines stock, making the attacks a "double
whammy" for them.) 
Concerning the statements of the former chairman of the
Deutsche Bundesbank Ernst Welteke, their tenor in various
press reports put together is as follows:
German central bank
president Ernst Welteke later reports that a study by
his bank indicates, "There are ever clearer
signs that there were activities on international
financial markets that must have been carried out
with the necessary expert knowledge," not only
in shares of heavily affected industries such as
airlines and insurance companies, but also in gold
and oil. [Daily Telegraph, 9/23/2001] His researchers
have found "almost irrefutable proof of insider
trading". [Miami Herald, 9/24/2001] "If you
look at movements in markets before and after the
attack, it makes your brow furrow. But it is
extremely difficult to really verify it."
Nevertheless, he believes that "in one or the
other case it will be possible to pinpoint the source".
[Fox News, 9/22/2001] Welteke reports "a
fundamentally inexplicable rise" in oil prices
before the attacks [Miami Herald, 9/24/2001] and then
a further rise of 13 percent the day after the
attacks. Gold rises nonstop for days after the
attacks. [Daily Telegraph, 9/23/2001] 
Related to those
observations, I sent a request via e-mail to the press
office of the Deutsche Bundesbank on August 1, 2011, from
which I was hoping to learn:
How did the Bundesbank deal with this information? Did US
federal agencies ask to see the study? With whom did the
Bundesbank share this information? And additionally: 1.
Can you confirm that there is such a study of the
Bundesbank concerning 9/11 insider trading, which was
carried out in September 2001?
2. If Yes: what is the title?
3. If Yes: who were the authors?
4. If Yes: has the study ever been made available to the
On August 2, I was then informed: "Your mail has
been received by us and is being processed under the
number 2011 / 011551." Ultimately, however, the
press office of the Deutsche Bundesbank was only
available for an oral explanation on the phone. With this
explanation, I then turned to the press office of the
federal financial regulator in Germany, the Bundesanstalt
fur Finanzdienstleistungsaufsicht, BaFin, with the
following e-mail - and that because of obvious reasons:
Yesterday, I sent a
request (see end of this e-mail) to the press office
of the Deutsche Bundesbank relating to insider
trading connected to the terrorist attacks on
September 11, 2001, and respectively relating to an
alleged study carried by the Deutsche Bundesbank. The
request carries the reference number 2011 / 011551.
The press office or respectively Mr Peter Trautmann
was only available for an oral explanation. I repeat
this now, because it is related to your entity. This
will be followed by my further questions.
According to an oral explanation from the press
office of the Deutsche Bundesbank, there has never
been a detailed and official study on insider trading
from the Bundesbank. Rather, there has been probably
ad-hoc analysis with corresponding charts of price
movements as briefings for the Bundesbank board. In
addition, it would have been the duty of the
Bundesfinanzaufsicht to investigate this matter. The
press office of the Bundesbank was also not willing
to give out any written information, not even after
my hint that this alleged study by the Bundesbank has
been floating around the Internet for years without
any contradiction. That was the oral information from
the Bundesbank press office, or respectively from Mr
Now my questions for you:
1. Has the BaFin ever investigated the 9/11 insider
2. With what result? Have the results been made
3. Have there not been any grounds for suspicion that
would have justified an investigation, for example as
damaged enterprise: Munich Re, and as buyers of put
options of UAL's United Airlines Company: Deutsche
4. Has the Deutsche Bundesbank ever enquired with
BaFin what information they have regarding the 9/11
insider trading - for example for the creation of ad-hoc
analysis for the Bundesbank?
5. Have the US federal agencies ever inquired if the
BaFin could cooperate with them in an investigation?
Could you reply to me in writing, unlike the Deutsche
Bundesbank, please? I would be very grateful for that!
The next day I did
indeed receive an e-mail concerning this topic from Anja
Engelland, the press officer of the BaFin in which she
answered my questions as follows:
1. Yes, the former
Bundesaufsichtsamt fur Wertpapierhandel, BAWe (federal
supervisory for securities trading), has carried out
a comprehensive analysis of the operations.
2. As a result, no evidence of insider trading has
been found. Their approach and results have been
published by the BAWe or BaFin in the annual reports
for the years 2001 (cf S 26/27) and 2002 (cf p 156
above first paragraph). Here are the links. [See here and here.]
3. See annual reports 2001 and 2002. Put options on
United Airlines were not traded on German stock
exchanges (the first EUREX options on US equities
were introduced only after the attacks on 9/11/2001);
there were warrants on UAL and other US stocks, but
those traded only in low volumes.
4. I personally do not know about such a request.
Furthermore, the Bundesbank itself would have to
comment on this.
5. BaFin is fundamentally entitled to the exchange of
information with foreign supervisory authorities,
like SEC, on the basis of written agreements, so-called
memoranda of understanding (MoU). Regarding potential
inquiries from foreign supervisory authorities, the
BaFin can unfortunately not comment, this would be a
matter of respective authority. For this I ask for
Then I wrote another
brief note to BaFin, "in order to prevent any
misunderstanding: your answers refers, as far as I
understand, solely to the financial markets in Germany
and Frankfurt, or not?" The reply from BaFin:
The answers refer
to the German financial market as a whole and not
only on the Frankfurt Stock Exchange. In terms of the
assessment of foreign financial markets, the relevant
authorities are the competent points of contact.
In my inquiries, I
mentioned, among other things, a scientific study by US
economist Allen M Poteshman from the University of
Illinois at Urbana-Champaign, which had been carried out
in 2006 regarding the put option trading around 9/11
related to the two airlines involved, United Airlines and
American Airlines. Poteshman came to this conclusion:
"Examination of the option trading leading up to
September 11 reveals that there was an unusually high
level of put buying. This finding is consistent with
informed investors having traded options in advance of
the attacks." 
study was conducted by the economists Wong Wing-Keung (Hong
Kong Baptist University, HKBU), Howard E Thompson (University
of Wisconsin) and Kweehong Teh (National University of
Singapore, NUS), whose findings were published in April
2010 under the title "Was there Abnormal Trading in
the S&P 500 Index Options Prior to the September 11
Motivated by the fact that there had been many media
reports about possible insider trading prior to 9/11 in
the option markets, the authors looked in this study at
the Standard & Poor's 500 Index (SPX Index Options),
in particular with a focus on strategies emanating from a
bear market, namely those under the labels
"Put Bear Spread" and "Naked ITM Call
Write", as each of these are in accordance with the
assumption that one would be betting on a general bear
market if one wanted to profit in anticipation of the 9/11
Along these lines, the authors refer to an article which
Erin E Arvedlund published on October 8, 2001, in Barron's,
the heading of which suggested precisely that thesis:
"Follow the money: Terror plotters could have
benefited more from the fall of the entire market than
from individual stocks." 
Basically, Wong, Thompson and Teh came to the conclusion
"that our findings show that there was a significant
abnormal increase in the trading volume in the option
market just before the 9-11 attacks in contrast with the
absence of abnormal trading volume far before the attacks".
More specifically, they stated, "Our findings from
the out-of-the-money (OTM), at-the-money (ATM) and in-the-money
(ITM) SPX index put options and ITM SPX index call
options lead us to reject the null hypotheses that there
was no abnormal trading in these contracts before
Instead, they found evidence for "abnormal trading
volume in OTM, ATM and ITM SPX index put options"
for September 2001, and also in "ITM-SPX index call
options" for the same month. "In addition, we
find that there was evidence of abnormal trading in the
September 2001 OTM, ATM and ITM SPX index put options
immediately after the 9-11 attacks and before the
expiration date. This suggests that owning a put was a
valuable investment and those who owned them could sell
them for a considerable profit before the expiration date."
