The SEC’s Economic Stimulus

Office Of the Whistle Blower Krasting

Finally the government is doing something to help the dismal employment situation and the drop in personal income.

The clever folks in D.C. have come up with something that I am sure is going to create a new cottage industry.

The upside in this new effort is very substantial indeed.

The payoff starts at $200k and the sky is the limit after that.

What does one have to do to get some of the fast cash being offered?


You just have to uncover a scam.

Not some small scam, mind you. It has to be pretty big. The minimum threshold is a scam of not less than $1m. These days everyone is ripping off everyone else. So this is really not as hard as it may sound. 

To get started on this exciting new opportunity one must first go to this web site:

Our good friend, Mary Shapiro, has formally initiated the Whistle Blowers club (AKA-Rat Patrol).

If you’re wondering where to begin the process of coming up with the required ‘dirt’, the good old SEC has a page for that too. They have these helpful suggestions of where to start looking.

SEC Details

I have to admit that my personal income has been lagging of late.

ZIRP is killing me and my stocks are (thankfully) underwater by only a tad so far this year. But my expenses have been soaring. My food and energy bill has been on a tear (I know this doesn’t matter to DC, but it sure does to me). Everything else is costing a bunch more (my health insurance is up 30% in a year!). The only expense that is going down is my income tax. Unfortunately that bill is zero because I am making no money (I suspect I’m not alone).

So I’ve decided that I’m going to become a rat and make some coin while I’m at it. This can be a collaborative effort. Anyone reading is welcome to join me while filing some claims. 

What “We” are looking for is evidence of some big scams. Ones that will pay us big time for blowing that whistle. The minimum of $1mm is not where I/We should focus our efforts. I want 20% of a very big number. Say $1B. That would put a tidy $200mm in our pockets (actually they take the tax “off the top”). For those budding entrepreneurs (and potential partners) out there I have some thoughts on where we might look to find some Mega Scams that we could cash in on. Back to those helpful suggestions by the SEC:

Fraudulent investment scheme, such as a Ponzi scheme or the promise of high-yield returnsThere has to be an angle here for us. The entire US economy is a Ponzi. Could we focus on the $6 trillion of recorded unfunded liabilities at the Social Security Trust Fund?

Unregistered securities offeringCould the Fed’s swap lines to other central banks be an avenue of inquiry? How about the Fed’s restriction on buying corporate securities? We have Maiden Lane as evidence they skirted the law.

General trading practices or pricing issuesI’m wondering if we could not make a case that QE is a distortion of pricing. After all, The Fed did buy 1.3 Trillion of private sector debt of the GSEs. That paper was worth no more than 60 cents on the dollar. The Fed bought it all in at a premium to par. 

The good folks at Treasury bought over $2b of subordinated debt of Fannie and Freddie. This crap had no security behind it at all. It was worth less than a quarter of the face value (at best). But that swill got bought out a premium as well. Someone has to be guilty on the pricing issue.

Manipulation of a security 

Manipulation? Everything is manipulated these days. Stocks, bonds, real estate and commodities have all been influenced by the not so invisible hand of Uncle Sam over the past few years.

Insider tradingThis is fertile ground for us. There are dozens of examples that we could hone in on. For example, the S&P downgrade announcement was know to every money centre bank well before it was public. We might look into all those “leaks” that Jon Hilsenrath at the WSJ gets from Bernanke.

Material misstatement or omission in a company’s public filings or financial statements, or a failure to fileI could go on for a bit in this category. On the matter of public filings consider that neither Treasury, CBO nor OMB acknowledge we have unfunded liabilities of $50 trillion or so. When it comes to something simple like “failing to file” we could look into the fact that there has been no budget in the USA for 860 days.

Municipal securities transactions or public pension plans 

The opportunities are endless in the category. Public pension funds are “accruing” income at an 8% rate, but they are not making close to that. Then there is the business of General Obligation debt by munis. Aren’t 49 states supposed to have balanced budgets?

Bribery of, or improper payments to, foreign officials (Foreign Corrupt Practices Act Violations)Just one example that I can think of. In his book “On the Brink” former TSec Hank Paulson describes how the Russians tried to conspire with the Chinese to force the US into a GSE debt buyback by threatening to dump paper onto an already weak market. The threat worked. The Fed ended up buying 1.3T. This was an “improper” payoff to foreign officials; no?

A specific market event or condition

This one is sure to get the folks at Zero Hedge a very big payday. They have documented every flash crash for the past year. How many has there been now? 20 or so that I can think of. 

While this area of inquire is certainly fertile ground for a whistle blower award it is also a difficult case to make. The problem is that the SEC would be on both sides of this. The SEC is absolutely responsible for the Flash Crashes. There can be no doubt about that. But getting them to agree (and to pay) will be another matter. In this case we could just document the facts and submit a claim. The claim would (of course) be denied. At that point all we would have to do is sue in Federal Court. The evidence of SEC culpability will stand up in court. (I think this is such a strong case that the lawyers would take it on a contingency basis) 

Note: I’ve separately contacted Tyler Durden to elicit his support. My proposal is that he opens this up as a “class action” whistle blow. (All ZH registered viewers as of 5PM today will be included in the payout). So far Mr. D has been keeping his cards to his chest on this. (I can’t blame him, there are billions involved.)

If your complaint does not fit in any of the categories above, please describe below

Ah! The “kitchen sink” approach is open to us as well. I was happy to see that the SEC has left this so open ended. It allows us to be creative. I’m not going to dwell on this one. I leave that to you. There are hundreds of areas of inquiry here.

Sadly, this piece is just a joke. While there may well be hundreds of opportunities to blow the whistle on schemes, ponzis misrepresentations and market manipulation perpetrated by D.C. the last few years the chances of getting paid by the SEC for these tips is about zero.

That’s not to suggest that we shouldn’t use this opportunity to register our feelings of what is fair and what is not. I think the collective “we” should be sending thousands of messages to the SEC. So many that the servers get clogged. I’ll be sending a few. In case you want to join me, that link again: SEC Whistle blower.

We may not get paid for being a rat. But we surely can send a message to the Rats.