Point of View Columns

Shell Game for Billionaires

Spring is on its way and the flowers are starting to bloom. But all the scented bouquets in the world cannot hide the stench arising from the sleight of hand shell games that we see being played out in the higher echelons of high finance. Consider that the SAC hedge fund paid a $600 million dollar fine for insider trading last week. This week it was announced that Citibank would be paying a $730 million fine for misleading investors. And neither institution has admitted to wrong doing in the process.

And SAC and Citibank should not be considered outliers or pariahs in the financial community. During the past year Bank of America, J.P. Morgan Chase and the Royal Bank of Scotland have all paid enormous fines, sometimes in excess of a billion dollars for misleading or improper conduct. On the Planet Earth such behavior would be called “stealing”. In the ethereal world of high finance it is called business as usual.

Take a moment to think about how much money an organization would have accumulated through insider trading for it to agree to pay a fine in excess of half a billion dollars. Think about how much money a bank must have made in providing misleading information to investors to justify paying a fine that approaches a billion dollars. Clearly these fines are seen as the cost of doing business – and then only if they get caught.

We see the Teapublicans doing their level best to shred and eviscerate the infrastructure that the Dodd Frank Act is supposed to establish in order to protect the public from wrongdoing by bad actors in the financial community. Instead of closing ranks to insure that a “free market” is also a “fair market”, too many opponents of regulation would rather let the thieves into the temple and walk away with all the profit that they can carry.

There was a time, not too long ago, when Wall Street was deeply involved in the process of investing in the future of this country. Investment bankers made money by financing the creation and expansion of businesses as well aggregating capital to support the development of the infrastructure of this country. Commercial bankers loaned money to small businesses and startups in addition to the blue chip firms.

This is not a reflection through a Norman Rockwell looking glass; these are historical facts that illustrate a very different mindset than what we find in the financial community today. Today technology based “trades” have replaced investment as the fuel that drives the Wall Street engine.

These trades, orchestrated by supercomputers that are linked globally, move enormous sums of money around the world in the blink of an eye 24 hours a day, seven days a week. The only jobs that these trades produce are in the banks, investment firms and law firms. The only infrastructure investment arising out of this faux finance would be the addition of a guest home on the summer estate of some hedge fund executive.

The shell game for billionaires entails moving money around and picking up the billions of dollars of loose change that somehow get left behind after every series of transactions. And fudging information to investors and illegally making use of inside information is just part of the shell game. Of course the grimy sweaty sans-culottes of the world aren’t supposed to worry about what is going on with this trans global shell game. And, by the way, don’t ask these would be Masters of the Universe to pay any additional taxes as they climb the greed beanstalk that, for them, reaches to the heavens.

We can go back to the fact that more regulation and more enforcement of those regulations might prevent some of the more egregious offenses. But the mindset in too much of the financial community is similar to players in some kind of Grand Game using supercomputers, offshore accounts and impenetrable documentation to grab as much money as possible. And if you get caught, you pay a fine that comes nowhere near the actual profit accumulated during a round of the Grand Game.

Perhaps the Masters of the Universe will realize that it is possible for them to make money through investment in the future and the financing of the dreams and plans of others – if they would only take a break from their computer simulated Grand Game.

I would not, however, recommend holding your breath waiting for this to happen.