What Real Financial Reform Would Look Like


We all know that CONgress is not going to do anything meaningful in relationship to getting our financial systems back to a semblance of normal.  4 lobbyists for every senator and state representative making their rounds, brief case of dough in hand, daily to insure everyone stays in line. Now people, small investors, individual investors are leaving the stock market because it is no longer a fair market.  Instead it is rigged for the PTB elites only.

Dennis K. Berman in last week’s Wall Street Journal stated the situation clearly:

“Today, small investors are fleeing the equities markets in droves, according to data from the Investment Company Institute, pulling out a net $34 billion from stock funds so far this year…..They say, “I still feel like someone is screwing me……trading feels different than it used to.”

Berman traces the problem to its source, the “inscrutable interplay between myriad exchanges and high-frequency traders, whose volume now accounts for an estimated two-thirds of all trading”…”a market that many perceive as tainted and prone to gaming by a cadre of insiders.”  That sounds like a long-winded way of saying the market is rigged.

According to Mike Whitney- BLN contributing writer, high-frequency trading (HFT) is algorithmic-computer trading that finds “statistical patterns and pricing anomalies” by scanning the various stock exchanges. It’s high-speed robo-trading that often times executes orders without human intervention. HFT allows one group of investors to see the data on other people’s orders ahead of time and use their supercomputers to buy in front of them. It’s called frontloading, and it goes on every day right under the SEC’s nose.

In an interview on CNBC, market analyst Joe Saluzzi was asked if the big HFT players were able to see other investors orders (and execute trades) before them. Saluzzi said, “Yes. The answer is absolutely yes. The exchanges supply you with the data, giving you the flash order, and if your fixed connection goes into their lines first, you are disadvantaging the retail and institutional investor.”

Frontloading is cheating pure and simple, but rather than go after the “big fish” who run these enormous computerized skimming operations; regulators have been rolling up rogue traders who absconded with the trading code.  So we go after the guys who stole the code from the cheaters, but not the cheaters themselves because they are too big and too protected.

HFT’s are just one of the major problems we are facing. Complex derivatives, which I have written extensively about and securitization and repo transactions were all preserved in their present state in the recent financial reform package passed by CONgress and will remain in their present state until the next big tremor rumbles through lower Manhattan bringing the markets down in a thunderous roar.

There is a lot of money sitting on the sidelines because of the uncertainty we face over the next 18-24 months.  This crisis has moved to a new level.  It is no longer issues over the balance sheet of the economy.  It is now a universal belief that we are somehow at an end of an era for America.  This is the danger I speak of in my articles.  What we believe in the present seems to dictate the reality of the future. We must regain our sense of community that trumps politics and greed.  We have done it several times in our history. Starting with the revolution, through the civil war, a depression, and two world wars, we as a people, note the singularity of the word people, have risen up and prevailed.

We need real finance market reforms.  HFT’s, CDS’s, Repo’s, and these securitization schemes are at the heart of what “needs to be fixed”.  If we have any chance to avoid the coming total collapse, we need to contact our representatives and let them know we KNOW exactly what is going on and it must stop right now.  Those in the beltway actually believe we have no clue or understanding of what is going on and therefore they are safe from voter repercussions.  Some even brag in private that they don’t even understand how the banksters do it, but they vote always in the Wall Street Boys interests and don’t take actions that offend those who butter their bread.  Let’s let them know we don’t “butter their bread” but we do vote and all the lobbyist money in the world doesn’t trump the vote.  We also have to really get some people in Washington who are not owned by anyone and are educated well enough to understand these issues and are independent enough and courageous enough to take the actions necessary to bring the sense of integrity back to our financial markets and restore a sense of normalcy. Wall Street will still be the biggest casino in the world but it will at least not be rigged by the “House”.

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Author: redhawk500

International business consultant, author, blogger, and student of life. After 35 years in business, trying to wake the world to a new reality. One of prosperity, abundance, and most importantly equal opportunity. it's time to redistribute wealth and power.

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