From all of this, they took the position that whilst they
couldn't definitively prove that insiders were active in
the market, "our results provide credible
circumstantial evidence to support the insider trading
Disambiguation: "in the money" means that the
circumstances arise on which the owner of a put option is
betting - the market price of the underlying asset, for
example a stock (or in this case an index of shares), is
lower at that moment compared to the price at the time
when the transaction took place. "At the money"
means that the price of the underlying asset has remained
equal or nearly equal. And "out-of-the-money"
means that the price of the underlying asset has gone up,
so the opposite of what the owner of the put option was
betting on took place. "In the money": win.
"Out of the money": loss.
There are also ITM, ATM and OTM options both for trading
strategies with put and call options, depending on which
kind of risk one would like to take. For example,
according to Wong, Thomson and Teh, the "Put-Purchase
Strategy" in the case of a downward movement of the
underlying asset "is a cheaper alternative to short-selling
of the underlying asset and it is the simplest way to
profit when the price of the underlying asset is expected
The use of the OTM put option compared to the ITM put
option, however, offers "both higher reward and
higher risk potentials (...) if the underlying asset
falls substantially in price. However, should the
underlying asset decline only moderately in price, the
ITM put often proves to be the better choice (...)
because of the relative price differential."
That is why speculators would fare best, if they bought
ITM put options, "unless the speculators would
expect a very substantial decline in the price of the
underlying asset." 
After they calculated such strategies in the light of the
available trading data in the CBOE relating to 9/11, the
three economists ultimately do not accept a possible
counter-argument that their results could be attributed
to the fact that the stock markets were generally falling
and that there had already been a negative market outlook.
Finally they pointed out: "More conclusive evidence
is needed to prove definitively that insiders were indeed
active in the market. Although we have discredited the
possibility of abnormal volume due to the declining
market, such investigative work would still be a very
involved exercise in view of the multitude of other
confounding factors," such as confusing trading
strategies, "intentionally employed by the insiders"
in order to attract less attention. 
That would be - and if only to invalidate these
scientific results once and for all - primarily a task
for the SEC, the FBI and other governmental authorities
of the United States. However, we will have to wait for
this in vain.
I think that not less worthy of a mention is an article
that the French financial magazine Les Echos published in
September 2007 about a study conducted by two independent
economics professors from the University of Zurich, Marc
Chesney and Loriano Mancini. Journalist Marina Alcaraz
summarized the content of the findings in Les Echos with
these words and with these explanations by Professor
Chesney, which I for the first time translated into
German (and do now translate from French into English):
volumes, which are very rare for specific stocks lead
to the suspicion of insider trading." Six years
after the attacks on the World Trade Center this is
the disturbing results of a recent study by Marc
Chesney and Loriano Mancini, professors at the
University of Zurich. The authors, one of them a
specialist in derivative products, the other a
specialist in econometrics, worked on the sales
options that were used to speculate on the decline in
the prices of 20 large American companies,
particularly in the aerospace and financial sector.
Their analysis refers to the execution of
transactions between the 6th and 10th of September
2001 compared to the average volumes, which were
collected over a long period (10 years for most of
the companies). In addition, the two specialists
calculated the probability that different options
within the same sector in significant volumes would
be traded within a few days. "We have tried to
see if the movements of specific stocks shortly
before the attacks were normal." We show that
the movements for certain companies such as American
Airlines, United Airlines, Merrill Lynch, Bank of
America, Citigroup, Marsh & McLehnan are rare
from a statistical point of view, especially when
compared to the quantities that have been observed
for other assets like Coca-Cola or HP," explains
Marc Chesney, a former Professor at the HEC and co-author
of Blanchiment et financement du terrorisme (Money
laundering and financing of terrorism), published
by Editions Ellipses. "For example 1,535 put
option contracts on American Airlines with a strike
of $30 and expiry in October 2001 were traded on
September 10th, in contrast to a daily average of
around 24 contracts over the previous three weeks.
The fact that the market was currently in a bear
market is not sufficient to explain these surprising
The authors also examined the profitability of the
put options and trades for an investor who acquired
such a product between the 6th and 10th September.
"For specific titles, the profits were enormous."
"For example, the investors who acquired put
options on Citigroup with an expiry in October 2001
could have made more than $15 million profit,"
he said. On the basis of the connection of data
between volumes and profitability, the two authors
conclude that "the probability that crimes by
Insiders (Insider trading) occurred , is very strong
in the cases of American Airlines, United Airlines,
Merrill Lynch, Bank of America, Citigroup and JP
Morgan. "There is no legal evidence, but these
are the results of statistical methods, confirming
the signs of irregularities." 
As Alcaraz continued to
state for Les Echos, the study by Chesney/Mancini about
possible insider trading related to the 9/11 attacks was
not the first of its kind; but it was in sharp contrast
to the findings of the US Securities and Exchange
Commission SEC and the 9/11 Commission, since they
classified the insider trading as negligible - the trades
in question had no connection to 9/11 and had "consistently
Different in the assessment is also the scientific work
that Chesney and Mancini had published together with Remo
Crameri in April 2010 at the University of Zurich, "Detecting
Informed Trading Activities in the option markets."
In the segment that is dedicated to the terror attacks of
9/11, the three authors come to the conclusion, that
there had been notable insider trading shortly before the
terrorist attacks on September 11 that was based on prior
Without elaborating on the detailed explanation of the
mathematical and statistical method, which the scientific
trio applied during the examination of the put option
transactions on the CBOE for the period between 1996 and
2006, I summarize some of their significant conclusions.
"Companies like American Airlines, United Airlines,
Boeing" - the latter company is a contractor of the
two airlines as aircraft manufacturer - "and to a
lesser extent, Delta Air Lines and KLM seem to have been
targets for informed trading activities in the period
leading up to the attacks. The number of new put options
issued during that period is statistically high and the
total gains realized by exercising these options amount
to more than $16 million. These findings support the
results by Poteshman (2006) who also reports unusual
activities in the option market before the terrorist
In the banking sector, Chesney, Crameri and Mancini found
five informed trading activities in connection to 9/11.
"For example the number of new put options with
underlying stock in Bank of America, Citigroup, JP Morgan
and Merrill Lynch issued in the days before the terrorist
attacks was at an unusually high level. The realized
gains from such trading strategies are around $11 million."
For both areas, the aviation and the banking sector, the
authors state that "in nearly all cases the
hypothesis", that the put options were not hedged,
"cannot be rejected". 
Regarding the options traded on EUREX, one of the world's
largest trading places for derivatives, which in 1998
resulted from the merger between the German and Swiss
futures exchanges DTB and SOFFEX, Chesney, Mancini and
Crameri focused on two reinsurance companies, which
incurred costs in terms of billions of dollars in
connection with the World Trade Center catastrophe:
Munich Re and Swiss Re.
On the basis of EUREX trading data provided by Deutsche
Bank, the three scientists detected one informed option
trade related to Munich Re, which occurred on August 30,
2001. The authors write: "The detected put option
with underlying Munich Re matured at the end of September
2001 and had a strike of 320 (the underlying asset
was traded at 300, 86 on August 30th). That option
shows a large increment in open interest of 996 contracts
(at 92.2% quintile of its two-year empirical distribution)
on August 30th.
