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Wall Street has Always Been Corrupt…

Off the keyboard of Jim Quinn

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Published on The Burning Platform on May 14, 2014

…or about to be corrupted

Discuss this article at the Market Flambe table inside the Diner

“It is difficult to get a man to understand something, when his salary depends on his not understanding it.”

Upton Sinclair – I, Candidate for Governor: And How I Got Licked

“The U.S. financial markets had always been either corrupt or about to be corrupted.” Michael Lewis, Flash Boys

I finished reading Michael Lewis’ Flash Boys take-down of Wall Street banks, hedge funds, government regulators and high frequency traders last week when I had spare time created by a weeklong denial of service attack on my website. It appears to me technology is being utilized more frequently as a mechanism for malevolence rather than a mechanism for good. The smartest guys in the room are figuring out ways to steal you blind in the financial markets, pilfer your personal information, spy on your electronic communications, and censor your right to free speech by taking away your ability to communicate freely on the internet. After reading Lewis’ maddening tome and experiencing the frustration of an attack that reached 50 million hits per day on my website, I’m reminded of two quotes from the brilliant dystopian visionary Aldous Huxley.

“Technological progress has merely provided us with more efficient means for going backwards.” ― Aldous Huxley – Ends and Means

“You shall know the truth and the truth shall make you mad.” Aldous Huxley

Technology has been pushed on the masses like a drug by the mega-corporation and mega-media dealers. Just walk down any city street and observe the technologically entranced zombies shuffling along the sidewalks staring blankly at a tiny screen, tapping away on an itsy bitsy keypad as if whatever they are conveying is of vital importance to the future of mankind. # Give me a break. God forbid if we had to go out in public without our iGadget attached to an appendage. We might actually have to use our brain to think. We might be able to look someone in the eye and smile. We might be able to say hello to a stranger. We might have to act like a human being.

Being connected electronically 24 hours per day is not progress. The technology being peddled to the masses by mega-corporations is designed to keep people amused, apathetic, distracted and uninterested in thinking critically. Our society has devolved into a technologically narcissistic, ego driven, submissive, trivial culture, asphyxiating in a sea of irrelevance and driven by greed and need to fulfill our every desire, rather than a technologically proficient, selfless, humble, critical thinking, civil minded society of self-reliant human beings who take responsibility for their own lives and refuse to saddle future generations with the financial consequences of living beyond their means. Our willful ignorance, misuse of technology, and inability to control our impulses and desires will be the ruin of our perverted civilization.

If the masses were capable of critical thinking and questioned the existing paradigm, they would conclude a small cadre of evil men has colluded to hijack the financial, political, and social systems in order to syphon off the nation’s wealth, while controlling the serfs through propaganda and luring them into debt servitude. Those who haven’t been brainwashed by media propaganda or amused to death by technology, are kept in check by thousands of laws, statutes, and regulations, enforced by millions of government bureaucrats and police state thugs. Technology is used by the state as a means of control, surveillance, censorship, and bilking the populace of their wealth. And if you don’t like it, the IRS, DHS, FBI, CIA, BLM, HHS, or some other three letter government agency will harass, arrest, fine, or kill you for not “cooperating”. And while the government is keeping you under their thumb, Wall Street shysters are stealing you blind.

The Truth Shall Make You Mad

“As soon as you realize that you are not able to execute your orders because someone else is able to identify what you are trying to do and race ahead of you to the other exchanges, it’s over. It really just pissed me off that people set out this way to make money from everyone else’s retirement account. I knew who was being screwed, people like my mom and pop, and I became hell-bent on figuring out who was doing the screwing.” – John Schwall – Flash Boys

As I continued reading Flash Boys I got progressively madder as more truth was revealed about the inner workings of Wall Street, the wasting of human intelligence on technological schemes to defraud the public, and the utter level of corruptness in the government agencies supposed to protect the public from the vultures in the financial industry feasting on the carcasses of dupes who still believe the “stocks for the long run” drivel regurgitated incessantly by the bimbos and slime balls on CNBC. The concepts of right and wrong, moral and immoral, honesty and dishonesty, and truth and lies are all purposefully blurred in shades of grey by those in power, in a blatant attempt to maintain and expand their vast wealth, immense power and complete governing control.

