September 11 Commission Report - Gnostic Liberation Front

lives. The exposure of the Brady/Durham bond fraud would have been too impactful for
the Americanpublic to ignore. The regulations of the SEC would have resulted in an
immediate exposure of this crime during settlement. Hence, the only option available to
the people that pulled this fraud together was to create a national emergency which would
allow the Federal Reserve board to suspend the SEC regulations, and the clearing
agencies (Bank of New York and GSCC) to mask their operations. This national
emergency was the attack on the World Trade Center
As a result of having had a dry run at this situation only the year before during the naval
war games, the management of the Federal Reserve had a precise strategy of how to deal
with this situation. Within hours of the attack on the WTC:
“…the Commission for the first time invoked its emergency powers under Securities Exchange Act
Section 12(k) and, on Friday September 14, issued several orders and an interpretive release to ease
certain regulatory restrictions temporarily. Last Friday, September 21, we extended this relief for an
additional five business days.” [Testimony Concerning The State of the Nation's Financial Markets in
the Wake of Recent Terrorist Attacks, Harvey L. Pitt, Chairman, U.S. Securities & Exchange
Commission Before the Committee on Financial Services United States House of Representatives,
September 26, 2001]
Section 12k – “Trading suspensions; emergency authority”- of the Securities Exchange
Act, when invoked, allows the Federal Reserve to do essentially and literally whatever it
thinks appropriate.
“The Commission, in an emergency, may by order summarily take such action to alter, supplement,
suspend, or impose requirements or restrictions with respect to any matter or action subject to
regulation by the Commission or a self-regulatory organization under this title, as the Commission
determines is necessary in the public interest and for the protection of investors…to maintain or restore
fair and orderly securities markets (other than markets in exempted securities)”
Recall, though: this national emergency was declared even thoughthe entire system
remained whole, and as documented earlier, none of the trading data was lost:
“…the U.S. financial system largely remained open throughout the day and thereafter. Banks and other
financial intermediaries stayed open. Key wholesale and retail payments system remained operational,
like other financial activities, except to the extent that telecommunications disruptions had a temporary
or local effect. Even firms in the World Trade Center were able to resume business from other offices
or from contingency sites within hours of the attack.” [Implications of 9/11 for the Financial Services
Sector , Remarks by Vice Chairman Roger W. Ferguson, Jr. At the Conference on Bank Structure and
Competition, Chicago, Illinois, May 9, 2002]
On the first day of the crisis, the SEC lifted “Rule 15c3-3 - Customer Protection--
Reserves and Custody of Securities,” which set trading rules for the following processes:
− The [seller] is not permitted to substitute other securities for those subject to this agreement an
therefore must keep the [buyer's] securities segregated at all times, unless in this agreement the
[buyer] grants the [seller] the right to substitute other securities
− Notification in the event of failure to make a required deposit.
− Physical possession or control of securities.
− Required Disclosure
− Control of securities/Requirement to reduce securities to possession or control.
THE SEPTEMBER 11 COMMISSION REPORT Page 196