Its price on that day was 10, 22. ... On the day
of the terrorist attacks, the underlying stock lost more
than 15% (the closing price on September 10th was
261, 88 and on September 11th 220, 53) and the
option price jumped to 89, 56, corresponding to a
return of 776% in eight trading days. ... The gains ...
related to the exercise of the 996 new put options issued
on August 30th correspond to more than 3.4 million."
Similar is true, according to the authors, for one
informed option trade on Swiss Re on August 20, 2001 with
"a return of 4,050% in three trading weeks", or
"more than 8 million." 
In a new version of their study that was published on
September 7, 2011, the authors stuck to their findings
from April 2010. They added the emphasis that in no way
the profits gained with the put options to which they
point could have been achieved due to sheer fortunate
coincidence, but that in fact they were based on prior
knowledge which had been exploited. 
With those results in terms of what went on at the EUREX
according to Chesney, Crameri and Mancini, I again
addressed the BaFin, which had written to me that for the
financial centers in Germany insider trading around 9/11
could be excluded, and asked:
How does this go
with your information that the federal supervisory
for securities trading (BAWe) could in its
comprehensive analysis not find evidence for insider
trading? Do the authors, so to speak, see ghosts with
no good reason?
In addition, I stated:
If it is true what
Chesney, Crameri and Mancini write, or if you at the
BaFin cannot (ad hoc) refute it, would this then
cause the BaFin to thoroughly investigate the matter
again? If the findings of Chesney, Crameri, and
Mancini were true, this would constitute illegal
transactions relating to a capital crime, which has
no status of limitations, or not?
In case that a need for
clarification had arisen at the BaFin, I added Professor
Chesney to my e-mail-inquiry in the "carbon copy"
- address field, as because these were the results of his
The response that I received from BaFin employee Dominika
Kula was as follows:
As I already told
you in my e-mail, the former federal supervisory for
securities trading (BAWe) carried out a comprehensive
analysis of the operations in 2001. As a result, no
evidence of insider trading has been found. For
clarification purposes, I wish to point out that
violations of statutory provisions of securities or
criminal law can never be excluded with absolute
certainty. In order to pursue and prosecute such
matters concrete evidence of an unlawful act is
required ... Such evidence does not exist here.
With regard to the sources you mentioned, I ask for
understanding that I can neither comment on
scientific analyses, nor on reviews by third parties.
Regarding the statutes of limitations for offences
relating to the violation insider trading regulations
trading I can give you the following information: A
violation of the law to prohibit insider trading is
punishable with imprisonment up to 5 years or with
fines. The statutes of limitations applied for crimes
carrying this kind of penalty (section 78 paragraph 3
No. 4 Penal Code) are five years. These limitations
are described in the statutes of limitations (§§ 78
et seq.) (Criminal Code).
In addition, I turned
to the EUREX with three questions:
1. How do you as EUREX comment on the findings of Messrs
Chesney, Mancini and Crameri?
2. Did you at EUREX perceive the particular trading in
Munich Re and Swiss Re it in any way as strange?
3. Have domestic (eg BAWe and BaFin) or foreign (such as
the U.S. Securities and Exchange Commission) authorities
ever inquired if there may have been evidence of insider
trading via the EUREX in connection with the 9/11 attacks?
I subsequently received the following response from
Heiner Seidel, the deputy head of the press office of the
Deutsche Borse in Frankfurt.
We do not give you
a public written response on behalf of the Deutsche
Börse or Eurex regarding the topics of your inquiry.
This is for the following reason: the trade
monitoring agency (HüSt) is part of the Exchange,
but it is independent and autonomous. Their
investigations are confidential and are carried out
in close coordination with the BaFin. They are never
public, a request which HüSt is therefore not
I leave it to the
reader to draw his/her conclusions from these two replies
from the press offices of BaFin and Deutsche Borse.
Regarding the topic of option trades related to 9/11, I
once more talked with Swiss historian Dr Daniele Ganser
("Operation Gladio"), by asking him this time
about the importance of those put options, which were
traded shortly before the attacks of September 11, 2001.
Ganser: This is an important point. This is
about demonstrating that there was insider trading on
the international stock exchanges before 11 September.
Specifically put options, ie speculation on falling
stock prices were traded. Among the affected stocks
were United Airlines and American Airlines, the two
airlines involved in the attacks.
A colleague of mine, Marc Chesney, professor at the
Institute of banking at the University of Zurich, has
examined these put options. You first of all have to
check if there may have been international
speculation that the aviation industry would be
experiencing a weak period and whether accordingly
also put options on Singapore Airlines, Lufthansa and
Swiss were bought. This was not the case.
Very significant put option trades were only
transacted for these two airlines involved in the
attacks. Secondly, you must examine the ratio of put
options to call options and look if they had also
been purchased to a similarly significant extent that
would constitute speculations on rising stock prices.
And that is also not the case. There were only
significant put options and only significant
transactions for United Airlines and American
Now you need to look further in order to see who
actually bought the put options, because that would
be the insider who made millions on September 11.
Most people are unaware that money was also earned
with the attacks on September 11. The Security and
Exchange Commission, SEC, the Securities and Exchange
Commission of the United States, however, does not
publish the information on who bought the put options,
because you can do this anonymously. It is disturbing
that this data is not made public.
What you have is the 9/11 Commission report, and here
it is pointed out , that there has been insider
trading, but that this insider trading cannot be
traced to [al-Qaeda leader] Osama bin Laden, which
means that it is highly unlikely that it had been Bin
Question: If this is not pursued any
further, what does it mean?
Daniele Ganser: This means that the
investigation of the terrorist attacks was incomplete,
and always at the point where there are
contradictions to the SURPRISE story, no further
investigations are made. It looks very much as if one
wants to examine only one story, the investigation is
therefore one-sided. But this does not only apply to
the put options. 
when Dr Ganser points out in his reply that this
important data is not published, it is actually only half
of the truth. Why? The answer is very simple and odd at
the same time: David Callahan, the editor of the US
magazine SmartCEO, filed a request to the SEC about the
put options which occurred prior to September 11 within
the framework of the Freedom of Information Act (FOIA).
The SEC informed Callahan in its reply of December 23,
2009 under the number "09 07659-FOIA" as
This letter is in
response to your request seeking access to and copies
of the documentary evidence referred to in footnote
130 of Chapter 5 of the September 11 (9/11)
Commission Report... We have been advised that the
potentially responsive records have been destroyed. 
Therefore, we will
unfortunately never know exactly how the SEC and the 9/11
Commission came to their conclusions regarding the 9/11
put options trading for their final report, because
relevant documents were not only held back, but also
destroyed - and that in spite of an agreement between the
SEC and the National Archive of the United States, in
which the SEC has agreed to keep all records for at least
25 years. 
The 9/11 Commission
report wrote this in footnote 130 of Chapter 5, which
briefly focuses on the alleged insider trading:
allegations of insider trading in advance of 9 / 11
generally rest on reports of unusual pre-9/11 trading
activity in companies whose stock plummeted after the
attacks. Some unusual trading did in fact occur, but
each such trade proved to have an innocuous
explanation. For example, the volume of put options -
investments that pay off only when a stock drops in
price - surged in the parent companies of United
Airlines on September 6 and American Airlines on
September 10 - highly suspicious trading on its face.