Michael Lewis focuses on our warped, rigged financial system, but his insights apply across the board to our entire society. Our economic, financial, political, regulatory, and judicial systems are all rigged. This serves the interests of the Deep State, Invisible Government, Oligarchs, Owners, or whatever other term you choose to describe the obscenely wealthy minority controlling this country. The existing establishment will never willingly change the system because it serves their myopic gluttonous interests.

“The deep problem with the system was a kind of moral inertia. So long as it served the narrow self-interests of everyone inside it, no one on the inside would ever seek to change it, no matter how corrupt or sinister it became.” Michael Lewis – Flash Boys

Flash Boys is the fourth Michael Lewis book I’ve read. I had previously read Liar’s Poker, The Big Short, and Boomerang. He is a masterful storyteller. He has the ability to humanize complicated financial concepts and cut through the purposeful complexity built into the financial system to reveal the corruption, criminality and moral degradation of Wall Street bankers and Washington DC politicians. He slices through all the spin, misinformation, and mistruths flogged by Wall Street and their paid-off media mouthpieces to reveal everyone on Wall Street to be in on the action when it comes to fleecing their customers (muppets). The stench emanating from the bowels of Wall Street banks, hedge funds, and high frequency trading bucket shops hangs like toxic smog over our bloated fetid crony capitalist corpse of a country. This cast of despicable felonious characters, scalps investors day after day, with the insiders pretending all is well and the man on the street is being protected.

“The reason is that everyone is a bad actor. There’s an ecosystem that has risen up around a broken pipe on Wall Street. You have high-frequency traders who are scalping the market. They pay exchanges for the tools they need to scalp investors; the exchanges pay banks to essentially mishandle the stock orders so high-frequency traders can maximize the take. It’s a system designed to extract taxes from investors.” – Michael Lewis –Wired

The average person believes the stock market is run on free market principles, with willing buyers and sellers paying and receiving the most efficient price with regards to their transactions. The American people have put their trust in gargantuan bureaucratic government agencies, funded with their tax dollars, to protect their interests and fight for their rights in the financial marketplace. They innocently believe a private bank – The Federal Reserve – owned and controlled by the Too Big To Trust Wall Street Mega-Banks, is actually enforcing regulations and looking out for the best interest of the small investor. They evidently haven’t been paying attention for the last fourteen years, as the Federal Reserve has purposefully created bubble after bubble with ridiculously low interest rates, money printing on an epic scale, encouraging complete deregulation of banks, inciting speculation, and ignoring criminal behavior by their Wall Street owners.

After reading Lewis’ exposes about these Wall Street scumbags, you realize Scorsese’s seemingly over the top portrayal of these people in Wolves of Wall Street is accurate. Nothing has changed since Lewis worked at Salomon Brothers in the 1980’s. The people inhabiting that culture are unscrupulous, greedy, obtuse, ignorant, and intent upon preying on the weaknesses of their “clients”, who they hold in contempt. They are the wolves and you are sheep. The comforting picture of a stock broker representing your interests on a small commission basis has been replaced by stock exchanges colluding with Wall Street banks, hedge funds and high frequency traders to fleece mom and pop out of hundreds of billions on an annual basis using their super-fast computers located within the stock exchanges. The people who know the truth have no interest in drawing the new picture because their massive paychecks depend upon not drawing the picture.

You can tell how accurate a portrayal is by the reaction of those being portrayed. Flash Boys and the subsequent interview of Lewis by 60 Minutes resulted in a broad based assault by Wall Street bankers, HFT dirt bags, corrupt stock exchange CEOs, SEC lackeys, Federal Reserve Chairwomen, bought off politicians, faux financial journalists, sellouts like Buffett, and of course the mouthpieces of Wall Street on CNBC. The oligarchs benefitting immensely from the HFT scams, Dark Pool schemes, and Stock Exchange pay to play swindles, attempted to ambush the good guys (Brad Katsuyama and Michael Lewis) on CNBC, the captured media pawn of the Wall Street ruling elite.

