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So, both-siderism rears its ugly head (and prevails) again.
What Heather says:
There are some areas of agreement among the left and right populists. They are both hostile to the “wealthy bipartisan elite” although for somewhat different reasons. It’s possible there could be some common legislative ground if both sides were sincere in their desire to rein in money in politics. But Sarah Palin’s words speak of a different priority — the visceral hostility toward immigrants and the obvious belief that they and other poor people are at the root of “workers’” problems. One certainly hopes that the poor and immigrant populations aren’t seen as chips in a negotiating session on these issues, but it wouldn’t be the first time that such devil’s bargains were made.
The real impediment to any agreement is the fact that most of the populist right is being funded and informed by the same wealthy interests they claim are destroying America with their immigrant-loving ways. These wealthy interests are actually less concerned about keeping their cheap immigrant labor (there are many ways of skinning that cat) than they are about the fact that the Republican Party is in grave danger of locking itself out of the executive branch for generations if it is seen as being overtly hostile to Latinos. They’ve invested a lot of time and money in the GOP and they do not wish to lose their grip on power simply because Sarah Palin and her friends don’t like immigrants. But there’s not much they can do about it — they’ve been stoking this right-wing populist base for decades now and that fire is now burning out of control.
It's nice (calming, actually) now and then (increasingly then) to hear our old-time "liberal" Democratic representatives tell the truth about their Wall Street allies.
Oh, for the old days.
That brand new competition is a group of Senators whose brains are rapidly gathering asymmetric information on the dirty dealings of Wall Street by clustering key Wall Street executives and experts into hearing panels and then drilling down for how things are really operating today at the stock exchanges, in the dark pools, and in the “casinos” run by the high frequency traders.
Equally important, by taking first-hand testimony at this series of hearings, the U.S. Senate is acknowledging two things: the Securities and Exchange Commission has dropped the ball and the Senate no longer trusts that regulator to deal with the problem or provide it with accurate information.
Jack Reed comes through for the little guy.
That's everyone except the Wall Street players, friends.
Senator Reed Calls Wall Street a ‘Casino’ in Tuesday’s Senate Hearing
By Pam Martens and Russ Martens
July 9, 2014
Senator Jack Reed
Wall Street awoke to a big problem this morning. Their army of physicists designing artificial intelligence algorithms to skim money from millions of trades undertaken by the pensions and mutual funds owned by the average American may not be smart enough for a brand new form of competition.
That brand new competition is a group of Senators whose brains are rapidly gathering asymmetric information on the dirty dealings of Wall Street by clustering key Wall Street executives and experts into hearing panels and then drilling down for how things are really operating today at the stock exchanges, in the dark pools, and in the “casinos” run by the high frequency traders.
Equally important, by taking first-hand testimony at this series of hearings, the U.S. Senate is acknowledging two things: the Securities and Exchange Commission has dropped the ball and the Senate no longer trusts that regulator to deal with the problem or provide it with accurate information.
Senator Jack Reed demonstrated how exquisitely this learning curve is working with this insightful statement at yesterday’s hearing before the Senate Banking Committee:
Senator Reed: “The market has changed. The old fashioned nostalgic view of the stock market is capital formation. That’s where you form capital which ultimately created jobs. Now it’s about trading. I’m struck. John Bogle, who will know more about this stuff than I will ever, made a speech a few months ago in April and he said, you know, the numbers tell a story: $56 trillion per year in trading volume as investors buy from and sell to one another, minute after minute, day after day, year after year.
That $56 trillion of trading volume dwarfs the capital formation total of $270 billion. Result: short term trading on Wall Street’s casino represents 99.5 percent of the market’s activity and long term capital formation – which is the small investor putting money in hoping that some day it will pay for college for the kids – is just a side show really…The market itself, as he says, it’s a casino.”
