Note of the author of this blog as disclosure: our global group of enterprises is a shareholder of certain banks that, for the best of our knowledge, weren't beneficiaries of the type of behavior that is described below. Likewise, our group doesn't buy or sell ETFs.
As an investigative journalist I thought this may be information that your could use or could forward to a colleague that covers these type of stories...
Below is a letter recently forwarded to Ben Bernanke, Chairman of the Federal Reserve Bank that outlines clear evidence that the actions of the Fed defrauded private investors of billions of dollars. It seems like some good lawyers could build a strong case out of this information. It make for a good story. You all need to talk to the admitted recipients of this money from the Fed to discuss whether there were agreements for each to buy each other’s stock or a concerted effort to ramp up stock prices.
If you would like to discuss this matter with the Federal Reserve Bank of New York please contact Thomas Baxter or Sahil Godiwala. Both attorneys for the New York Fed. (212) 720-5000.
Also, If you know of a reporter this story may be better suited please feel free to forward to them or have them call me directly.
I can be reached at 904-260-8472
-Will Pitts
wpitts@wgpitts.com
December 7, 2010
Mr. Ben Bernanke
Chairman
Federal Reserve Bank
20th Street and Constitution Avenue NW
Washington, DC 20551-0001
Re: Federal Reserve Bank Wipes out Entire Class of Investors Through Market Manipulation
Dear Chairman Bernanke:
On or about March of 2009, the Federal Reserve Bank (The “Fed”) commenced in actions that involved making loans to banks, financial institutions, wholly owned Fed companies (i.e. Maiden Lane), lenders and publicly traded companies. Additionally evidence suggest that the Fed through these firms and at the direction of the Fed made direct purchases of equities in publicly traded companies for the purpose of raising stock prices. These transactions were undisclosed to the public and investors. Neither the Fed nor the recipient companies disclosed these material transactions to the investing public. Ostensibly, this assistance from the Fed was conducted with the objective of increasing the stock value of many troubled companies and banks. Additionally, under the plan by the Fed and U.S. Treasury, these banks and financial institutions used the Fed supplied funds to purchase each other’s stock. This was conducted to allow each bank to raise each other’s stock values to improve the assets values on one another’s balance sheets. These actions were supported encouraged, known about and assisted through actions of the Fed and the United States Treasury.
While these actions may have been helpful to those firms to abate the systemic problems within the market, assisted in working to make recipient banks more solvent and may have prevented additional bank failure, these actions resulted in severe detrimental damage to many individual investors.
As you are keenly aware, most every market transaction has two sides to a trade. As a stock or asset class increases in value, some investors realize gain while simultaneously others who concluded that the stocks would NOT improve in price and made investments accordingly known as taking a “short” position would loose money. The inverse of this scenario is also true.
As stock prices decrease, those investors who purchased inverse Exchange Traded Funds (“ETF’s’) would gain value in their investments.
As I understand it, between the Fed and the SEC you all are charged with ensuring fairness, honesty and integrity in our markets and monetary system. It is also my understanding that the Fed professes to never intervene in the markets unless it is to prevent crisis.
I attempted to understand current events, market conditions and the fundamentals of financial and cash flow statements prior to making personal direct investments. I have always assumed that significant transactions with companies being publicly traded would be conducted in the open and that significant transactions would be disclosed to all investors to make informed decisions. Unfortunately, it appears that as a result of the Feds efforts to correct the current financial crisis these rules of disclosure and openness were set aside.
After the September 2008 market crash I took a much more active role in managing my investments. Based upon reading financial data and analyst reports it was very obvious to me that there many commercial property REITS, banks and lending institutions were severely impaired, would suffer significant cash shortfalls and were insolvent or would go bankrupt. It appears that your office arrived at the same conclusion as evidenced by the subsequent injection of hundreds of billions of dollars of cash directed to these institutions by the Fed.
In 2008 at the bottom of the market I sold positions I owned in physical gold and banks stocks such as Bank of America (BAC), Citigroup (C) and also non financial companies such as Ford (F). I used these proceeds to purchased inverse ETF’s such as NYSE: FAZ (Direxion Financial 3x Short) and NYSE:SRS (Proshares Real Estate 2x Short).
Since making these purchases, these ETF’s have suffered significant drops in value as reflected in their price. In fact NYSE: FAZ has plummeted from $1100 per share to $11 per share and SRS has reduced in price from $1000 per share to $19.50 per share. It is now apparent that the Fed spend trillions of dollars to raise the price of bank stocks and to inversely suppress the price of these inverse ETFs.
Now 20 months after these investments were originally made, your office disclosed that it had directly and indirectly injected hundreds of billions of dollars into numerous publicly traded companies. However, this information was not made public to investors by either the Fed or the institutions receiving these cash injections as these significant material transactions were occurring.
As a result, investors could not make informed investment decisions. By allowing investors to make investments into funds such as FAZ and SRS and other inverse ETF’s, while the Fed was performing transactions that the Fed knew or should have known would severely harm the investors in these publicly traded fund.
My damages had I continued to hold onto my shares of Ford and physical gold are in excess of $__ million. Therefore, I appeal to your office to make due and just compensation in treble damages amounting to $__ million dollars for a full and good faith settlement of this matter. If this is agreeable, I am prepared to enter into a confidential good faith settlement. I would also be prepared to drop action in attempting to raise public awareness to prepare for a class action lawsuit against the Fed regarding this matter.
Should we not be able to resolve this matter I will be forced to file a claim in the Federal District Court and work to initiate a Class Action Lawsuits to represent all owners of these inverse ETF’s that suffered economic loss. Enclosed please find a few of the reports relied upon to arrive at the conclusions. I would seek to further explore this through depositions and discovery of the many recipients of funds from the Fed.
I do not envy your position and the challenges you face during these very difficult times. Should your office desire to discuss this, I can be reached at my office at XXX-XXX-XXXX or my mobile at XXX-XXX-XXXX
Regards,
William G. Pitts
