Trouble In Stock-Loan Scheme Town

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Everyone knows that you’re nobody until somebody loves youstalks youslips 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]

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