Courtesy of Pam Martens.
Senator Jack Reed Calls Wall Street a ‘Casino’ at July 8, 2014 Senate Hearing on Market Structure
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.”
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