In Bed with Wall Street: The Conspiracy Crippling Our Global Economy is a great read for those seeking to understand our financial system’s failures and the reasons the global economy ceases to function properly. Larry Doyle highlights the shenanigans of FINRA (Financial Industry Regulatory Authority), the uneven-to-nonexistent oversight by the SEC, the corrupt culture of Wall Street, and the Street’s self-serving entanglement with the government.
While readable and enjoyable, Larry’s new book could serve as a comprehensive treatise detailing the failure of self-regulation and systemic conflicts of interest. The revolving door between the financial industry and its regulators, whether in self-regulatory agencies such as FINRA or in government, promotes capture and corruption. Unfair practices such as extra-legal taxpayer bailouts, failures to prosecute, High Frequency Trading (HFT), and “permissible” insider trading are symptoms we see every day.
Excerpt (pp 160-164)
The behavior of selected individuals and institutions needs to be exposed and properly adjudicated if capitalism is to exorcise the cronyism that was core to the fraud. James K. Galbraith, the chair in government and business relations at the University of Texas at Austin, understood this. Galbraith addressed the Senate Judiciary Committee’s Subcommittee on Crime in mid-2010 and laid out the shortcomings behind and the fallout from our economic crisis. His exquisitely detailed testimony skewered his own profession, the study of economic theory, for its failure to properly delve into and understand systemic financial frauds. In point of fact, leading into the current crisis, Wall Street curried favor with academics by paying them to produce research supportive of practices and market developments central to the perpetuation of fraud.
Galbraith methodically detailed the manner in which a control fraud—when a trusted person in a position of responsibility subverts the system/company for personal gain—develops, flourishes,perpetuates, and ultimately fails. The failure of the fraud, though, belies the fact that many of the perpetrators walk away filthy rich. The fraud itself and the injustice running throughout the system are predicated on a failure of the rule of law in mandating and upholding legal contracts. These failures have been propagated by our government, regulators, ratings agencies, a wide array of financial institutions, and individual citizens as well. As frauds go unpunished and moral hazards propagate, our nation has seemingly become inured to the growth of other frauds and moral hazards.
