An interesting take on securities traders

Mark Cuban compares them to hackers:

My last two posts were designed to stimulate discussion. But lets talk the real problem that regulators, public companies, investor/shareholders and traders face. The problem is that Wall Street doesn’t know what business it is in. Regulators don’t know what the business of Wall Street is. Investor/shareholders don’t know what business Wall Street is in.

The only people who know what business Wall Street is in are the traders. They know what business Wall Street is in better than everyone else. To traders, whether day traders or high frequency or somewhere in between, Wall Street has nothing to do with creating capital for businesses, its original goal. Wall Street is a platform. It’s a platform to be exploited by every technological and intellectual means possible.

The best analogy for traders ? They are hackers. Just as hackers search for and exploit operating system and application shortcomings, traders do the same thing. A hacker wants to jump in front of your shopping cart and grab your credit card and then sell it. A high frequency trader wants to jump in front of your trade and then sell that stock to you. A hacker will tell you that they are serving a purpose by identifying the weak links in your system. A trader will tell you they deserve the pennies they are making on the trade because they provide liquidity to the market.

I recognize that one is illegal, the other is not. That isn’t the important issue.

The important issue is recognizing that Wall Street is no longer what it was designed to be. Wall Street was designed to be a market to which companies provide securities (stocks/bonds), from which they received capital that would help them start/grow/sell businesses. Investors made their money by recognizing value where others did not, or by simply committing to a company and growing with it as a shareholder, receiving dividends or appreciation in their holdings. What percentage of the market is driven by investors these days ?

Source (h/t Chomsky in this iTulip thread).

More comments on the financial crisis

Heather Mallick has this to say about the current crisis:

"The cost of a funeral can be more than $10,000," American International Group was telling – OK, threatening – Canadians in a TV commercial on the same day the memorial service for its U.S. parent was held courtesy of the Bush administration. The cost of the funeral for the world's biggest insurer was $85 billion. Even as they expired, the insulated Canadian branch that shares the AIG name was trying to sell low-income Canadians insurance to pay for their own coffins.

These huge, shambling gambling firms haven't caused enough trouble for their sentient customers; now even the corpses are headed for a pauper's grave.
But what does one say to a fallen giant? Shame on you? You Lehman boys go straight to your rooms and think about what you've done!?

So the Lehman lads are weathering it out upstairs because they didn't technically do anything wrong and they won't suffer. They created jewels out of old chunks of sewer brick and played them in a casino. The laws that sent Conrad Black to jail were ye olde obvious ones that anyone would have been a fool to break. What Wall Street did en masse was greedy and stupid, but there are no rules against that. Quite the contrary: everything in our modern ethos encourages it.

Some people find Mallick irritating, but she definitely has a way with words.

And as to how to pay for such a huge bailout, independent Senator Bernie Sanders (from that island of civilization, Vermont) has some ideas:

Amid one of the worst financial crises in American history, Senator Bernie Sanders (I-Vt.) today laid out a four-part plan to cope with the collapse of financial institutions and avoid future failures of businesses “too big to fail.”

First, Sanders proposed a surtax on the very wealthy to pay for bailouts of Fannie Mae, Freddie Mac and American International Group.

“The wealthiest 400 families in America saw an increase in their wealth of $670 billion since President Bush has been in office. They have seen extraordinary benefits under Bush’s reckless economic policies. The middle class, whose standard of living has declined, should not be paying for these bailouts. Rather, we need an emergency surtax on those at the very top in order to pay for any losses the federal government suffers as a result of necessary efforts to shore up the economy,” Sanders said.

He has other ideas too, notably this:

Third, he said giant businesses like Bank of America should be broken up so no company in the future could bring the American economy down with it. Said Sanders, “This country can no longer afford companies that are ‘too big to fail.’ If a company is so large that its failure would cause systemic harm to our economy, if it is too big to fail, then it is too big to exist.”

Thanks to Atomicat for the link.