CNBC stacked the deck against the good guys with the President of the BATS exchange, William O’Brien, given the task of shouting the loudest in an attempt to discredit the factual assertions made in the book. The BATS exchange was founded by high frequency traders and designed to foster the predatory schemes of high frequency trading firms who paid the exchange for the privilege of swindling investors. He went berserk on-air, accusing Brad Katsuyama of lying and denying that his firm purposefully allowed high frequency traders to front run slower orders from regular investors. I guess he thought rage, fury, screaming and false accusations would convince the hoi polloi of his innocence. He was wrong. The traders on the NYSE and in trading firms across Wall Street stopped trading to watch the contest on their screens. They would cheer every time Brad Katsuyama calmly responded with truth based facts.

Michael Lewis described the encounter shortly thereafter in an interview:

“The substantial shocker from this encounter is that Katsuyama tried to get O’Brien to admit that the BATS Exchange uses one very slow data feed to give investors the prices in the market, while selling, for vast sums of money, a faster feed to high-frequency traders, the effect being that the high-frequency trader knows the prices in the exchange before your order. So he has the privilege of trading against you at an old price if he wants to. And O’Brien says no that’s not true. He lied, on national television, about a central fact about his business.” Michael Lewis –Wired

Under threat of prosecution, the BATS exchange had to admit its esteemed President blatantly lied on national TV. That seems par for the course when it comes to Wall Street executives. Deceitfulness, duplicity, and evasiveness are crucial requirements for the psychopaths occupying the corner offices in this warped world of high finance. The Wall Street Journal reluctantly revealed the truth:

BATS Global Markets Inc., under pressure from the New York Attorney General’s office, corrected statements made by a senior executive during a televised interview this week about how its exchanges work.

BATS President William O’Brien, during a CNBC interview Tuesday, said BATS’s Direct Edge exchanges use high-speed data feeds to price stock trades. Thursday, the exchange operator said two of its exchanges, EDGA and EGX, use a slower feed, known as the Securities Information Processor, to price trades.

 The distinction matters because high-speed traders can use powerful computers and superfast links between markets to outpace traders and trading venues that rely on slower market data, such as the SIP.

Would the BATS Exchange have revealed the truth if they had not been pressured by the New York Attorney General to do so? Not bloody likely. Wall Street never admits guilt for any of its crimes, wrongdoings, misconduct, deceit or deceptions. They pay $1 billion in fines to their government co-conspirators as a public relations ploy, without admitting guilt and after reaping $10 billion of criminally generated profits. Not a bad ROI. The principles of right versus wrong, moral versus immoral, honesty versus dishonesty, and clarity versus opacity are willfully evaded by the titans of Wall Street and create no dilemmas for these greed driven psychopaths. Money and power are their drugs and the Federal Reserve is their dealer.

Michael Lewis books strike a chord with the public because he chooses a good guy hero his audience can empathize with. He played the sympathetic character in Liar’sPoker. Michael Burry, the brilliant Asperger’s Syndrome suffering investment genius, plays the role in The Big Short. And Brad Katsuyama, the mild mannered good hearted hobbit-like Canadian, takes on the evil forces of Mordor in Flash Boys. These characters all have something in common. They don’t fit in. They question the existing paradigm. They refuse to give in to the depraved culture permeating Wall Street. They exhibit an inner moral strength that enables them to resist the temptation of ill-gotten riches. And they don’t surrender their principles for a buck. This passage gives you a glimpse into the soul of Brad Katsuyama:

“In America, even the homeless were profligate. Back in Toronto, after a big bank dinner, Brad would gather the leftovers into covered tin trays and carry them out to a homeless guy he saw every day on his way to work. The guy was always appreciative. When the bank moved him to New York, he saw more homeless people in a day than he saw back home in a year. When no one was watching, he’d pack up the king’s banquet of untouched leftovers after the NY lunches and walk it down to the people on the streets. “They just looked at me like, ‘What the fuck is this guy doing?’” he said. “I stopped doing it because it didn’t feel like anyone gave a shit.” –  Michael Lewis – Flash Boys

The apologists for the corrupt establishment attempted to trash Lewis and Katsuyama by contending the market has always been rigged and manipulated, therefore, the HFT embezzlement is just business as usual. Warren Buffett, king of oligarchs and apologist for the Wall Street billionaire club, assures the peasants the financial markets are fairer than ever. If Uncle Warren says it’s so to his girl Becky Quick on CNBC, how can anyone doubt him? It’s as if the supposedly mathematical genius billionaire forgot everything he learned in business school.