Yet, further investigation has revealed that the
trading had no connection with 9/11. A single US-based
institutional investor with no conceivable ties to al-Qaeda
purchased 95 percent of the UAL puts on September 6
as part of a trading strategy that also included
buying 115,000 shares of American on September 10.
Similarly, much of the seemingly suspicious trading
in American on September 10 was traced to a specific
US-based options trading newsletter, faxed to its
subscribers on Sunday, September 9, which recommended
These examples typify the evidence examined by the
investigation. The SEC and the FBI, aided by other
agencies and the securities industry, devoted
enormous resources to investigating this issue,
including securing the cooperation of many foreign
governments. These investigators have found that the
apparently suspicious consistently proved innocuous.
(Joseph Cella interview (Sept 16, 2003; May 7, 2004;
May 10-11, 2004); FBI briefing (Aug 15, 2003); SEC
memo, Division of Enforcement to SEC Chair and
Commissioners, "Pre-September 11, 2001 Trading
Review," May 15, 2002; Ken Breen interview (Apr.
23, 2004); Ed G. interview (Feb. 3, 2004).
The author Mark H
Gaffney commented on this finding of
Notice ... the
commission makes no mention in its footnote of the 36
other companies identified by the SEC in its insider
trading probe. What about the pre-9/11 surge in call
options for Raytheon, for instance, or the spike in
put options for the behemoth Morgan Stanley, which
had offices in WTC 2? The 9/11 Commission Report
offers not one word of explanation about any of this.
The truth, we must conclude, is to be found between
the lines in the report's conspicuous avoidance of
the lion's share of the insider trading issue.
Indeed, if the trading was truly "innocuous",
as the report states, then why did the SEC muzzle
potential whistleblowers by deputizing everyone
involved with its investigation? The likely answer is
that so many players on Wall Street were involved
that the SEC could not risk an open process, for fear
of exposing the unthinkable. This would explain why
the SEC limited the flow of information to those with
a "need to know", which, of course, means
that very few participants in the SEC investigation
had the full picture.
It would also explain why the SEC ultimately named no
names. All of which hints at the true and frightening
extent of criminal activity on Wall Street in the
days and hours before 9/11. The SEC was like a
surgeon who opens a patient on the operating room
table to remove a tumor, only to sew him back up
again after finding that the cancer has metastasized
through the system.
At an early stage of its investigation, perhaps
before SEC officials were fully aware of the
implications, the SEC did recommend that the FBI
investigate two suspicious transactions. We know
about this thanks to a 9/11 Commission memorandum
declassified in May 2009 which summarizes an August
2003 meeting at which FBI agents briefed the
commission on the insider trading issue. The document
indicates that the SEC passed the information about
the suspicious trading to the FBI on September 21,
2001, just ten days after the 9/11 attacks.
Although the names in both cases are censored from
the declassified document, thanks to some nice
detective work by Kevin Ryan we know whom (in one
case) the SEC was referring to. The identity of the
suspicious trader is a stunner that should have
become prime-time news on every network, world-wide.
Kevin Ryan was able to fill in the blanks because,
fortunately, the censor left enough details in the
document to identify the suspicious party who, as it
turns out, was none other than Wirt Walker III, a
distant cousin to then-president G W Bush.
Several days before 9/11, Walker and his wife Sally
purchased 56,000 shares of stock in Stratesec, one of
the companies that provided security at the World
Trade Center up until the day of the attacks. Notably,
Stratesec also provided security at Dulles
International Airport, where AA 77 took off on 9/11,
and also security for United Airlines, which owned
two of the other three allegedly hijacked aircraft.
At the time, Walker was a director of Stratesec.
Amazingly, Bush's brother Marvin was also on the
Walker's investment paid off handsomely, gaining $50,000
in value in a matter of a few days. Given the links
to the World Trade Center and the Bush family, the
SEC lead should have sparked an intensive FBI
investigation. Yet, incredibly, in a mind-boggling
example of criminal malfeasance, the FBI concluded
that because Walker and his wife had "no ties to
terrorism ... there was no reason to pursue the
investigation." The FBI did not conduct a single
For this translation, I
asked Kevin Ryan via e-mail if he could send me a link
for his "nice detective work". Ryan, who's in
my humble opinion one of roughly 10 people around the
world who have to be taken seriously regarding 9/11,
You are referring
to my paper "Evidence for Informed Trading on
the Attacks of September 11." [See here.] The following two
references from the paper are relevant to what you
are describing.  9/11 Commission memorandum
entitled "FBI Briefing on
Trading", prepared by Doug Greenburg, 18 August 2003,
The 9/11 Commission memorandum that summarized the
FBI investigations refers to the traders involved in
the Stratesec purchase. From the references in the
document, we can make out that the two people had the
same last name and were related. This fits the
description of Wirt and Sally Walker, who were known
to be stock holders in Stratesec. Additionally, one (Wirt)
was a director at the company, a director at a
publicly traded company in Oklahoma (Aviation General),
and chairman of an investment firm in Washington, DC
(Kuwam Corp). Here are two other recent articles on
Stratesec and its operators. [See here and here.]
The stock of Stratesec, I should add by myself,
increased in value from $0.75 per share on September
11 to $1.49 per share when the market re-opened on
September 17. As a firm that provides technology-based
security for large commercial and government
facilities, Stratesec benefited from the soaring
demand of security companies right after 9/11.
It is also remarkable
what Ryan wrote to me regarding a company on which he did
some research, too: Viisage Corp, another high-tech
In late 2005, George Tenet became a director for
Viisage, which had been flagged by the SEC for 9/11
trading but never investigated. Viisage was led by
Roger LaPenta, formerly of Lockheed.
Seven months later, in 2006, FBI director Louis Freeh
also joined the Viisage board. One might think that
when both the CIA director (on 9/11) and the FBI
director (from 1993 to June 2001) joined a company
suspected of 9/11 insider trading, we might want to
go back and actually investigate the SEC's flagging
of that company. But, of course, that was not the
case. In 2009, "Bandar Bush" hired Freeh as
his personal attorney.
Freeh is nowadays the
bankruptcy trustee of the alleged market manipulator MF
Global. And about his client, the former Saudi ambassador
Prince Bandar, I should add that we know for sure that he
bankrolled indirectly via his wife two of the alleged
would-be 9/11 hijackers, Khalid Al-Mihdhar and Nawaf Al-Hazmi.
But let's get back to the subject of destruction. On
September 11, not only human life, aircraft and buildings
were destroyed in New York City, but also data on
computers and in archives. For example, several federal
agencies occupied space in Building 7 of the World Trade
Center, including the Securities and Exchange Commission
on floors 11 to 13.
Those and other data could have given information about
the alleged 9/11 insider trading (though it seems to be
very unlikely that no backup existed elsewhere
independent of the local computer systems). In fact, some
technology companies were commissioned to recover damaged
hard disks, which had been recovered from the debris and
dust of Ground Zero.
One of these companies was the English company group
Convar, more precisely: their data rescue center in the
German city Pirmasens. Erik Kirschbaum from the news
agency Reuters reported in December 2001 that Convar had
at that time successfully restored information from 32
computers, supporting "suspicions that some of the
911 transactions were illegal".
