By Pam Martens and Russ Martens: November 30, 2015

The problem with Wall Street is not just that individual participants serially disrespect the law. The bigger problem is that Wall Street as an industry has structured itself as an ingrained law-avoidance system. There’s simply no other industry in America where you could start the sentence – “Wall Street is the only industry in America where…” – and find endless ways to finish that thought.

Jamil Nazarali, the head of Citadel Execution Services, the trading arm of a hedge fund and dark pool operator, gave the above sentence a trial run on October 27 at a Securities and Exchange Commission meeting on market structure. Nazarali said:

“This industry is the only one that I am aware of where a for-profit public company regulates its customers and competitors. And I understand that you guys think that that’s important but what is it that you guys do that someone else couldn’t do? All those regulatory functions that you described, why couldn’t some other entity do that? Why does it have to be within your four walls?”

Nazarali was referring to one of our top seven critically needed reforms on Wall Street – the structure of stock exchanges. It used to be that stock exchanges were owned by members and operated along the lines of public utilities. They were there to provide a service to the investing public, make sure that trading was done in an honest and transparent way, and discipline bad actors. Today, stock exchanges are publicly traded, profit-motivated businesses. In a bid to boost profits, they have abandoned even a pretense of fairness and are selling services that create an outrageously tilted playing field to the wealthiest players.

It’s so bad today at the stock exchanges that last year, on April 6, Jonathon Trugman of the New York Post compared the exchanges to brothels, writing:

“What is clearly unfair and unethical — and, frankly, ought to be outlawed — is how the exchanges have essentially taken on the role of running a high-priced, high-frequency brothel…”

The stock exchanges, like the New York Stock Exchange and Nasdaq, are allowing high frequency traders to co-locate their own computers next to those of the exchanges in order to pick up a speed advantage against regular folks who can’t afford the enormous fees. Additionally, the exchanges have a faster data feed with more detail for those willing to pay up while the general public gets the slow data feed. The costs for these perks can add up to tens of thousands of dollars per year – leaving the little guy out in the cold.

The second long-overdue reform needed on Wall Street is ending its private justice system. Here again, Wall Street is the only industry in America where its customers, as well as its employees, must contractually agree to surrender their rights to use the nation’s courts. Instead of courts, judges, juries, and reporters attending open trials, Wall Street runs its own private justice system called mandatory arbitration which has, repeatedly, been rigged as to outcome. Without the sunshine of an open court system, abuses are allowed to pile up until they threaten the entire financial system.

A modern financial system simply can’t be built around a King George III form of justice. A rigged justice system is precisely what our country’s founding fathers alleged against King George III in the Declaration of Independence. They wrote in the historic document that King George III “has made Judges dependent on his Will alone, for the tenure of their offices, and the amount and payment of their salaries” and he was “depriving us in many cases, of the benefits of Trial by Jury.”

Third, Wall Street is the only industry in America where the mega banks own stock in their primary regulator. (Can you imagine Exxon or Koch Industries owning stock in the U.S. Department of Justice?) Through an arcane system, Wall Street mega banks like JPMorgan Chase and Citigroup own stock in the Federal Reserve Bank of New York, which oversees the bank examiners that examine the books of those banks. In the lead up to the 2008 crash, CEOs from both banks (Jamie Dimon of JPMorgan Chase and Sandy Weill of Citigroup) actually sat on the Board of Directors of the New York Fed.

Fourth, Wall Street is the only industry in America which is allowed to package products and sell them to Americans and consumers around the world where fatal conflicts of interest occurred in the creation and packaging of the product. To see the significance of this defect, imagine that ABC Drug Company was openly paying kickbacks to the Food and Drug Administration to get a good ruling on a drug to be consumed by millions of people around the world.

Wall Street is openly allowed to continue this fatal conflict by paying fees for ratings to the ratings agencies, like Moody’s and Standard and Poor’s, even after the bogus triple-A ratings of bundled subprime mortgages blew up the U.S. housing market, bankrupted major banks, and played a key role in the greatest economic downturn since the Great Depression.

Which leads us to the fifth critically needed reform of Wall Street – ending its control of Congress through campaign financing and gold-plated revolving doors. The only means of effectively ending this takeover of those elected to represent the interests of the general public is to enact public financing of campaigns and place a longer time ban on public officials moving to Wall Street.

Sixth, the Securities and Exchange Commission must be restored as a Federal agency that is both feared and respected on Wall Street. Permitting long-tenured lawyers for Wall Street banks to sail through a Senate confirmation and park their conflicted derrières in the Chairman’s seat at the SEC is an outrage to all Americans. We need a longer time ban on Wall Street executives and Wall Street lawyers moving into government service.

And, finally, and most important, we need the restoration of the Glass-Steagall Act to prevent the heads I win, tails you lose mentality on Wall Street. Wall Street in the roaring twenties leading to the 1929 crash and in today’s gilded age, is allowed to wallow in OPM – other people’s money. By getting its hands on the insured savings deposits of moms and pops all over America through the repeal of the Glass-Steagall Act in 1999, mega Wall Street banks can use other people’s money to place its high risk gambles. When the big banks win those gambles, it gives big bonuses to its own executives and traders. When it loses, as in the case of Citigroup and other firms in 2008, taxpayers bear the brunt of the excesses with a forced bailout and window dressing reforms of the system.

Restoration of the Glass-Steagall Act would once again make it illegal for banks holding insured deposits to be under the same roof with Wall Street investment banks that underwrite stocks and bonds or stock brokerage firms that peddle stock to the public.

To get these seven critical reforms, we need engaged citizens across America writing letters to the editor of your local newspapers with a unified message: we’ve had enough of Wall Street as a rigged, wealth transfer mechanism in drag as a financial system.