In that April 28, 2014 speech, Bogle, the founder of the giant mutual fund family, Vanguard, provided a broader indictment of today’s Wall Street casino, stating:
“But it is only capital formation that adds value to our society. Trading, by definition, subtracts value. Indeed, the casino mentality remains in the catbird seat of finance. Is that good or bad for investors and for our society? As Nobel Laureate in Economic Sciences and New York Times columnist Paul Krugman recently put it, “society is devoting an ever-growing share of its resources to financial wheeling and dealing, while getting little or nothing in return.”
“I might go even further, and suggest that we are getting less than nothing in return. More broadly, be warned by these words of wisdom from the great British economist John Maynard Keynes in 1936: ‘When enterprise becomes a mere bubble on a whirlpool of speculation, the position is serious. For when the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done.’ ”
Senator Elizabeth Warren challenged the often heard defense of high frequency trading as that of providing liquidity to the market. She queried witnesses at the hearing on how high frequency traders could be adding any liquidity to the market if they were jumping in and out of stocks all day long with no intention of holding them long term for genuine investment purposes.
Senator Elizabeth Warren Questions Citadel CEO, Ken Griffin, at July 8, 2014 Senate Hearing
When billionaire Ken Griffin, CEO of giant hedge fund Citadel, was asked to address the question by Warren, he went into a dance around the subject of his use of high frequency trading. Warren moved on to Kevin Cronin, Global Head of Trading of mutual fund family Invesco, Ltd, who seemed sincere in his desire to provide useful information to the Senators. Cronin said that the average high frequency trader is likely holding stocks for no more than “a minute.”
Senators from both sides of the aisle have apparently gained new knowledge from the revelations in the complaint recently lodged against Barclays’ dark pool by the New York State Attorney General, Eric Schneiderman. Democrats as well as Republicans were asking yesterday if dark pools should be eliminated. The witness consensus was that there should be a means of allowing large block trades to achieve anonymity to avoid driving down the share price in that stock and harming other investors but the deeply conflicted model where large broker-dealers are now routing the bulk of their own customers’ retail trades into their own dark pools is a serious problem of both ethics as well as draining liquidity from the regulated, lit exchanges.
There was a sense of déjà vu in listening to Senator Warren describe the skimming of trades and Senator Reed explain his epiphany of the “casino” which adds nothing to capital formation to benefit the future prospects of the country, its people, its industries or its job market.
Forever seared in my brain is the image of Laura Flanders having her own epiphany of what motivated Wall Street in the lead up to the bust of 2008. Flanders, in 2009, was interviewing Andrew Cockburn and Leslie Cockburn, producers of the documentary, American Casino, on her show on Grit TV.
After the Cockburns explain how the scam worked, fueled by the “crackpot” deregulatory prognostications of then Federal Reserve Chairman Alan Greenspan, Flanders asks, with a blend of contempt and genuine shock frozen on her face: “So you think it was all really a scam to transfer money from the vulnerable and the poor to the wealthy.”
As we have been telling our readers for the past eight years, under its current structure, Wall Street is simply an institutionalized, government-enabled, wealth transfer scheme. (We have even placed a menu heading titled “Wealth Transfer Schemes” on our top menu bar to assist average Americans with achieving their own asymmetric information.)
That Wall Street has now deployed high-speed computers, Ph.D.s writing artificial intelligence algorithms, co-located servers inside the stock exchanges to gain micro-second speed advantage, off-exchange, dark pool trading of 100 and 200-share lots of retail customer orders, special order types to fleece other customers – is all simply a high tech acceleration of the wealth transfer scheme to loot the savings of hardworking Americans struggling to put a little aside for their own future and that of their children.
It’s encouraging to, at last, hear and see members of the Senate Banking Committee asking the hard questions that show an awakening to this long, crippling, wealth stripping nightmare.
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For full text of the referenced Bogle speech, see: Speech by John Bogle on Financial Reform, April 28, 2014
Bill Greider lives.
We are so lucky in that he's still with us and has never shied from the truth about those in power whom he knows so well from his years of reporting on their deeds.