'The suspicion is that inside information about the
attack was used to send financial transaction commands
and authorizations in the belief that amid all the chaos
the criminals would have, at the very least, a good head
start,' says Convar director Peter Henschel." 
Convar received the costly orders - according to
Kirschbaum´s report the companies had to pay between $20,000
and $30,000 per rescued computer - in particular from
credit card companies, because: "There was a sharp
rise in credit card transactions moving through some
computer systems at the WTC shortly before the planes hit
the twin towers. This could be a criminal enterprise - in
which case, did they get advance warning? Or was it only
a coincidence that more than $100 million was rushed
through the computers as the disaster unfolded?" 
The companies for which Convar was active cooperated with
the FBI. If the data were reconstructed they should have
been passed on to the FBI, and the FBI, according to its
statutory mandate, should have initiated further
investigation based on the data to find out who carried
out these transactions. Henschel was optimistic at the
time that the sources for the transactions would come to
Richard Wagner, a Convar employee, told Kirschbaum that
"illegal transfers of more than $100 million might
have been made immediately before and during the disaster.
'There is a suspicion that some people had advance
knowledge of the approximate time of the plane crashes in
order to move out amounts exceeding $100 million,' he
says. 'They thought that the records of their
transactions could not be traced after the main frames
were destroyed'." 
Wagner's observation that there had been "illegal
financial transactions shortly before and during the WTC
disaster" matches an observation which Ruppert
describes in Crossing the Rubicon. Ruppert was
contacted by an employee of Deutsche Bank, who survived
the WTC disaster by leaving the scene when the second
aircraft had hit its target.
According to the
employee, about five minutes before the attack the
entire Deutsche Bank computer system had been taken
over by something external that no one in the office
recognized and every file was downloaded at lightning
speed to an unknown location. The employee, afraid
for his life, lost many of his friends on September
11, and he was well aware of the role which the
Deutsche Bank subsidiary Alex Brown had played in
insider trading. 
I was curious and
wanted more information from Convar regarding their work
on the WTC-computer hard drives, but also about the
statements made by Peter Henschel and Richard Wagner.
Thus, I contacted the agency which represents Convar for
press matters, with a written request. But their agency
"ars publicandi" informed me swiftly:
Due to time
constraints, we can currently offer you neither
information nor anyone on the part of our client to
talk to regarding this requested topic.
I also approached
KrollOntrack, a very interesting competitor of Convar in
writing. Ontrack Data Recovery, which also has
subsidiaries in Germany, was purchased in 2002 by Kroll
Inc - "one of the nation's most powerful private
investigative and security firms, which has long-standing
involvement with executive protection US government
officials including the president. This would require
close liaison with the Secret Service." 
At the time of the 9/11 attacks, a certain Jerome Hauer
was one of the managing directors at Kroll Inc. He had
previously established the crisis center for the mayor of
New York City as director of the Office of Emergency
Management (OEM), which occupied office space on the 23rd
floor of the WTC Building 7. Hauer helped former FBI
agent John O'Neill to get the post of the head of
Security Affairs at the WTC, and spent the night of
September 11 with O'Neill in New York before the latter
lost his life on September 11 in the WTC. Hauer was most
likely involved in the planning of "Tripod II",
the war game exercise at the port of New York City. 
Therefore, I found it appealing to uncover some more
details of this aspect, or, more accurately to find out
if Ontrack or KrollOntrack had received an order in 2001
or after to rescue computer hard drives from the WTC. The
answer I received from KrollOntrack said:
Kroll Ontrack was
not at the site of the data recovery - the devices at
the Twin Towers have been completely destroyed or
vaporized. The firm Kroll was, however, at that time
active in the field of computer-forensic
investigations, securing devices in the surrounding
In essence, these two
inquiries did not help me at all. If anything, a further
question arose: why did KrollOntrack send me a response,
where it was really obvious that the content did not
match the facts? After all, I had written in my inquiry
that Convar had received orders to restore damaged
computer hard drives from the World Trade Center.
I sent a new inquiry, attaching a link for Erik
Kirschbaum's Reuters article and additional cinematic
reports on Convar's which showed that some of the WTC
disks had not been "completely destroyed or
vaporized". I stated to KrollOntrack: "Your
answer does not seem to match the facts, when it comes to
'completely destroyed or vaporized'. Will you still stick
to your answer?"
KrollOntrack then replied that their previously given
assessment constituted "not a statement, but an
I do not find this assessment worthless, because it is in
line with the knowledge of the general public and can
easily be refuted in argumentum in contrario by Convar´s
One film report to which I referred to in my second
inquiry to KrollOntrack originated from the German
television journal Heute-Journal broadcast on March 11,
2002, on ZDF, and the other from the Dutch TV documentary
Zembla, broadcast on September 10, 2006.
The ZDF report showed that Convar received the WTC disks
from the US Department of Defense and that Convar had
managed until March 2002 to recover more than 400 hard
drives. It also reported that the private companies that
employed Convar had paid between $25,000 and $50,000 per
hard drive. In the TV documentary Zembla, Convar
essentially maintained its position as it had been
reported by Erik Kirschbaum in 2001.
Obviously, in connection with 9/11 there has not only
been insider trading via put options, but there is
additional evidence that there have been illegal
financial transactions via credit cards through which
more than 100 million US dollars were removed from the
WTC computer systems.
Those occurred shortly before and during the WTC disaster.
It remains unclear what the FBI did later on with the
data recovered by Convar. On the other hand, it may have
been not very much, as can be seen from a memorandum from
the 9/11 Commission, which was released in May 2009.
The 9/11 Commission asked the FBI about the use of credit
cards for insider dealing. On the basis of the
information provided by the FBI, the commission came to
the conclusion that no such activity occurred because
"the assembled agents expressed no knowledge of the
reported hard-drive recovery effort or the alleged scheme"
- but above all "everything at the WTC was
pulverized to near powder, making it extremely unlikely
that any hard-drives survived". 
The activities of Convar, however, prove the exact
But it gets even better. According to Zembla, the FBI was
directly involved with the data rescue efforts of Convar.
And on top of it, the broadcast of Heute-Journal reported
that Convar worked in that "highly sensitive"
matter with several federal agencies of the United States
So there have been ample indications for insider trading
based on foreknowledge of the attacks, but there are very
few hard facts as Catherine Austin Fitts, a former
managing director and member of the board of the Wall
Street investment bank Dillon, Read & Co, Inc (now
part of UBS), pointed out when I talked with her about
Ms Fitts, what are
your general thoughts related to the alleged 9/11-insider
Catherine Austin Fitts: Well, I've
never been able to see concrete evidence that the
insider trading has been proved. There's a lot of
anecdotal information from investment bankers and
people in the investment community that indicate that
there was significant insider trading, particularly
in the currency and bond markets, but again it hasn't
I think around situations like 9/11 we've seen things
that can only be explained as insider trading.
Therefore, it wouldn't surprise me if it turns out
the allegations are true, because my suspicion is
that 9/11 was an extremely profitable covert
operation and a lot of the profits came from the
trading. It wouldn't even surprise me if it turns out
that the Exchange Stabilization Fund traded it and
that some of the funding for the compensation fund
for the victims came from the ESF.
Insider trading happens around these kinds of events,
but if you really want to produce evidence of insider
trading, you need the subpoena powers of the SEC, and
of course we know that they haven't exercised them.