There is $21 trillion worth of U.S. stocks traded every year. Based upon Katsuyama’s analysis of how much high frequency traders, Wall Street dark pools, and the stock exchanges selling access were skimming on virtually every transaction, he estimated at least $160 million per day was being stolen from stock investors. That comes to a cool $40 billion per year, at a minimum. High frequency trading accounted for 25% of all stock trades in 2005. By 2008 high frequency traders accounted for 65% of all trades. They now account for in excess of 80% of all trading. The Ivy League educated Wall Street elite insist this extreme level of computer generated trading provides liquidity and efficiency for the markets. In reality, the actual trading results of the HFT firms, hedge funds and Wall Street TBTF banks prove the game is rigged. JP Morgan experienced ZERO trading loss days in 2013. Goldman Sachs, Morgan Stanley and most of the mega-banks have had virtually perfect daily trading results since 2010. If they are all winning, who is losing? Guess. Lewis provides further evidence of “investing” perfection:

“In early 2013, one of the largest high-frequency traders, Virtu Financial, publicly boasted that in five and a half years of trading it had experienced just one day when it hadn’t made money, and that the loss was caused by “human error.” In 2008, Dave Cummings, the CEO of a high-frequency trading firm called Tradebot, told university students that his firm had gone four years without a single day of trading losses. This sort of performance is possible only if you have a huge informational advantage.” – Michael Lewis – Flash Boys

Buffett, the financial “journalists” on CNBC, and all of the defenders of the Wall Street criminal cabal must have been asleep during their Stat class in college. The statistical probability of going four years or even four weeks without a losing trading day is as close to zero as you can get, unless the game is rigged and you are cheating. These results were not accomplished due to the brilliance of Wall Street big hanging dicks and their oversized brains. They were accomplished by front running stock market orders, bribing stock exchanges for first access, gaming the system with more powerful computers, ripping off clients in shadowy dark pools, and keeping the SEC at bay with promises of jobs and riches if they look the other way. This was all done under the veil of hyper-complexity designed to obscure, confuse, and cover-up the truth from unsuspecting investors.

And it is all done “legally” under the auspices of Regulation NMS, established by the SEC in 2007, to foster both competition among individual markets and competition among individual orders, in order to promote efficient and fair price formation across securities markets. As with almost every government regulation, law, or diktat, the new method of “protecting” the sheeple created fresh ways to fleece the sheeple by those who wrote the regulation. See Dodd-Frank and the Affordable Care Act. I don’t need a law or regulation to tell me the difference between right and wrong.

When obnoxiously wealthy pricks with the ability to bribe stock exchanges to place their trading computers on the floor of the exchange and financially induce the Wall Street banks to funnel trades through their dark pools in order to know what is happening a nanosecond before everyone else, and use this information to front run unknowing investors to generate risk free profits, it’s wrong. It really is black and white. I don’t care that it is supposedly “legal”.  By complying with Regulation NMS the smart order routers of institutional investor firms like Vanguard, Fidelity and Schwab simply funneled naïve investors into various snares laid for them by the unscrupulous high frequency traders. The bad guys always win and the good guys always lose on Wall Street. And no one does anything because they are all on the take. Lewis puts it in terms the average person can understand.

“It was riskless, larcenous, and legal – made so by Reg NMS. The way Brad had described it, it was as if only one gambler were permitted to know the scores of last week’s NFL games, with no one else aware of his knowledge. He places bets in the casino on every game and waits for other gamblers to take the other side of those bets. There’s no guarantee that anyone will do so; but if they do, he’s certain to win.” – Michael Lewis – Flash Boys

If you aren’t mad yet, you will be after I go into the details of the regulatory capture, obscure deep pools within the bowels of the Too Big To Trust Banks, misuse of technology to defraud the public, and purposeful complexity built into the financial system to confuse and mislead the investing populace. I’ll tackle that in Part Two of this article.

