Courtesy of Pam Martens
New York Stock Exchange Trading Floor
By Pam Martens and Russ Martens
U.S. stock markets have historically been challenged by corrupt actors. But there have been two extreme periods of corruption in the history of U.S. stock markets. One period occurred in the lead up to the 1929 stock market crash when Wall Street cartels were forming pools to wildly manipulate stock prices. That period led to an economic calamity known as the Great Depression. It also led to two years of intense hearings in the U.S. Senate to investigate the structure of the stock market, followed by intense legislative reforms including the Glass-Steagall Act, the Securities Act of 1933 and the Securities Exchange Act of 1934.
The second period was the lead up to the 2008 stock market crash which led to the economic collapse known as the Great Recession. In that period, like 1929, Wall Street banks were allowed to systematically engage in practices to enrich themselves at the expense of the public and the national interest. But instead of seriously reforming Wall Street, the Justice Department allowed the criminals to avoid jail time and a Congress whose members received heavy campaign funding from Wall Street allowed Wall Street to simply move its corrupt practices into ever darker corners of the market.
The Securities Exchange Act of 1934 explains why it is a matter of national interest to protect U.S. markets from corruption by powerful players:
“Frequently the prices of securities on such exchanges and markets are susceptible to manipulation and control, and the dissemination of such prices gives rise to excessive speculation, resulting in sudden and unreasonable fluctuations in the prices of securities which (a) cause alternately unreasonable expansion and unreasonable contraction of the volume of credit available for trade, transportation, and industry in interstate commerce, (b) hinder the proper appraisal of the value of securities and thus prevent a fair calculation of taxes owing to the United States and to the several States by owners, buyers, and sellers of securities, and (c) prevent the fair valuation of collateral for bank loans and/or obstruct the effective operation of the national banking system and Federal Reserve System.
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