If anything, right after 9/11, the government settled
a significant amount of cases I presume because a lot
of the documents were destroyed by the destruction of
WTC building number 7, where the SEC offices and
other governmental investigation offices were. 
Fitts, who had written
a longer essay in 2004 related to this, replied to my
question about who had benefited from 9/11:
Austin Fitts: 9/11 was extraordinarily
profitable for Wall Street, they of course got a kind
of "Get Out of Jail Free card" as I've just
described. In addition, the largest broker of
government bonds, Cantor Fitzgerald, was destroyed,
and there was a great deal of money missing from the
federal government in the prior four or five years.
If you look at the amount of funds involved, it is
hard to come to a conclusion other than massive
securities fraud was involved, so I find it very
interesting that this happened. 
A short explanation:
Cantor Fitzgerald's headquarters were located in the
North Tower of the WTC (floors 101-105). On 9/11, the
company lost nearly two-thirds of its entire workforce,
more than any other tenant in the WTC. (Also two other
government bonds brokers, Garbon Inter Capital and
Eurobrokers, occupied office space in the WTC towers that
were destroyed.) Back to Fitts and the question: "Cui
Austin Fitts: In addition, the federal
government took the position that they couldn't
produce audited financial statements after 9/11,
because they said the office at the Pentagon that
produced financial statements was destroyed. Now
given what I know of the federal set up of financial
statements, I am skeptical of that statement.
But needless to say, if you take the government on
its word, you had another "Get Out of Jail Free
card" for four trillion dollars and more missing
from the federal government. So if you're just
looking at the financial fraud angle, there were a
lot of parties that benefited from 9/11. But then of
course what 9/11 did, it staged the passage of the
Patriot Act and a whole series of laws and
regulations that I collectively refer to as "The
Control on Concentration of Cash Flow Act." It
gave incredible powers to centralize.
In addition, if you look at monetary policies right
after 9/11 - I remember I was over in the City of
London driving around with a money manager and his
phone rang and he answered it on his speaker phone.
It was somebody on Wall Street who he hadn't talked
to since before 9/11, and he said to him: "Oh
Harry, I am so sorry about what has happened, it must
have been very traumatic." And the guy said:
"Don't be ridiculous! We were able to borrow
cheap short and invest long, we're running a huge
arbitrage, we're making a fortune, this is the most
profitable thing that ever happened to us!" - So
you could tell the monetary policies and sort of
insider games were just pumping profits into the bank
at that time, so that was very profitable.
But of course the big money was used for a
significant movement of the military abroad and into
Afghanistan and then into Iraq ... You could see that
the country was being prepared to go to war. And sure
enough, 9/11 was used as a justification to go to war
in Afghanistan, to go to war in Iraq, and commit a
huge number of actions, and now much of the
challenges about the budget are the result of
extraordinary expenditures on war including in
Afghanistan and Iraq and the costs of moving the army
abroad and engaging in this kind of empire building
with ground military force.
So I think if you ask Cui Bono on 9/11, one of the
big categories was all the people who made money on
engineering the popular fear they needed to engineer
these wars. I believe whether it was financial fraud,
engineering new laws or engineering wars, it was a
fantastically profitable covert operation. 
In that category of
people who benefit from 9/11 are also the arms
manufacturer Raytheon, whose share price gained directly
from the 9/11 attacks. Trading of the shares of Raytheon,
the producer of Tomahawk and Patriot missiles (and parent
company of E-systems, whose clients include the National
Security Agency and CIA), experienced an abrupt six-time
increase of call option purchases on the day immediately
before September 11. 
The outright purchase of call options implies the
expectation that a stock price will rise. In the first
week after 9/11, when the New York Stock Exchange opened
again, the value of Raytheon actually shot up
considerably. Looking at the development of the stock
price, the impression is a very weak performance before
the attacks - and then, after resumption of trade, a
"gap" (at substantial volume) upwards. In other
words: just under $25 on September 10, the low in the
period between August 20 to September 28, at $31, 50 on
September 17 and up to $34, and 80 on September 27, 2001.
With regards to government bonds, buyers of US Treasury
securities with a maturity of five years were also
winners. These securities were traded in an unusually
large volume shortly before the attacks. The Wall Street
Journal reported at least in early October 2001 that the
Secret Service had started an investigation into a
suspiciously high volume of US government bond purchases
before the attacks. The Wall Street Journal explained:
bills are the best investments in the event of a
global crisis, in particular one like this which has
hit the United States. The papers are treasured
because of their safety, and because they are covered
by the US government, and usually their prices rise
if investors shun riskier investments, such as shares.
Adding to this
phenomenon, the government issues these bonds that serve
as a basis of money creation for funding a war such as
the immediately declared "war on terror",
engaging the Tomahawks from Raytheon. And here it may
again be useful to have a quick look at the "cui
The US Federal
Reserve creates money to fund the war and lends it to
the American government. The American government in
turn must pay interest on the money they borrow from
the Central Bank to fund the war. The greater the war
appropriations, the greater the profits are for
combination, one could say.
I also talked about the topic of 9/11 insider trading
with one of the world's leading practitioners at the
interface between the international capital markets, the
national security policy of the US as well as geopolitics,
James G Rickards. He gave me some answers in a personal
discussion, which I am allowed to repeat here with his
Did suspicious trading activities of uncovered put
options on futures markets occur shortly before 9/11?
James G Rickards: Well, the trading
documents certainly look suspicious. It is simply a
fact that an unusually high volume of purchases of
put-options for the two airlines occurred over the
three trading days before the attacks. This is a mere
fact, no speculation, no guessing around. This is
clearly obvious from the documents of the trading
sessions on the derivatives exchanges.
Question: Do you think that the
intelligence agencies could have got a warning signal
based on this information?
James G Rickards: Theoretically that is
possible, if are you are looking and watching out for
this. But there was far more significant information,
which was ignored.
Question: Do you also think that some
people with foreknowledge operated speculatively in
the option markets?
James G Rickards: Based on the
documentation of the trading session it seems that
this has been the case, yes.
Let's sum up a bit at
the end. We have, among other things:
The "nice detective work" by Kevin Ryan
related to Stratesec/Wirt Walker III. Some highly
inconsistent information vis-a-vis Convar/illegal credit
card transactions. Scientific papers supporting the
allegations that there were indeed unusual trading
activities in the option market before the terrorist
attacks of 9/11, although the 9/11 Commission (based on
the investigation of the SEC and the FBI) ruled that
As it became clear that I would publish this article here
at Asia Times Online, I contacted the US Federal Bureau
of Investigation via its press spokesman Paul Bresson in
order "to give the FBI the opportunity to give a
public statement with regards to three specific issues".
Those three specific issues were the ones I have just
highlighted. Related to each of them I've asked Mr
Bresson/the FBI: "Could you comment on this for the
public, please?" Up to this moment, Mr Bresson/the
FBI did not respond to my inquiry in any way whatsoever.
Does this come as a surprise?
I've also got back in touch with "ars publicandi",
the firm that does public relations for Convar in Germany.
The response said: "Unfortunately I have to inform
you that the status has not changed, and that Convar
considers the issue of 9/11 as dead in general."
As you have read, the status in August of last year was
At the end of this article, I should perhaps mention that
this research ultimately led to negative consequences for
me. After I contacted the FBI, I was informed by the
publisher of a German financial website, for which I
conducted interviews for a professional fee (and had
already prepared more work), that no further cooperation
was possible. Now that I will come in one way or another
into the focus of the FBI, any association with me would
Well, you know the rules.
