What inspired you to write Naked, Short and Greedy?

I was inspired by the entrepreneurs who lost everything but never gave up the fight. Their companies were destroyed by Wall Street yet they just kept going. I was inspired by retail investors who, again, lost everything, but kept fighting for the shares they knew they owned.

I can’t tell you how many times I wanted to just give up, walk away from writing this story (@spiramus was infinitely patient!) I was in Vancouver in June 2018 where I got to talk with Robert Kuhl and Louis Doyle, the operators of barker minerals. When I saw that Louis was working on the company’s mineral claims, in remote parts of Canada, every day… I realized that I had to finish the book, I had to tell the story of the entrepreneurs and the investors who believed in them, the damage they suffered at the hands of Wall Street.

Because Wall Street writes its own rules (“self-regulatory organizations”), there was little if any recourse to the law. Regulators either ignored their complaints or collaborated with Wall Street. Government was too dependent on political contributions from Wall Street (or preparing for a revolving door more) that they refused to act.

I can’t change the rules, but I knew I had a platform to tell their story – so I kept going.

What was the writing process like? Do you enjoy doing the research?

LOVE it! Totally my jam! I include it in the list of activities for “my perfect day” along with creating art, playing music, and exercising. It is solitary work and I’ve always enjoyed my own company as much as being with friends.

Lessons not learned is in my academic style of writing – every little thing has to be researched, referenced, confirmed. That takes a lot of time. The result is a precision that allows me to defend it under any circumstances (press, regulators, etc.).

Naked, Short and Greedy was actually harder to write for a different reason: I had to re-live some of the unpleasant events of that time. I found Chapter 14 (“Resistance from Wall Street”) particularly difficult. At the time it happened, I worked to maintain a positive outlook, to keep going in the face of adversity. For the writing, I had to be completely honest with myself that there were groups of people, including C-suite executives, in self-regulatory organizations sitting in a room plotting how they could marginalize and silence me.

I still think it’s bizarre. If I ever feel like my message isn’t getting enough attention, I remind myself that those guys are spending A LOT of money to make that happen!

What changes have occurred in Wall Street since writing the book?

The book was published in January 2020; not much has changed for the good since. There were new rules about reporting stock lending – but not keeping the accounting straight for voting loaned shares. NSCC “enhanced” capital requirements – but the clearing fund is still less $ than FTDs.

From 2020 to 2022, NSCC submitted about 40 different proposed rulemakings to the SEC. None of them do the one thing that would be an enormous first step toward correcting the systemic problems: NSCC must “summarily suspend and close the account of any participant who is in default of any delivery of securities”.

Congress gave them that power in 1975 (NSG Endnote 134). [P.L. 94-29, 4 June 1975 amending Securities and Exchange Act of 1934, Section 17A.a.5.(C): “A registered clearing agency may summarily suspend and close the account of a participant who…, (ii) is in default of any delivery of funds or securities..”* ).

*https://www.congress.gov/bill/94th-congress/senate-bill/249

What is one thing you hope people take away from reading the book?

Even a small protest, directed at the right places, can make change happen.

2000-2008 Pajamahadeen was much smaller than the size of Reddit + Twitter community today. Yet, they were largely responsible for requiring NSCC to routinely release at least some data on settlement fails. Before that, NSCC released only one number as of December 31 each year and that was buried in the notes to the financial statements.

Things are still a mess, don’t get me wrong! Don‘t let the perfect be the enemy of the good. Self-regulatory organizations are endemic in capital markets. There is no panacea to fix all the systemic problems.

Lessons not Learned covered what hadn’t been learned before the financial crisis, do you think any of those lessons have now been learned?

Oh, my gosh, NO! Lessons Not Learned demonstrated how ignoring those lessons got us to 2008. But I also went page by page through Dodd-Frank and everything that came out of the Financial Crisis Inquiry Commission. Nothing has been done to stop Wall Street’s Failure to Deliver problem.

Unless and until NSCC summarily suspends and closes the account of participants who fail to deliver stocks and bonds for settlement, nothing will change. Everything else is just re-arranging the chairs on the Titanic.

What’s next? Are there any other topics you particularly want to write about?

Naked, Short and Greedy was my “swan song” on this topic; it is a narrative version of Lessons Not Learned. There is no new thing under the sun in finance: the entire 2021 meme stock episode is largely a repeat of the 2006 events described in NSG. This is one of the reasons I left DTC in 1993: everything “new” was just a variation on a theme.

I do enjoy research and writing, so I’m sure there will be something. I have considered doing a volume that compiles the articles I’ve written, especially since 2009, maybe including some of the keynote speeches with graphics of the slides.

For now, I remain committed to spreading the message of Naked, Short and Greedy to a broad audience. Lessons Not Learned is not as accessible, but for anyone who wants the “back up” of “due diligence” #DD for Naked, Short and Greedy, it’s all in Lessons Not Learned.