News in Brief: Wall Street "Flash Crash" Culprit Identified and More

Thursday, 13 May 2010 12:29 By Yana Kunichoff, t r u t h o u t | News in Brief | name.

The so-called "flash crash" on Wall Street last week, in which the Dow Jones industrial average dropped by almost 1,000 points, may be the fault of a single trader on Chicago derivatives exchange, reported The Guardian UK. A rapid series of big bets by the unnamed individual over a 19-minute period on the Chicago Mercantile Exchange are being investigated by regulators. These trades amounted to 9 percent of volume on the largest futures account tracking US stock prices, the Standard & Poor's e-mini futures contract. According to Gary Gensler, head of the Commodity Futures Trading Commission, the trader entered the market at 2:32 PM on Thursday and stopped trading at 2:51 PM - exactly when the Dow fell a record-breaking 998.5 points, before swiftly recovering ground.

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Federal prosecutors, working with securities regulators, are conducting a criminal investigation into whether several major Wall Street banks purposefully misled investors about their roles in mortgage-bond deals, reported The Wall Street Journal. The banks, who also received civil subpoenas from the Securities and Exchange Commission, include JPMorgan Chase, Citigroup, Deutsche Bank and UBS.

Eight Wall Street banks also received subpoenas late Wednesday from Andrew Cuomo, the attorney general of New York, reported The New York Times. Cuomo has started an investigation to determine whether the banks provided false or misleading information to rating agencies to inflate the grades of certain mortgage securities. This is part of a wider national investigation into the causes of the collapse of the housing market.

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The Federal Bureau of Investigation (FBI) has raided sever locations in the Northeast and taken several people into custody Thursday, reported The New York Times, as part of the ongoing investigation into the failed Times Square bomb attempt. According to a statement released by the FBI in Boston, the actions "do not relate to any known immediate threat to the public or active plot against the United States" and were planned based on evidence gathered following the discovery of the car bomb plot on May 1.

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As efforts continue to clean up the environmentally catastrophic oil spill in the Gulf of Mexico, the Obama administration plans to force British Petroleum (BP) to pay more cleanup costs of the disaster, reported The Guardian UK. This is part of a new funding measure by President Obama to increase from $1 billion to $1.5 billion the amount that may be spent from an emergency cleanup fund paid with industry fees. This could force BP to carry the wider economic costs of the spill, such as lost wages for fisherman and the impact on tourism. BP estimated the costs of dealing with the massive oil spill have now hit $450 million, and are projected to continue rising.

Meanwhile, Transocean, the owner and operator of the drilling rig that exploded and sank last month, is seeking to limit its liability to just under $27 million, reported the Dow Jones Newswire. It is filing the request in the US District Court in Houston under a 150-year-old law originally implemented to help US ship owners compete with foreign vessels. Transocean, the world's biggest offshore driller, was leasing its rig to BP at the time.

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A Thai general who supported anti-government protesters who have been occupying Bangkok for more than two months was shot and seriously injured by sniper fire, reported the BBC, shortly after a deadline for troops to seal the "red-shirt" protesters' camp had passed. The general, Khattiya Sawasdipol, was also known as Seh Daeng (Commander Red) and described himself as the red-shirts' military strategist. Thai Prime Minister Ahbisit Vejjajiva said he will extend a state of emergency already in place in the capital and surrounding areas to 15 more provinces, according to security officials. The protesters are calling for Abhisit to dissolve Parliament and call new elections.

Yana Kunichoff

Yana Kunichoff is an assistant editor at Truthout.

Last modified on Thursday, 13 May 2010 13:57