As far as the abnormal option trades around 9/11 are
concerned, I want to give Max Keiser the last word in
order to point out the significance of the story.
Regardless of who did it, we can know that more than
a few had advance warning - the trading in the option
market makes that clear.
i. PROMIS was first developed by Inslaw during the 1970s
under contracts and grants from the Law Enforcement
Assistance Administration (LEAA). These guarantees gave
the government licenses to use the early versions of
PROMIS but not to modify them, or to create derivative
works, or to distribute PROMIS outside the federal
government. By 1982, because of strong disagreements over
a fee-incentive, Modification 12 Agreement to the
original contract, the United States Department of
Justice and Inslaw Inc became involved in a widely-publicized
and protracted lawsuit. PROMIS was originally designed as
a case-management system for prosecutors. (Source
1. Compare Michael C Ruppert: Crossing the Rubicon:
The Decline of the American Empire at the End of the Age
Of Oil, New Society Publishers, Gabriola Island, 2004,
2. Ibid, page 153.
3. Ibid, page 154-155.
4. Ibid, page 170.
5. Ibid, page 238-253: "9/11 Insider Trading, or 'You
Didn't Really See That, Even Though We Saw It'."
6. Ibid, page 239.
7. Compare Chris Blackhurst: "Mystery of terror 'insider
dealers' ", published at The Independent on October
4, 2001, see here.
8. Compare "Profits of Death", published at
From the Wilderness on December 6, 2001, see here.
9. For the fact, that it was George Tenet who recruited
Krongard, compare George Tenet: At the Center of the
Storm, Harper Collins, New York, 2007, page 19.
10. Compare Marc Chesney, Remo Crameri and Loriano
Mancini: "Detecting Informed Trading Activities in
the Option Markets", University of Zurich, April
2010, online here.
11. Nafeez M Ahmed: Geheimsache 09/11. Hintergründe
uber den 11. September und die Logik amerikanischer
Machtpolitik, Goldmann Verlag, Munich, 2004, page 182.
(Translated back into English from German.)
12. Compare Michael C Ruppert: Crossing the Rubicon,
13. Wing-Keung Wong, Howard E. Thompson und Kweehong Teh:
"Was there Abnormal Trading in the S&P 500 Index
Options Prior to the September 11 Attacks?",
published at Social Sciences Research Network, April 2010,
14. Compare "Bank of America among 38 stocks in SEC's
attack probe", published at Bloomberg News on
October 3, 2001, archived here.
15. Michael C Ruppert: Crossing the Rubicon, page
17. "Suppressed Details of Criminal Insider Trading
Lead Directly into the CIA's Highest Ranks",
published at From the Wilderness on October 9, 2001, see here.
18. Compare "Early September 2001: Almost
Irrefutable Proof of Insider Trading in Germany",
published at History Commons, see here.
19. Allen M Poteshman: "Unusual Option Market
Activity and the Terrorist Attacks of September 11, 2001",
published in The Journal of Business, University of
Chicago Press, 2006, Vol 79, Edition 4, page 1703-1726.
20. Wing-Keung Wong, Howard E Thompson und Kweehong Teh:
"Was there Abnormal Trading in the S&P 500 Index
Options Prior to the September 11 Attacks?", see end
21. Ibid. The authors refer to Erin E Arvedlund: "Follow
the money: terrorist conspirators could have profited
more from fall of entire market than single stocks",
published in Barron's on October 8, 2001.
22. Wong, Thompson, Teh: "Was there Abnormal Trading
in the S&P 500 Index Options Prior to the September
25. Marina Alcaraz: "11 septembre 2001: des volumes
inhabituels sur les options peu avant l'attentat",
published in Les Echos, page 34, September 10, 2001,
26. Marc Chesney, Remo Crameri and Loriano Mancini:
"Detecting Informed Trading Activities in the Option
Markets", see end note 10.
30. Compare Marc Chesney, Remo Crameri and Loriano
Mancini: "Detecting Informed Trading Activities in
the Option Markets", published at the University of
Zurich on September 7, 2011, see here.
31. Vgl Lars Schall: "Sapere Aude!", German
Interview with Dr Daniele Ganser, published at LarsSchall.com
on August 18, 2011, see here.
32. Compare a copy of the letter by the SEC on MaxKeiser.com,
33. Compare related to this agreement Matt Taibbi: "Is
the SEC Covering Up Wall Street Crimes?", published
at Rolling Stone on August 17, 2011, see here.
34. Mark H Gaffney: "Black 9/11: A Walk on the Dark
Side", published at Foreign Policy Journal on March
2, 2011, see here.
35. Compare Peter Dale Scott: "Launching the US
Terror War: the CIA, 9/11, Afghanistan, and Central Asia",
The Asia-Pacific Journal, Vol 10, Issue 12, No 3, March
19, 2012, see online here.
35. Erik Kirschbaum: "German Firm Probes Last-Minute
World Trade Center Transactions", published at
Reuters on December 19, 2001, online here.
38. Michael C Ruppert: Crossing the Rubicon, page
39. Ibid, page 423.
40. Ibid, page 423-426.
41. Commission Memorandum: "FBI Briefing on Trading",
dated August 18, 2003, page 12, online here.
42. Lars Schall: "9/11 Was A Fantastically
Profitable Covert Operation", Interview with
Catherine Austin Fitts, published at LarsSchall.com on
September 3, 2011, see here.
43. Ibid. Compare further related to the "cui bone"
topic Catherine Austin Fitts: "9-11 Profiteering: A
Framework for Building the 'Cui Bono'?", published
at GlobalResearch on March 22, 2004, see here.
44. Lars Schall: "9/11 Was A Fantastically
Profitable Covert Operation", see end note 42.
45. Compare "Bank of America among 38 stocks in SEC's
attack probe", see end note 14. "A Raytheon
option that makes money if shares are more than $25 each
had 232 options contracts traded on the day before the
attacks, almost six times the total number of trades that
had occurred before that day. A contract represents
options on 100 shares. Raytheon shares soared almost 37
percent to $34.04 during the first week of post-attack US
46. Compare Barry Grey: "Suspicious trading points
to advance knowledge by big investors of September 11
attacks," published at World Socialist Web Site on
October 5, 2001, see here.
47. J S Kim: "Inside the Illusory Empire of the
Banking Commodity Con Game," published at The
Underground Investor on October 19, 2010, see here.
Lars Schall is a German financial
journalist. This article is an exclusive, slightly
modified and updated excerpt from the book Mordanschlag
9/11. Eine kriminalistische Recherche zu Finanzen, Ol und
Drogen (Assassination 9/11: A criminalistic research on
finance, oil and drugs), published in Germany by
Copyright 2012 Asia Times Online (Holdings) Ltd.