What Does the Democratic Party Actually Believe?
William Greider on July 9, 2014
To put it crudely, the dilemma facing the Democratic party comes down to this: Will Dems decide next time to stand with the working people, or will they stick with their big-money friends in finance and business? Some twenty years ago, Bill Clinton taught Democrats how they can have it both ways. Take Wall Street’s money — gobs of it — while promising to govern on a heart-felt agenda of “Putting People First.”
It worked, sort of, for the party. Not so much for the people. New Democrats prevailed. Old labor-liberals lost their seat at the table. Among left-wing malcontents, Bill Clinton became “slick Willie.”
Now economic adversities have blown away the Clinton legacy, which is rightly blamed for much of what happened to middle-class wage earners. New voices like senators Elizabeth Warren and Sherod Brown are demanding a new new politics — big governing reforms that really do put people first.
The old New Dems are stuck with their moderation and obsolete economic doctrine that is utterly irrelevant amid the nation’s depressed circumstances.
Sooner or later I expect politics will change, because the injuries and adversities will not go away in the absence of stronger government interventions. For now, however, the Clintonites are the Democratic Party, having deliberately excluded liberal thinkers and activists from the ranks of government policymakers for two decades. Economic experts recruited by the Obama administration are more likely to have been trained at Goldman Sachs or Citigroup. They do not personally share the public’s anger.
So here is the unspoken subtext for 2016 and beyond: What does the Democratic Party actually believe? Democrats argue among themselves, but try not to provoke fratricidal accusations. The question is sufficiently hot that it is no longer a subterranean discussion. The Washington Post and The New York Times are chewing on it too.
A recent Post article warned Democrats to lay off the “inequality” talk for fear of sounding like “class warfare.” Well, yes, it is. As billionaire Warren Buffett remarked, the class warfare has been underway for some years. “Our side won,” he said.
The president has made several fine speeches on the issue, but the Post says the White House has already decided to drop it. Talk specifics, but keep it cool. Robert Borosage, director of the Campaign for America’s Future, suggests this is a recipe for “passive voice populism.”
The New York Times produced a tougher piece on the Dems’ intramural debate. It described in disturbing detail how closely Hillary has relied on the financial constituency.
“As Wall St. Faces Scorn, It Warms to Clinton,” the headline said. She was, after all, a senator from New York. And when she ran for president and lost in 2008, organized labor was enthusiastically on her side.
Still, Hillary Clinton is dangerously out of step with the new zeitgeist. If she already has the 2016 nomination locked up, as her campaign gremlins keep telling us, it’s hard to imagine she would desert the finance-friendly politics that supported her rise to power.
The Hillary question has many corners to it. On one hand, it could achieve the epic breakthrough of electing a woman. On the other hand, it might postpone the restoration of progressive economic polices for another four years.
For that reason and some others, Clinton could run and lose the election. Still, many Dems see her as as the best prepared candidate and the best compromise among contending party factions.
Dems do realize the need to hold onto the White House and Supreme Court appointments in order to derail the Roberts Court’s attack-happy right-wingers. Or, who knows, maybe she will decide not to run.
In other words, this dilemma will not be resolved by one election, or maybe several elections, because it is larger than individual candidates and their personal qualities. Nor is it limited to Democrats (witness the nervous breakdown of the Republican Party). We are really looking at the capture of representative democracy deformed by the deadly embrace of capitalism.
Only the people themselves can dig themselves out of this trap. My personal hunch is that Democratic office holders will not find the courage to embrace the future and the reform vision that some of their colleagues are advocating until their party feels threatened by its own constituencies. That is, the Dems need to experience more of the surprise rebellions that took down some old bulls in the GOP. If the people cannot get either major party to lead the way, maybe they will need to create a new party that will.
Robert Scheer is also still alive and well (but no longer found at the LA Times for a very good reason - he's not a rightwinger or even someone who pretends to be).
