Saturday, February 25, 2006

The SEC's Keystone Kops in Action


SEC Enforcement gets another CEO's conspiracy tip

I had a hard time thinking of an appropriate metaphor today. Is the Securities and Exchange Commission engaged in a Joe McCarthy-style witch hunt by serving subpoenas on two Dow Jones reporters -- and then saying "never mind" after getting calls from journalists? Or is it functioning more along the lines of the Keystone Kops, comically chasing after the wrong quarry?

I decided on the latter -- the "never mind" bit was the deciding factor -- but am omitting "comically" because there's nothing funny about it.

As I detail in Wall Street Versus America, the SEC and other regulators have regularly taken actions that are late, weak, and, as in this instance, just totally stupid. Thus the SEC twisted itself into a pretzel to get naked-shorting conspiracy cultists off its back by enacting something called "Regulation SHO." Yet, simultaneously, the SEC's Keystone Kops acknowledged that the "stock counterfeiting scandal" pushed by these con men did not exist. (Note answer to Question 7.1 in this SEC document.)

So today we have the SEC, in full flower of stupidity, chasing down the private vendettas of Overstock Inc.'s CEO, Patrick Byrne, whose principal problem is that his company just isn't a very good investment. Who is to blame? Well, I don't have to tell you, it certainly isn't him! Why, he is just the CEO of the company. Not his fault. It's them! The conspiracy! Joe Nocera's column today in the New York Times is the definitive article on this one-ring corporate circus. It's impossible to mock or parody Byrne, because he does such a great job himself.

Enter the SEC. Instead of consigning his rants and conspiracy theories and private vendettas against shorts and the press into the round file, it launches an investigation. In other words, the pinnacle of our self-regulatory system did precisely what it did with the naked shorting conspiracy nuts.

Don't get me wrong -- this is serious business. Herb Greenberg of Marketwatch, one of the subpoena recipients, is correct in saying that the SEC's action will have a chilling effect on financial journalism. He and Carol Remond of Dow Jones News Service, the other subpoenaed reporter, are two of the toughest financial reporters around. They and others have paid the price for good work by being regularly smeared by Byrne and his lowlife sidekick, an Internet loon who goes by the phony name "Bob O'Brien." The latter, outed by the NY Post as an ex-used medical equipment salesman named Phil Saunders, is the naked shorting cult's Cowardly Lion, roaring against real and imagined enemies while carefully guarding his identity to avoid being held accountable for his constant barrage of lies and smears.

"O'Brien" said this morning, in a typically psychopathic Internet post, that he was "shaking with laughter" after reading the devastating Nocera piece, which ripped him and Byrne to shreds. Later in the day, "O'Brien" published a rambling, hysterical rant from Byrne, lashing out at his villains and obsessions in his usual fashion. Typical line: "Now as far as Nocera's piece goes, it is about as dopey as he sounded when he called."

The SEC might want to wander over to the conspiracy-cult's websites and take a hard look at the kind of characters with whom it has crawled under the sheets.

Not that the SEC would ever do such a thing, of course. Don't forget, we're dealing with an agency that provides a light-hearted, Mack Sennett touch to our regulatory process. Why am I not "shaking with laughter"?

UPDATE: Christopher Cox, the SEC chairman, ate crow on Monday. In the words of Greg Newton, veteran financial journalist, the SEC staff is "out of control."

For more on this weird controversy see earlier posts in this blog, including:

"Naked shorting" cultists smear a BW reporter. (Feb. 21)

The short-selling hysteria continues. (Feb. 24)

The smear du jour -- this time a lie about Herb Greenberg. (Feb. 26)

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Wall Street Versus America: The Rampant Greed and Dishonesty That Imperil Your Investments will be published by Penguin USA on April 6.

Click here for its Amazon.com listing and here for my web site.

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