Wednesday, November 9, 2011

The Wall Street Game Has Been Rigged, And Not In Your Favor

Capitalism: A Love Story by Michael Moore is a film everyone should see and think about. Much of it was not new to me as I know about much of what is covered in the movie. I spent a number of years working with investment securities, traders, and portfolio managers for equities foreign and domestic, fixed income, hedge funds and private equity funds. I have followed the ups and downs of the markets and interest rates for many years. Michael Moore is entertaining and at times even funny, but the message he is trying to get across is very serious.

Everyone wants to be a winner. No one enters the markets to lose money. But, winning all the time is almost impossible. What some people have tried to do to win all the time is modify the rules or flat out cheat. The Federal Government was lobbied hard to modify the securities laws that helped our country avoid a serious financial crisis since the Great Depression. Laws were written in the 1930s to create the Securities & Exchange Commission and in 1940 the Investment Act to deal with mutual funds. Over the next 70 or so years Wall Street bankers have lobbied Congress that the old laws were no longer needed. Several members of Congress bought their story and even some took money and went to work for the banks after leaving government.

Those that did not try to change the laws that governed banking and the securities industry decided to cheat. Cheating by insider trading was just one of several ways that the cheaters cheated. Ponzi funds, like Bernie Madoff, was another form of cheating. Then there were those less understood methods such as "buying" a credit rating that was clearing not deserved. There are other ways to cheat, but they are too complicated to explain for our purposes here today, but they exist.

There is way too much closeness between the bankers on Wall Street and the people in the Federal Government that are charged with protecting investors, both institutional and individual, from fraud in the securities industry. Something needs to be done to correct this problem that clearly exists. But, nothing will be done until enough people understand that they have been cheated. There are those that cheated by going outside the laws and there are those that "cheated" by changing the laws that protected investors for over 70 years. Nothing is going to be changed by either Democrats or Republicans until the public understands that the Wall Street game has been rigged and not in their favor.

Stay tuned.

Level Playing Field Out The Window by F.D. Zigler, acrylics on paper envelope. This piece of political satire is framed and for sale for $850.

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