On the NSA, Hillary Clinton Is Either a Fool or a Liar
Clinton is using Edward Snowden as a punching bag to shore up her hawkish bona fides.
Robert Scheer
July 8, 2014
(This story originally appeared at Truthdig. Robert Scheer is the author of The Great American Stickup: How Reagan Republicans and Clinton Democrats Enriched Wall Street While Mugging Main Street (Nation Books).)
Who is the true patriot, Hillary Clinton or Edward Snowden? The question comes up because Clinton has gone all out in attacking Snowden as a means of burnishing her hawkish credentials, eliciting Glenn Greenwald’s comment that she is “like a neocon, practically.”
On Friday in England, Clinton boasted that two years ago she had favored a proposal by a top British General to train 100,000 “moderate” rebels to overthrow the Assad regime in Syria, but Obama had turned her down. The American Thatcher? In that same interview with the Guardian she also managed to get in yet another shot against Snowden for taking refuge in Russia “apparently under Putin’s protection,” unless, she taunted, “he wishes to return knowing he would be held accountable.”
Accountable for telling the truth that Clinton concealed during her tenure as secretary of state in the Obama administration? Did she approve of the systematic spying on the American people as well as of others around the world, including the leaders of Germany and Brazil, or did she first learn of all this from the Snowden revelations?
On Saturday, a carefully vetted four-month investigation by The Washington Post based on material made available by Snowden revealed that while Clinton was in the government, the NSA had collected a vast trove of often intimate Internet correspondence and photos of innocent Americans, including many users of Facebook, Google, Yahoo, Microsoft and other leading Internet companies. The Post reported many files “described as useless by the [NSA] analysts but nonetheless retained…have a voyeuristic quality. They tell stories of love and heartbreak, illicit sexual liaisons, mental-health crises, political and religious conversions, financial anxieties and disappointed hopes.”
The Post concluded after four months of reviewing the documents and checking with government agencies that the material supplied by Snowden was invaluable in evaluating the NSA program: “No government oversight body, including the Justice Department, the Foreign Intelligence Surveillance Court, intelligence committees in Congress or the President’s Privacy and Civil Oversight Board, has delved into a comparably large sample of what the NSA actually collects—not only from its targets but from people who may cross a target’s path.”
Did Secretary of State Clinton know that such massive spying on the American people was going on and, if not, why isn’t she grateful that Snowden helped to enlighten her? With her scurrilous attacks on Snowden, Hillary Clinton is either a fool or a liar.
Too harsh? Consider her continued insistence that Snowden could have addressed his concerns over the massive NSA spying on Americans and the rest of the world by going through normal channels instead of turning over the documents as he has entrusted to respected news organizations that won the Pulitzer Prize for their efforts.
In an April speech at the University of Connecticut, Clinton said of Snowden: “When he absconded with all of that material, I was puzzled, because we have all these protections for whistleblowers.” That is simply not true; Snowden as a contractor to the government is not entitled to the federal protections that cover federal employees. But even those federal employees have found scant protection under the Obama administration in their attempt to blow the whistle on national security practices.
As secretary of state in an administration that has charged three times as many Americans with violations of the draconian Espionage Act than all preceding presidents combined, Clinton must know that the Obama Justice Department has effectively moved to silence whistleblowers from stating their case in court.
They even tried to prevent Thomas Drake, an honored NSA employee charged under the Espionage Act, from even using the words “whistleblower” or “First Amendment” in his defense. Drake had taken his concerns over NSA’s violation of the law to the Defense Department Inspector General and the congressional intelligence committees of both houses of Congress, but that did not stop the Obama administration, when Clinton was in the cabinet, from prosecuting him under the Espionage Act for talking to the press. The government’s case collapsed with a federal judge calling it “unconscionable” that Drake had been put through “four years of hell.”
