woody:

crazynutjob:

This appears to be the big story for the day. There aren’t many details, which should probably be expected given that this is a large, ongoing FBI operation. The FBI seems to be under the impression that this is a rigged market and that common industry practices might be illegal. This post on naked capitalism is probably the best bit of background information on the consultancies (the key players who aren’t the funds or the actual insiders).

CNBC just reported a third search warrant being executed. Elsewhere, hedge funds have enacted new email retention policies, effective immediately.

i like this, so then I can make further fun of libertarian ideals of the “self regulating market” when I go back on campus. 

Wait, which direction are you arguing? Financial markets are heavily regulated. There are volumes of regulation that favors the big players at the expense of the little guy. The laws prevent competition, encourage consolidation beyond economic efficiency levels, and could not be better designed to siphon power into the hands of the few. “Self regulated” doesn’t mean legal support for abuse of power and no legal consequences for violations. Our regulations are asymmetric. Our politicians adopted a legal framework that reflected the “What’s good for Goldman is good for the US” slogan. What’s funny is people who believe giving more power to regulators will somehow result in a regulatory framework that creates a level playing field. As long as special interests exist, they will use their money to influence regulations that favor them. As long as regulators have the power, the trend will be to transfer power to special interests.

Have you noticed that the Health Care legislation, touted as protecting the consumer against price gouging by health insurers, has led to the fastest increase in premiums in history? Isn’t it odd that health insurer profits are rising, not shrinking? And when you legally have to purchase insurance from them, do you think this will reverse? Even when politicians claim to balance things, they are generally being less than truthful. Health insurers and drug companies wrote the health care legislation. Banks wrote the banking regulation.

But beyond that, this insider trading investigation is a bad example. We don’t really care about insider trading. We don’t consider it to be a serious crime. If we did, we wouldn’t exempt congress from insider trading laws. We don’t exempt congress from serious crimes like rape or kidnapping. The SEC has been receiving complaints about this insider trading for a decade. This isn’t about leveling the playing field. They want your money back. People are pulling their money out of the market. Right now, the politicians want to do their part to convince the little guy that they care about a level playing field. Maybe a level playing field will convince you to put your money back. This is laughable because there is no level playing field, even without rampant insider trading.