Rolling Stone, Matt Taibi (excerpts):
Did you hear about
the plot to rig global interest rates? The $137 million
fine for bilking needy schools and cities? The ingenious
plan to suck multiple fees out of the unemployment checks
of jobless workers? Take your eyes off them for 10
seconds and guaranteed, they'll be into some shit again -
Bank of America has systematically ripped off almost
everyone with whom it has a significant business
relationship, cheating investors, insurers, depositors,
homeowners, shareholders, pensioners and taxpayers. It
brought tens of thousands of Americans to foreclosure
court using bogus, "robo-signed" evidence
a type of mass perjury that it helped pioneer. It
hawked worthless mortgages to dozens of unions and state
pension funds, draining them of hundreds of millions in
value.Last year, the Federal Reserve allowed Bank of
America to move a huge portfolio of dangerous bets into a
side of the company that happens to be FDIC-insured,
putting all of us on the hook for as much as $55
trillion in irresponsible gambles. They lie, cheat
and steal as reflexively as addicts, they laugh at people
who are suffering and don't have money, they pay
themselves huge salaries with money stolen from old
people and taxpayers and on top of it all, they
completely suck at banking. And yet the state won't let
them go out of business, no matter how much they deserve
it, and it won't slap them in jail, no matter what crimes
they commit. That makes them not bankers or capitalists,
but a class of person that was never supposed to exist in
America: royalty.Founded by a first-generation Italian-American
named Amadeo Giannini the bank set out to serve
immigrants denied credit by other banks, and it was
instrumental in helping to rebuild the city after the
devastating earthquake of 1906. But like many of the
truly bad ideas in history, the present-day version of
Bank of America was the product of a testosterone
overdose.. In the end, it all comes back to mortgages.
Though Bank of America would ultimately be charged with
committing a dizzyingly diverse variety of corporate
misdeeds, the bulk of the trouble the bank is in today
arises from the Great Mortgage Scam of the mid-2000s,
which caused the biggest financial bubble in history.The
holy trinity of Bank of America, Countrywide and Merrill
Lynch represented the worst conceivable team of financial
powers to get hold of this scam.In this case, it was the
most careless mortgage lender ; the most dangerous
mortgage gambler and the most relentless packager of
mortgage pools. These guys were so corrupt, they even
shocked one another: According to a federal lawsuit, top
executives at Countrywide complained privately that Bank
of America's "appetite for risky products was
greater than that of Countrywide."
And what about that ostensible insurance that Bank of
America sold with its bundles of mortgages? Well, those
policies turned out not to be worth very much, since so
many of the loans defaulted that they blew the insurers
out of business. If you went bust buying bad mortgages
from Bank of America, chances are, so did your insurer.
At best, you two could now share a blanket in the
poorhouse. Incredible as it sounds, owing practically
everyone in the world billions of dollars apiece is only
half of Bank of America's problem. The bank didn't just
flee the scene of its various securities rip-offs. It
also made a habit out of breaking the law and engaging in
ethical lapses on a grand scale, all over the globe. Once
your money ends up in their pockets, they just slither
off into the night, no matter their legal or professional
obligations. What's most striking in all of these scams
is the corporate culture of Bank of America: These guys
are just dicks. Time and again, they go out of their way
to fleece their own customers, without a trace of remorse.
In classic con-artist behavior, Bank of America even
tried to rip off homeowners a second time by gaming
President Obama's HAMP program, which was designed to aid
families who had already been victimized by the banks. In
a lawsuit filed last year, homeowners claim they were
asked to submit a mountain of paperwork before receiving
a modified loan only to have the bank misplace the
documents when it was time to pay up.The bank's list of
victims goes on and on. The disabled? Just a few weeks
ago, the government charged Bank of America with
violating the Fair Housing Act by illegally requiring
proof of disability from people who rely on disability
income to make their mortgage payments. Minorities? Last
December, the bank settled with the Justice Department
for $335 million over Countrywide's practice of dumping
risky subprime loans on qualified black and Hispanic
borrowers. The poor? In South Carolina, Bank of America
won a contract to distribute unemployment benefits
through prepaid debit cards and then charged
multiple fees to jobless folk who had the gall to
withdraw their money from anywhere other than a Bank of
America ATM. Seriously, who hasn't this bank
conspired to defraud? Puppies?
In sum, Bank of America torched dozens of institutional
investors with billions in worthless loans, repeatedly
refused to abide by contractual obligations to buy them
back, evaded hundreds of millions in local fees and taxes,
pushed tens of thousands of people into foreclosure using
phony documents, ignored multiple court orders to stop
its illegal robo-signing, and exploited President Obama's
signature mortgage-relief program. The bank fixed the
bids on bonds for schools and cities and utilities all
over America, and even conspired to try to game the game
itself by fixing global interest rates!
Bank of America should have gone out of business back in
2008. Just as the mortgage market was crashing, it made
an inconceivably stupid investment in subprime mortgages,
acquiring Countrywide and the billions in potential
lawsuits that came with it. "They tried to catch a
falling knife and lost their hand and foot in the process,"
says Joshua Rosner, a noted financial analyst. It then
spent $50 billion buying a firm, Merrill Lynch, that was
rife with billions in debts. With those two anchors on
its balance sheet, Hugh McColl's bicoastal dream bank
should have gone the way of the dinosaur.But it didn't.
Instead, in the midst of the crash, the government forked
over $45 billion in aid to Bank of America $20
billion as an incentive to bring its cross-eyed bride
Merrill Lynch to the altar, and another $25 billion as
part of the overall TARP bailout. In addition, the
government agreed to guarantee $118 billion in Bank of
America debt. But by far the biggest bailout to Bank of
America has come via the sweetheart deals it cut to
settle the massive lawsuits filed against it. Some of the
deals, which were brokered by the Justice Department and
state attorneys general, allowed the bank to get away
with paying pennies on the dollar on its mountains of
debt. Worst of all was the recent $26 billion foreclosure
settlement involving Bank of America and four other major
firms. The deal, in which the banks agreed to pay cash to
screwed-over homeowners in exchange for immunity from
federal prosecution on robo-signing issues, was hailed as
a big multibillion-dollar bite out of the banks.
President Obama was all but strutting over his beatdown
of Wall Street. "We are Americans, and we look out
for one another; we get each other's backs," he
declared. "We're going to make sure that banks live
up to their end of the bargain."
Oh, and one more
thing, since we're talking about avoiding bills: Bank of
America didn't pay a dime in federal taxes last year. Or
the year before. And here's the biggest scam of all:
After all that help all the billions in bailouts,
the tens of billions in Fed loans, the hundreds of
billions in legal damages made to disappear, the untold
billions more of unpaid bills and buybacks Bank of
America is still failing. In December, the bank's
share price dipped below $5, and after being cut off by
Fannie in February, the bank announced a truly shameless
plan to jack up fees for depositors by as much as $25 a
The Dodd-Frank financial reform approved by Congress last
year was supposed to fix the problem of Too Big to Fail,
giving the government the power to take over and disband
troubled megafirms instead of bailing them out. "The
way to cut our Gordian financial knot is simple,"
MIT economist Simon Johnson wrote in The New York
Times. "Force the big banks to become smaller."
But few in the financial community believe that will ever
happen. "If Bank of America crashes, the first thing
that would happen is Dodd-Frank would be revealed as a
fraud," says Rosner. "The Fed and the Treasury
would ask Congress for a bailout to 'save the economy.'
It's the worst-kept secret on Wall Street."In a pure
capitalist system, an institution as moronic and corrupt
as Bank of America would be swiftly punished by the
market the executives would get to loot their own
firms once, then they'd be looking for jobs again. But
with the limitless government support of Too Big to Fail,
these failing financial giants get to stay undead forever,
continually looting the taxpayer, their depositors, their
shareholders and anyone else they can get their hands on.
The threat posed by Bank of America isn't just financial
it's a full-blown assault on the American dream.
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