Hillary Clinton knows just how selective the Obama administration has been in punishing whistleblowers who expose government violations of the Constitution. Obama made a political decision not to hold accountable any of those involved in the torture program conducted during the Bush years but zealously prosecuted CIA veteran John Kiriakou under the Espionage Act for publicly revealing and condemning one of the most horrendous episodes in the nation’s history.
Kiriakou, destroyed professionally and financially for his efforts to hold the torturers accountable, plea-bargained for the thirty-month sentence he is currently serving. Whistleblower Chelsea (formerly Bradley) Manning was given a far harsher sentence for revealing crimes in Iraq in a war that Hillary Clinton supported. If she asks for your vote, you might remind her of Kiriakou’s words before being imprisoned:
“The conviction of Bradley Manning under the 1917 Espionage Act and the US Justice Department’s decision to file espionage charges against NSA whistleblower Edward Snowden under the same act are yet further examples of the Obama administration’s policy of using an iron fist against human rights and civil liberties activists. President Obama has been unprecedented in his use of the Espionage Act to prosecute those whose whistleblowing he wants to curtail.
“The purpose of an Espionage Act prosecution, however, is not to punish a person spying for the enemy, selling secrets for personal gain, or trying to undermine our way of life. It is to ruin the whistleblower, personally, professionally and financially. It is meant to send a message to anybody else considering speaking truth to power: challenge us and we will destroy you.”
That is the message that Hillary Clinton seeks to send to Edward Snowden. Remind her of that when she asks for your vote.
(Read Next: Noam Chomsky on how the government uses ‘national security’ to justify its worst abuses.)
And, it continues at Wall Street on Parade:
Who Owns the U.S. Stock Market?
By Pam Martens and Russ Martens
July 8, 2014
Serious observers of Wall Street are increasingly asking this question: could a group of trading venues with giant pools of capital, operating in the dark, using high-speed algorithms and artificial intelligence that has a massive historical database and gets smarter with each micro-second trade — effectively own the stock market. Today, we take a look at the massive trading control exercised by just five Wall Street firms.
JPMorgan Chase, Bank of America and Citigroup jointly control trillions of dollars in commercial bank deposits with thousands of branch bank buildings stretching across the United States scooping up the life savings of everyday Joes who have no clue these are also the Masters of the Universe on Wall Street.
Goldman Sachs and Morgan Stanley also own FDIC insured banks. Goldman Sachs Bank USA, as of March 31, 2014, has $104.7 billion in assets; Morgan Stanley Bank, N.A., as of the same date, has $108.8 billion in assets.
These institutions have access to the Fed’s discount window, super cheap access to capital from FDIC insured deposits and a massive subsidy of their institutions under the too-big-to-fail doctrine. And, they also own outright or jointly a large swath of anything and everything that passes as a trading venue on Wall Street today.
The dark pool known as BIDS Trading, L.P. says it “was designed to bring counterparties together to anonymously trade large blocks of shares.” According to its web site, it is owned by: JPMorgan Chase, Bank of America Merrill Lynch, Citigroup, Goldman Sachs and Morgan Stanley – along with other financial firms.
Before BATS Global Exchange pulled its planned Initial Public Offering (IPO), its SEC filing said its owners included Citigroup, a subsidiary of Bank of America Merrill Lynch, and others. BATS has since merged with Direct Edge, whose owners included Goldman Sachs. The combination of BATS with Direct Edge puts four of the 13 public stock exchanges under the control of this one entity.
According to a March 31, 2013 report from Morningstar, the following Wall Street firms were among the major shareholders of the New York Stock Exchange/Euronext: Citigroup, 6.5 million shares; Morgan Stanley, 5.9 million shares; JPMorgan Asset Management (UK) Ltd., 4.9 million shares; Merrill Lynch & Co. Inc., 4.2 million shares; Goldman Sachs & Co., 3.1 million shares. In November of last year, the IntercontinentalExchange Group, Inc. purchased NYSE/Euronext. It is unclear if the Wall Street firms are still stakeholders.