Whistleblowers & Wall Street’s “Good Hands”

Off the keyboard of Steve Lendman

Published originally on the Steve Lendman Blog

Discuss this article at the Epicurean Delights Smorgasbord inside the Diner

Obama’s War on Whistleblowers

At perhaps the most perilous time in world history, exposing vital truths takes on greater urgency than ever.
 
Freedom in America is endangered. Truth telling and dissent increasingly aren’t tolerate. Whistleblowers are called threats to national security.
 
The ACLU says “leak detection, prevention, and punishment is cause for alarm.”
 
“National security must be protected and properly classified information must be kept safe. However, this cannot be at the expense of a free, open and informed society.”
 
Harry Truman once said:
 
“When even one American – who has done nothing wrong – is forced by fear to shut his mind and close his mouth, then all Americans are in peril.”
 
The National Security Whistleblowers Coalition (NSWBC) is an alliance of whistleblowers. In August 2004, Sibel Edmonds founded it. It’s independent and nonpartisan. She serves as president.
 
Its members include “current or former federal employees or civilians working under contract to the United States who, to their detriment or personal risk, bring to light fraud, waste, and abuse in government operations and agencies when such improprieties compromise the national security of the United States.”
 
The The Government Accountability Project (GAP) “promote(s) government accountability….protect(s) whistleblowers, advanc(es) free speech, and empower(s) citizen activists.”
 
Since 1977, it’s been “the nation’s leading whistleblower protection and advocacy organization.”
 
Americans Who Tell the Truth (AWTT) honors those who do so. It’s “dedicated to the belief that a profound sense of citizenship is the only safeguard of democracy and the best defense of our social, economic, and environmental rights. “
 
It “teaches the courage to act for the common good.” Doing so, it believes, “inspire(s) hope in the future.”
 
On January 23, ATWW and GAP honored CIA/anti-torture whistleblower John Kiriakou. “Even if torture works,” he said, “it cannot be tolerated – not in one case, or a thousand, or a million.”
 
“If their efficacy becomes the measure of abhorrent acts, all sorts of unspeakable crimes somehow become acceptable.”
 
“I may have found myself on the wrong side of the government on torture. But I’m on the right side of history.”
 
“There are things we should not do, even in the name of national security. One of them, I now firmly believe, is torture.”
 
More on Kiriakou below. He’s Obama’s latest whistleblower victim. His Justice Department wages war on them more aggressively than all previous administrations combined.
 
Candidate Obama promised transparency, accountability, and reform. Extremist Bush administration policies will end, he said. He called sunlight “the best source of information about waste, fraud, and abuse.”
 
“We need to empower federal employees as watchdogs of wrongdoing and partners in performance. (I’ll) strengthen whistleblower laws to protect federal workers who expose waste, fraud, and abuse of authority in government.”
 
He said one thing. He did another. As president, he usurped diktat powers. He wages war on truth. He targets whistleblowers. He prioritizes surveillance powers.
 
They include warrantless wiretapping, accessing personal records, monitoring financial transactions, and tracking emails, Internet and cell phone use. It’s done lawlessly to gather secret evidence for prosecutions.
 
In his book “Necessary Secrets,” Gabriel Schoenfeld said he “presided over the most draconian crackdown on leaks in our history – even more so than Nixon.”
 
Rhetorically he supports civil liberties and transparency. “Such acts of courage and patriotism….should be encouraged rather than stifled,” he said.
 
At the same time, he betrayed the public trust. He targets free expression and dissent. He pursues police state prosecutions and intimidation.
 
He claims Justice Department immunity from illegal spying suits. He exceeds the worst of all previous administrations.
 
His national security state targets activists, political dissidents, anti-war protestors, Muslims, Latino immigrants, lawyers who defend them, whistleblowers, and investigative journalists.
 
Law Professor Jack Balkin expressed alarm, saying:
 
“We are witnessing the bipartisan normalization and legitimation of a national surveillance state.” Obama exceeded the worst of George Bush.
 
Bradley Manning’s persecution is well known. So is targeting Julian Assange. Others get little or less coverage.
 
James Risen was targeted for his book titled “State of War: The Secret History of the CIA and the Bush Administration.”
 
