Everyone knows that you’re nobody until somebody loves you stalks you slips a rohypnol in your drink accuses you and your kind of being criminals (it’s true). A “number” of people in Wall Street’s securities lending business may earn that kind of recognition in the very near future: Business Week’s Matthew Goldstein reports that federal prosecutors in Brooklyn are close to charging current and former Street employees with “taking part in a complex kickback scheme that may have collectively cost the financial houses and short sellers million of dollars in higher and unnecessary fees.”
Three Sal Bonpensieros are already cooperating with prosecutors. Past and present stock loan desk employees from Bear Stearns and Morgan Stanley are being the most thoroughly investigated. Prosecutors also have their eye on Goldman (and former Goldman) employees, as well as Janney Montgomery Scott, Merrill Lynch and Nomura Securities.
No doubt this has left many short-sellers on the train back from Greenwich this afternoon with mixed feelings. On the one hand, finally someone is uncovered for criminality in the short-selling business and it turns out they weren't working for a hedge fund. Take that anti-naked short-selling conspiracy theorists! On the other hand, it means that all those brainiac business school grads at the hedge funds were being taken to the cleaners by a bunch of guys at the stock lending desks of Bear Stearns and Morgan Stanley! Talk about humiliating.
The Crackdown on Stock-Loan Schemes [Business Week]
Posted by tod , May 17, 2007 4:55PM
nice sopranos reference
Posted by anon , May 17, 2007 5:36PM
Braniac AND business school grad? Are you sure?
Posted by anon , May 17, 2007 5:44PM
Don't see it as a loss for braniac hedge fund guys, see it as a win for five guys named Vinnie.
Posted by joe , May 17, 2007 6:59PM
stock loan is such a scam. we had a boxed position in a hard to borrow and our prime broker was charging us 11% on the borrow and paying us 4% to lend. Taking a spread is one thing, but 700 fucking bps is criminal.
Posted by The Corner , May 17, 2007 7:27PM
The NYSE regulatory arm has been prosecuting sec lending desks for over two years now, and they've been kicking people out of the business. But from what I understand they haven't been the Morgans and Bears they've been like the Nomura's and Dresdner's and BNY's.
Note to Joe why not pair off the box?
Posted by , May 18, 2007 9:57AM
Bear Stearns has to be doing something wrong, it's in thier DNA
Posted by T , May 18, 2007 1:06PM
just wait till no one is able to recieve a short on any HTB, because the SEC has cracked down on naked short selling , then watch the hedgies cry
Posted by anon , May 18, 2007 1:56PM
What do you mean by HTB, T?
Posted by , May 18, 2007 3:41PM
HTB = HARD TO BORROW
Posted by , May 18, 2007 4:31PM
I agree that pb is such a scam...we obviously get charged on our htb shorts but we never get the credit when we are long...that is a ridiculous difference and a fuckload of money. oh and by the way, our pb is part of our bank...we are on the same side!
Posted by t , May 21, 2007 2:56PM
to the guy with credits on your long, check your PB if you have stock in a type 1 account , you maybe be able to hypothecate your stock , and set up a deal to have it lent out to the street to make some money on your existing long position, I believe when its ina margin account firm has access to lend out your stock
Posted by PB-Scammer , Jun 22, 2007 5:38PM
Attn Joe: Too bad, so sad, next time upload your trade file with a buy-to-cover and you wont get raped by the 10"... err 700 bps Stock Loan Train