According to an SEC document dated April 27, 2012, the Box Options Exchange is jointly owned by multiple firms which include Citigroup and LabMorgan Corp., a technology think tank at JPMorgan Chase.
The gambit to create dark trading pools dates back to at least 1999. As we previously reported, in September 1999 Citigroup’s Smith Barney, Morgan Stanley, Merrill Lynch and Goldman Sachs partnered with Bernard Madoff to compete head on with the New York Stock Exchange in a venture called Primex Trading. (As we now know, Madoff was running a Ponzi scheme at that time, calling into question how much due diligence was done by lawyers for this joint venture.)
The Nasdaq stock market licensed the Primex Auction System and ran it for two years before abruptly shutting it down on January 16, 2004.
With the intense competition among these Wall Street powerhouses, one has to seriously question why they are always teaming up in joint ventures. As we reported in January 2008 in an article titled “How Wall Street Blew Itself Up,” these same five firms, along with others, were involved in the joint creation of a company, Markit, to price exotic, off-exchange traded derivatives. That company went public last month.
In addition to having their fingers in these other trading pots (no one has ever accused the Justice Department of taking anti-trust seriously when it comes to Wall Street), each of the five Wall Street behemoths also own and operate their own dark pools which are collectively trading billions of shares a week.
One of the most sprawling of these global trading operations is owned by Citigroup. The company owns Automated Trading Desk whose web site says it is trading approximately 200 million shares a day (1 billion a week). Citigroup also owns the following dark pools: Citi Match, Citi Cross, Liquifi, and LavaFlow.
According to some industry estimates, as much as 40 percent of stock trading in the U.S. may now be occurring off of public stock exchanges. These five firms account for a good chunk of that in their own dark pools which function as unregulated stock exchanges that do not make the bids and offers of the stocks they trade publicly available.
On June 30, the Financial Industry Regulatory Authority (FINRA) released a regulatory notice indicating that the SEC had approved new language for FINRA Rule 5210. The upshot of this language change is that it smells like both the SEC and FINRA believe these Wall Street dark pools may be gaming the trading of stocks in wash trades. The relevant part of the new rule language reads as follows:
“Under Rule 5210 and its supplementary material, self-trades resulting from orders that originate from unrelated algorithms or separate and distinct trading strategies within the same firm would generally be considered bona fide transactions. However, self-trades by a single algorithm or trading desk or related algorithms or trading desks raise heightened concerns that this type of trading may not reflect genuine trading interest, particularly if there is a pattern or practice of such trades. This type of trading becomes increasingly problematic when it accounts for a material percentage of the volume in a particular security.
Consequently, under new Supplementary Material .02, firms must have policies and procedures in place that are reasonably designed to review their trading activity for, and prevent, a pattern or practice of self-trades resulting from orders originating from a single algorithm or trading desk, or related algorithms or trading desks. The supplementary material was adopted to address those instances where self-trades, even though unintentional, may not reflect genuine trading interest, especially where they account for a significant amount of volume in a security and potentially adversely affect the price discovery process.”
It’s been four years since the Flash Crash on Wall Street sent stocks into a 900-point bungee jump, wiped out over $200 million of investors’ money by improperly triggering stop-loss orders, and shredded public confidence in stock markets. And still, to this day, the Securities and Exchange Commission does not have a Consolidated Audit Trail (CAT) to properly police who is placing orders, at what time, at what speed, in what securities and in which trading venue.
The SEC is 80 years old. If it really wanted to properly police stock trading on Wall Street, one has to figure it would have had that Consolidated Audit Trail in place long before now.
The concentration of insured deposits in the U.S. among these firms; the fact that over 90 percent of derivative trading is controlled by these same firms; that the same firms, over and over again are jointly owning pieces of the same trading venues; that they are now trading billions of shares a week in darkness, should be enough to send Congressional banking committees into a frenzy of drafting new legislation to rein in this mess.
It hasn’t happened. As Senator Dick Durbin famously said about Congress in 2009, the banks “frankly own the place.”
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