Courtesy of Pam Martens.
BusinessWeek Looks at the Rigging of Stock Research on Wall Street, May 13, 2002
Michael Lewis is getting a dose of the backlash typically reserved for Wall Street whistleblowers. To judge from the reaction to his new book, “Flash Boys,” which lays out how the stock market is rigged by high frequency traders, you’d think that his charge that the U.S. stock market has been corrupted is the fanciful musing of an unhinged mind.
Lewis underwent a prosecutorial style interview on CNBC; Tweeters charged him with assorted evils; the Wall Street Journal quickly ran an OpEd titled “High-Frequency Hyperbole” in which Clifford Asness and Michael Mendelson from hedge fund AQR Capital – the ultimate in trustworthy sources — attempted to move folks along, nothing to see here, with the emphatic proclamation that “The stock market isn’t rigged…”
The cold, hard facts backed by 80 years of copious documentation, like cancelled checks from the 1930s’ Senate hearings, where business journalists were bribed to tout stocks, and scandalous emails from the 1990s where stock analysts called the companies “crap” and “dogs” in internal emails while lavishing praise on the offerings to an unsuspecting public, is that the stock market has been rigged, in one way or another, throughout much of U.S. history.
In August 1996, the Securities and Exchange Commission brought charges against the Nasdaq stock market for conspiring to rig stock prices while its self-regulator, the National Association of Securities Dealers (NASD), failed to carry out even the most basic of its duties due to the influence of its Wall Street cronies who ran the NASD. The rigging dated back over a decade and potentially a lot longer.
Audio-taped calls released by the SEC at the time caught traders conspiring to manipulate prices and engaging in harassment against any traders who were reluctant to go along. The tapes also showed traders agreeing to move the price of a stock to help a competitor or create the false impression of buying interest in order to unload unwanted stock inventory off the books of a Wall Street firm.
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