Wall Street: “Trust Us.” Me: “No!”

Last week the Wall Street Journal wrote an article on the SEC‘s efforts to ban “naked access,” which is a system whereby big stock traders are given direct access to brokers’ computers so that they can trade faster. The SEC fears that this could be destabilizing to markets. Wall Street says that naked access improves liquidity. They also say that “high-speed trading firms are sophisticated and have risk-management tools that limit the likelihood of destabilizing trades.”

Haven’t we heard that song before? Wall Street said that they were sophisticated traders of mortgage-backed securities, and that their risk-management models would keep them from getting in trouble. We know how that turned out. I’m no expert on naked access, but I know that when Wall Street says “trust us,” I make sure they haven’t just stolen my wallet.

Along the same lines, here is an article in Slate describing how Wall Street has always complained about regulations that ended up helping the industry.

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4 responses to “Wall Street: “Trust Us.” Me: “No!”

  1. Why can’t everybody get “naked access?” Why just big traders? Can’t I get naked too? How does this help little traders?

  2. If even Alan Greenspan admitted he gave Wall Street too much credit for good sense and wise decisions, why should we trust ANYTHING they say?

  3. Here’s something I don’t get —

    One of the lessons that was supposedly learned from this financial crisis is that it’s dangerous to have financial institutions that are “too big to fail.”

    So what do we have now, more than a year later?

    Chase has absorbed Washington Mutual and bought Bear Stearns at a fire sale price. Bank of America now owns Merrill Lynch. Wells Fargo and Wachovia have merged. So the big banks have gotten even bigger, thus posing an even greater risk than they did before.

    • If ever there was a time to revisit the anti-trust laws…

      Too big to fail means too big to follow the law, too big to comply with regulations, too big to honor the obligations to shareholders, bondholders, vendors, employees, and customers. The future is grim indeed.

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