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Old October 13th, 2011, 12:17 PM
AR AR is offline
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Join Date: Sep 2005
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Default News from Wall Street

It's worth mentioning that the NYT this morning reports on an important sentence handed down in Federal Court in New York:

The fallen hedge fund billionaire Raj Rajaratnam received on Thursday the longest-ever prison sentence for insider trading, a watershed moment in the government’s aggressive two-year campaign to root out the illegal exchange of confidential information on Wall Street.

Judge Richard J. Holwell sentenced Mr. Rajaratnam, the former head of the Galleon Group hedge fund, to 11 years in prison. A jury convicted him of securities fraud and conspiracy in May after a two-month trial.

The Wall Street protesters have generally attributed the problems there to a systemic malaise, and that's at least partially true. But it's worth noting that there are names and faces who are responsible for serious wrongdoing and who are too seldom identified, much less brought to justice.

And then there is the excerpt of the speech given to the Wall Street protesters by the noted economist and Nobel Laureate Joseph Stiglitz, which puts a concise, coherent frame around the issue that those carrying the signs have been generally unable to express:

Our financial markets have an important role to play. They're supposed to allocate capital, manage risks. But they misallocated capital and they created risk. We are bearing the cost of their misdeeds. Theirs is a system where we've socialized losses and privatized gains. That's not capitalism; that's not a market economy. That's a distorted economy, and if we continue with that, we won't succeed in growing, and we won't succeed in creating a just society.

And then there was President Clinton on Letterman last night, who said that while he understands the frustration of the protesters, they're eventually going to have to shift their message and their rhetoric from venting about the problems to serious discussion about solutions. A good point, in my view.

My first crack at a solution--and it's an easy one conceptually, but very difficult to pull off: institute serious campaign finance reform so that we stop selling public policy to the highest bidder. Eliminate super-pacs, and clamp down seriously on campaign spending overall. Constitutional amendment if necessary.

My second crack at a solution--(which my financial advisor mentioned to me yesterday more or less as a joke, but it's interesting): for several years anyway, do all Congressional voting by secret ballot. This would help free up Congress to actually act on behalf of the country instead of playing to their donors and their extremist bases. It's counterintuitive, because we all believe, at least conceptually, in "sunshine," but these are strange times. I'm not sure that I could swallow this at the end of the day--and it would not lack for unintended consequences, but it's really intriguing.

But if we put both of those things together, we might be on to something.

The most dangerous man in society is the man who has nothing left to lose. -- Saul Bellow
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