Greedy Continues to Gut US

This article in the NYTimes shows that Greed is still running rampant on Wall Street and the Financial markets:
“Since the almost overnight collapse of Bear Stearns earlier this year, top-level Wall Street executives have been pleading with regulators to investigate what they see as efforts by short sellers to plant false information and profit from it.

Lehman Brothers, for example, faced rumors last week that two major clients had stopped doing business with the firm. Lehman€™s stock dived almost 20 percent before recovering somewhat as both clients denied the rumors.

The issue is a notoriously challenging one for the SEC. Rumors have long been a part of Wall Street€™s fabric, and to prove rumor-mongering is a difficult task, especially with 24-hour news and communications technology like instant messaging and text messaging. But Wall Street executives insist that false information is permeating the marketplace as never before. Since Wall Street firms are highly leveraged businesses that need outside financing, confidence is crucial, and rumors can overshadow the strength of their businesses, executives say.”

First, the need for this type of warning indicates how shark-invested the US financial markets have become. Literally, with huge lay-offs in the finance sector, large stock devaluations and huge fortunes at stake, privateering and pirating rules the Financial High Seas. The enormous financial upheavals help to disguise malvolent actions. In this financial storm getting my share protected overrides all other considerations: fiduciary trust, national economic well being, skirting the law among other things.

Second, the SEC, Treasury, FED and other financial regulators are hopelessly at sea trying to control the new Greed Invested Risk-takers. It is the complexity of derivative financial instruments, the relentless pace of 7/24 trading, the precariousness of huge leverage, the fragility of access to astonishing salary payouts , and market positions changing overnight that has this vortex increasing as every sector sagging with debt-driven obligations – says “I won’t be the next Bear Sterns”. And as the country lurches from one financial disaster to the next, “the controllers and regulators” look more like reels of Keystone Kops.

Third, this continuing and already year old financial debacle indicates how much the fabric of the economy is subject to the whims of unbridled Greed. Kenneth Arrow won a Nobel Prize for his work on the social and legal boundaries in economic systems. He proved in his General Possible Theorem that rational players could collectively make individual and even Pareto optimal decisions and still leave behind the best decision for the overall group. In this way he showed that bad decisions for the overall economy could be readily or “rationally” taken when many players were satisficing but not necessarily producing the optimal outcome for economy and the greatest number=the whole economy. In effect Arrow was calling into question the unquestioned efficiency of Adam’s Smith Invisible Economic hand. This has been the argument from thinkers on the right who suggest “their Darwinian decisions” always produce the greatest good (and very handsome returns for themselves). Thus informed, Arrow has gone on to comment on the need for morals and trust to keep economic systems working effectively. Clearly, that effective working level of trust has evaporated from US Financial markets – and all the Still-President’s men cannot even seem to restore it.

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