In February 2011, former CIA agent Jeffrey Sterling was indicted for allegedly providing him classified information. Risen’s book discussed an unidentified firsthand account of extraordinary rendition, torture and other type abuses.
 
He refused to disclose his sources. Obama officials alleged Sterling. He was indicted under Espionage Act of 1917 provisions. Transparency is verboten. Secrecy is official policy. Truth-telling is criminalized.
 
According to Reporters Committee for Freedom executive director Lucy Dalglish:
 
“The message they are sending to everyone is ‘You leak to the media, we will get you.’ “
 
“As far as I can tell, there is absolutely no difference (between Bush and Obama), and (he) seems to be paying more attention to it. This is going to get nasty.”
 
Longtime reporter/author Helen Thomas accused Obama of “controlling the press.”
 
“It’s shocking. It’s really shocking,” she added. “What the hell do they think we are, puppets? They’re supposed to stay out of our business. They are the public servants. We pay them.”
 
Waging war on truth-telling is more aggressive now than ever. Former National Security Agency (NSA) official Thomas Drake was targeted.
 
He was indicted on multiple charges of “willful retention of classified information, obstruction of justice and making false statements.”
 
Charges alleged he gave Baltimore Sun reporter Sibohan Gorman classified NSA documents. She focused mainly on its “Trailblazer” project. She discussed illegal spying, waste and other abuses.
 
She called the scheme “the biggest boondoggle going on (at the time) in the intelligence community.” She said people have a right to know.
 
Drake’s leaks exposed illegal spying, waste, fraud and abuse. He provided information on a public/private national security surveillance state.
 
He said profiteers are incentivized to hype fears. Doing so benefits their bottom line priorities. Justice Department prosecutors tried to prosecute him. They failed. Charges were dropped. Others aren’t as lucky.
 
Drake, Sterling, Risen, and others like them are heroic. They’re some of America’s best. They prioritize doing the right thing. They know the risks and take them. They’re punished for acting responsibly. Police states operate that way.
 
In April 2012, Obama’s Justice Department headlined “Former CIA Officer John Kiriakou Indicted for Allegedly Disclosing Classified Information, Including Covert Officer’s Identity, to Journalists and Lying to CIA’s Publication Board.”
 
In January 2012, he was initially charged with a criminal complaint. Subsequent counts included violating Espionage Act provisions “for allegedly illegally disclosing national defense information to individuals not authorized to receive it.”
 
Kiriakou formerly headed CIA counterterrorism operations in Pakistan. He was involved in capturing alleged Al Qaeda operative Abu Zubaydah. He took no part in torture and abusive interrogation practices.
 
In December 2007, he went public. His book titled “Reluctant Spy: My Secret Life in the CIA’s War on Terror” revealed Agency wrongdoing.
 
He said Zubaydah was waterboarded 83 times in one month. Doing so is torture, he stressed. He helped expose abusive Agency practices. Official policy prioritizes them.
 
He became Obama’s seventh Espionage Act whistleblower target. Others include Bradley Manning, Drake, Sterling, FBI linguist Shamai Leibowitz, civilian linguist James Hitselberger, and State Department analyst Stephen Kim.
 
They’re in good company.
 
Previous targets included Socialist presidential candidate Eugene Debs, Industrial Workers of the World (IWW) founder Bill Haywood, social justice advocate Emma Goldman, journalist/author/socialist activist John Reed, political activist Max Eastman, civil rights leader Philip Randolph, and Social Democratic Party of America and its successor Socialist Party of America co-founder Victor Berger.
 
On January 25, morning headlines said CIA whistleblower Kariakou got 30 months for disclosing a covert Agency officer’s identity.
 
He’s the first past or present CIA officer facing prison. He’s criminalized for doing the right thing. Torturers stay free.
 
Kariakou potentially faced longterm incarceration. In October, he accepted plea bargain terms.
 
They’re sought and/or accepted for lesser sentences. Innocent victims take them to avoid harsher treatment.
 
Kariakou pled guilty to one count of violating the Intelligence Identities Protection Act. Other Espionage Act charges were dropped.
 
Before sentencing, US District Court Judge Leone Brinkema asked if he had anything to say. He declined. Brinkema added that “Perhaps you have already spoken too much.”
 
