From James Howard Kunstler
Author of The Long Emergency
July 27, 2009 Ukiah Valley, Mendocino, North California
By now, everyone in that fraction of the world that pays attention to something other than American Idol and their platter of TGI Friday’s loaded potato skins knows that Goldman Sachs has been caught at another racket in the stock market: front-running trades. What a clever gambit, done with the help of the markets themselves – the Nasdaq in particular – in which information on trades is held back a fraction of a second from public view, while the data is shoveled to the computers of privileged subscribers who can execute zillions of programmed micro-trades before the rest of the herd makes a move. This allows them to vacuum up hundreds of millions of dollars by doing absolutely nothing of value. The old-fashioned method used by brokers was called “churning,” in which stocks were bought and sold incessantly (by phone) from the portfolios of inattentive clients merely to generate commissions. In any sensible society – i.e. a society with an instinct for self-preservation – it would be against the law and the people doing it would be sent to prison.
I’m not a lawyer, but I’ve got to think that the actions at the Nasdaq end – shoveling the data to the privileged subscribers a fraction of a second early – is patently illegal in the first place, since the whole purpose of an exchange is to create a fair trading space. Where both parties are concerned, it should amount to a plain vanilla criminal conspiracy to commit stock trading fraud. Maybe the larger question is: since when did we become a society lacking the instinct for self-preservation – that is, a society bent on suicide? Or maybe the question is better put to Goldman Sachs’s CEO Lloyd Blankfein.
Since this racket was made public, there has been chatter all over the Web about how angry the American public is about Wall Street in general, and increasingly about Goldman Sachs in particular. Keep reading→