Commentary - 01/22/2010

Fleecing The Lambs - Redux

It just doesn't seem right to have just finished reading a book, published in 1971, that seems like it was published this week. Especially when that old book details Wall Street demanding assistance from the U.S. Treasury.

The author is Christopher Elias, and the title of that book is Fleecing the Lambs, subtitled A startling look at Wall Street's most powerful institution-the New York Stock Exchange. Could anything be more current?

Here's a few statements to think about, made almost 40 years ago.

Wall Streeters still act as if they are immune to common law even though their dishonesty is well documented, and the Exchange enforces its rules as it sees fit. As in the case with most self-regulating industries, its members are not all equal under the rules. As for the investor, the Exchange decides nothing that will give him an even break.
(Preface, page ix)
Does not this seem especially current?
. . . Wall Street has reason to be confident, even arrogant, about its political clout in Washington in recent years. It put the leading Democrat candidate for the presidency in 1972 on the defensive, complaining over rough handling, and forced the chairman of a Senate investigative committee virtually to apologize for what he was about to do--namely, investigate an industry sorely in need of investigation.
(Chapter 1, page 11)

[April 1970] Many Wall Street firms on that very date were close to collapse, victims of their own incompetence. If they did go under, they would take many of their customers with them, for billions of dollars worth of securities belonging to individuals and corporations were held in Street names.
(Chapter 1, page 16)
It's amazing that this kind of history repeats. It almost seems that a majority of folks desire to be lied-to and stolen-from. If they actually don't, then perhaps our education system really doesn't educate us, but simply sets us up again for another shearing.
The reforms of the 1930s certainly improved things for investors. But these measures did not make Wall Street honest--just less dishonest. What is desperately needed is an end to self-regulation, the removal from control of men whose only interest is their own, and the development of a market that serves everyone. All of Wall Street's history cries for nothing less. All of Wall Street's present condition makes such change mandatory.
(Chapter 3, page 44)
However, the following segment is what I'd most like to pass along today, because Wall Street obviously has just fleeced us again.
[Bernard J.] Lasker was chairman of the Exchange during one of Wall Street's most revealing periods--mid-1969 to mid-1971. One of the greatest bull markets of all time ended just as he became chairman, and in the bear market that followed, the drop in Street income revealed shabby management practices, incompetent office operations, outright stealing of customers' securities, and the shaky financial standings of the firms. Perhaps most incriminating was the inability--or, more precisely, the disinclination--of the Exchange to regulate its own industry.

. . . "It's obvious the major firms," he said in May, 1970, "can't go on losing the amounts we know they're losing, forever. If this continues for a prolonged period of time, we could see some problems, and it may be that we would need additional help." Not once did Lasker suggest that major reform was needed--indeed, crucial--in Wall Street. The "help" he was referring to was the U.S. Treasury.
(Chapter 10, page 150)

No wonder older folks seem to have some sort of "deja vu." And there's more!
Imperious and impatient, Lasker thought nothing of dipping into the U.S. Treasury to save Wall Street's firms, for he was a classic example of the powerful Wall Streeter. A personal friend for ten years of President Nixon, he led a militant contingent of Wall Streeters to the White House in April, 1970, to demand aid: or else the economy itself, he said outright, would be hurt. Never had there been so overwhelming a reason for stripping Wall Street of its self-regulatory power. But as a piece of blackmail the information served the Street well.
(Chapter 10, page 151)
Sound familiar? One last quote:
As a result of its influence at all levels, the Street too often successfully has intimidated its opponents, and from this sort of success has grown a feeling among its members that they are immune from the laws that other men must live under. Even when blatant skullduggery has been unearthed and there was no way to avoid a hearing, trial, or other adjudication, the punishments meted out to the guilty have been as ineffectual as no punishments at all.
Perhaps that's why Sometimes The Dragon Wins

2010 by Edward Ulysses Cate
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