Separately, Kiriakou thanked supporters. He came “out of court positive, confident and optimistic,” he said.
 
“I’m headed to prison while the torturers and the lawyers who papered over it and the people who conceived it and the man who destroyed the proof of it, the tapes, will never face justice.”
 
“And that’s the saddest part of the story,” he added. Unconscionable crimes reflect official policy. Police states operate that way.
 
Obama heads the worst of rogue governance. Humanity may not survive another four years.
 
 
Wall Street’s in Good Hands with Mary Jo White

 
On January 24, Obama nominated Mary Jo White as SEC head. “You don’t want to mess with Mary Jo,” he said. Others have different views. More about her below.
 
Washington is Wall Street occupied territory. Regulatory oversight is absent. Earlier New Deal reforms are gone.
 
The Securities and Exchange Act of 1934 followed the Securities Act of 1933. Under the Constitution’s interstate commerce clause, it required offers and security sales to be registered. State “blue sky laws” previously governed them.
 
The 1934 law regulated secondary trading of financial securities. It established the SEC under Section 4 to enforce the new act.
 
Later came the 1939 Trust Indenture Act, the 1940 Investment Company Act, the same year Investment Advisors Act, Sarbanes-Oxley in 2002, the 2006 Credit Rating Agency Reform Act, and Dodd-Frank in 2010.
 
SEC regulators long ago abandoned their mandate. The agency was established to enforce federal securities laws, the security industry, the nation’s financial and options exchanges, and other electronic securities markets and instruments.
 
In the 1930s, they were unknown. They include derivatives and other forms of speculation. In principle, SEC is charged with uncovering wrongdoing, assuring investors aren’t swindled, and keeping the nation’s financial markets free from fraud and other abuses.
 
For decades, it’s been weak-kneed. Under George Bush, it was more facilitator than enforcer. It’s a paper tiger. It abandoned the public trust. It operates the same way under Obama. It
 
  • turns a blind eye to fraud and abuse;
 
  • protects Wall Street, not investors;
 
  • neutered its enforcement staff’s authority;
 
  • adopted voluntary regulation; and
 
  • lets investment banks hold less reserve capital, as well as freely use leverage speculatively.
 
Wall Street gets a free hand. Major banks take full advantage. They do what they please. They operate with impunity. They do it the old-fashioned way. They make money by stealing it. Their business model is fraud and grand theft.
 
They transformed America into an unprecedented money making racket. They function more like a crime family than business.
 
They manipulate markets. They front-run them. They pump and dump. Doing so artificially inflates security prices.
 
They profit in up and down markets. They scam investors. They bribe politicians. Their officials infest Washington.
 
At most, they get occasional wrist slaps. Fines imposed are pocket change. Prosecutions don’t follow. Mega-crooks are free to keep stealing. They take full advantage.
 
Mary Schapiro was SEC head from January 2009 – December 2012. She’s a consummate insider. She spent years promoting self-regulation.
 
She formerly headed the National Association of Securities Dealers’ (NASD). She ran the Commodity Futures Trading Commission. Her expertise includes quashing fraud investigations.
 
She took full advantage in subordinate SEC positions under Reagan, Bush I and II. She did the same for Obama as agency head.
 
The Wall Street Journal noticed. It said her regulatory record showed she “infrequently pursued tough action against big Wall Street firms.”
 
Expect Mary Jo White to operate the same way. She’s a consummate insider. She’s considered safe. Why else would Obama choose her? He’s beholden to Wall Street. Money power owns him.
 
On January 24, a Wall Street Journal editorial headlined “Political Regulators.” It commented on White’s appointment.
 
Media scoundrels call her a tough prosecutor. She “stood up to terrorists and mobsters.” Can she “do the same for Wall Street?”
 
“(W)e remember cases when she wasn’t so tough.” The 1996 Clinton-Gore campaign-finance scandal was one of many.
 
She asked Congress to “back off its probe of the AFL-CIO’s Rich Trumka.” At issue was compromising her own investigation, she said. It was more whitewash than scrutiny of wrongdoing.
 
White targeted small players. “None of this bodes well” going forward, said the Journal.
 
“The media’s Obama Protection Club may consider us rude for bringing all this up, but then a little scrutiny might make Ms. White more likely to resist Democrat pressure for politicized law enforcement.”
 
White is Wall Street’s new enabler-in-chief designee. She’s the first former prosecutor to head SEC. As US attorney for the Southern District of New York, she prosecuted alleged terrorists and crime bosses. She got Mafia boss John Gotti convicted of murder and racketeering.
 
Occasionally she targeted small Wall Street players. She didn’t lay a glove on big ones. She’s a former Nasdaq director.
 
She currently heads Debevoise & Plimpton’s litigation department. It’s a New York-based international law firm. It serves corporate clients. Its Wall Street ones include a rogue’s gallery of white collar crooks.
 
JP Morgan Chase, Goldman Sachs, Deutsche Bank, HSBC, UBS and Bank of America among others are represented.
 
White defended B of A’s former head, Ken Lewis. Until stepping down in September 2009, he was Bank of America chairman, president and CEO. He reflects the worst of Wall Street crooks. He’s got lots of company.
 
White’s husband, John White, represents an obvious conflict of interest. He formerly headed SEC’s corporate finance section. He’s now at Cravath, Swaine & Moore. It’s a prominent New York law firm. White lobbies against regulation.
 
It hardly matters. Getting tough on crime isn’t Mary Jo’s mandate. Too big to fail means too big to jail.
 
Expect no change on White’s watch. She profiteers from revolving door politics. Her government positions got her high-paying private sector jobs. She’s part of the corrupt system.
 
Expect business as usual at SEC. As top regulatory cop, she’ll take full advantage. Her predecessors did the same. Whitewashing crime in the suites pays. Lucrative private sector jobs follow government service.
 
White will be better than ever rewarded when she leaves. She knows the game and plays it. She did it before. She’ll do it again. Career prospects depend on it.
 
Matt Taibbi addressed what goes on. He headlined his Rolling Stone article “Why Isn’t Wall Street in Jail?”
 
Corporate bosses aren’t prosecuted. “Nobody goes to jail.” Nobody except occasional minor players. “(F)ederal regulators and prosecutors (let) banks and finance companies” get off easy.
 
Whitewash is policy. A “mountain of evidence indicates that when it comes to Wall Street, the justice system not only sucks at punishing financial criminals, (it’s become) a highly effective mechanism for protecting” them.
 
Taibbi quoted former SEC chief accountant Lynn Turner saying:
 
“I think you’ve got a wrong assumption – that we even have a law enforcement agency when it comes to Wall Street.”
 
Open and shut cases are whitewashed. Others are placed in a “deal with later” file. Later never arrives. The most high-profile cases get “gummed up in the works, and high-ranking executives” get off scot-free.
 
It’s standard practice for Wall Street. The Street’s biggest crooks aren’t touched. They’re free to steal again. Crime pays. Regulators cash in.
 
“The Revolving Door isn’t just a footnote in financial law enforcement,” said Taibbi. “Over the past decade, more than a dozen high-ranking SEC officials (took) lucrative jobs at Wall Street banks or white-shoe law firms.”
 
Partnerships are worth millions. Banks pay top executives multiples more. “All of this paints a disturbing picture.” It reflects a “closed corrupt system.”
 
Powerful interests get their way. Obama’s no different from Bush and earlier presidents. He allocated “massive amounts of federal resources” going after the wrong people.
 
“So there you have it. (Undocumented) immigrants: 393,000. Lying moms: one. Bankers: zero. The math makes sense because the politics are obvious.”
 
Winning elections and profiteering out of office depend on “bang(ing) on the jailable class.” Innocent people fill prisons. Others committed misdemeanors too minor to matter.
 
Steal “a billion” and stay free to steal more. It’s the American way. White’s job is seeing nothing changes. Accounting Today warned us, saying:
 
In February 2012, she addressed a New York University School of Law forum. Prosecutors must not “fail to distinguish what is actually criminal and what is just mistaken behavior, what is even reckless risk-taking, and not bow to the frenzy,” she said.
 
At Debevoise & Plimpton, she represented some of Wall Street’s worst. She’ll do likewise at SEC. She’s part of the system. She’s safe. She won’t disappoint.

Knarf plays the Doomer Blues

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