By Pam Martens: April 10, 2014 Too-big-to-fail Wall Street mega banks are now one part bank, one part legal defense and one part confidence-game. JPMorgan’s Chairman and CEO, Jamie Dimon, whose career has now survived more scandals in the past two years than most business titans ever see in a lifetime, has penned a masterful 32-page head-fake to shareholders. Dimon tells shareholders that the company has “consistently shown good financial performance” while distancing himself from the $30 billion the company has paid out in fines and settlements for a rash of misdeeds since January 2013. The word “fortress” appears five times in the letter with the oft-expressed “fortress balance sheet” morphing additionally into the “fortress control system” and the “fortress company.” Dimon’s photo appears alongside the letter, clad in a navy jacket and blue shirt. Next year he might want to complete the fortress analogy by donning a Knight’s metal … Continue reading →

By Pam Martens: April 9, 2014 The caribou have vanished on Wall Street and the wolves are in a feeding frenzy against each other. Yesterday, the Wall Street Journal reported that Goldman Sachs is considering shuttering its Sigma X dark pool, a business that brought in $7.17 billion from equity trading in 2013, before accounting charges. There are only three reasons that a Wall Street mega bank shutters a $7 billion business instead of selling it: it’s crazy; its regulators told it to shutter it; there’s more bad news ahead about this business and the firm is trying to get out in front of the fallout. We know Goldman Sachs is only crazy like a fox, so that leaves options two and three. On March 13, Bloomberg News reported that Goldman Sachs sent refund checks to some of its customers for trades that had occurred in August 2011 where it … Continue reading →

By Pam Martens: April 8, 2014 Most Americans are traveling with a blindfold on Wall Street’s rigged superhighway. Until bestselling author, Michael Lewis, blanketed the airwaves last week with the news that yet another cartel has formed on Wall Street to front-run the stock trades of ordinary investors with a super-speedy fiber-optic line financed by private investors, the public remained in the dark about the latest weapon in Wall Street’s high-tech arsenal for transferring the little guy’s wealth into the hands of the one percent. The plan was so insidious that it reminded us of the stealth practices carried out by Wall Street in the tech boom of the late 1990s to line the pockets of the corner offices while separating the small investor from his life savings. One of those practices is benignly called a “penalty bid” (every trick on Wall Street has some indecipherable name to disguise what’s … Continue reading →

By Pam Martens: April 7, 2014 The fallout from the new book, “Flash Boys” by Michael Lewis continues. Yesterday, Jonathon Trugman wrote in the New York Post that “These traders who use the HOV lane to get ahead of investors could not do their trades without the full knowledge and complicity of the New York Stock Exchange and Nasdaq.” Trubman went on to compare the two best known stock exchanges in the U.S. to houses of ill repute, 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…” While it’s true that the New York Post might possibly overuse sexual analogies (on August 10, 2011 it ran a front page cover comparing the Dow Jones Industrial Average to a “hooker’s drawers”), in this instance Trugman is spot on. Not … Continue reading →

By Pam Martens: April 3, 2014 Michael Lewis is getting a dose of the backlash typically reserved for Wall Street whistleblowers. To judge from the reaction to his new book, “Flash Boys,” which lays out how the stock market is rigged by high frequency traders, you’d think that his charge that the U.S. stock market has been corrupted is the fanciful musing of an unhinged mind. Lewis underwent a prosecutorial style interview on CNBC; Tweeters charged him with assorted evils; the Wall Street Journal quickly ran an OpEd titled “High-Frequency Hyperbole” in which Clifford Asness and Michael Mendelson from hedge fund AQR Capital – the ultimate in trustworthy sources — attempted to move folks along, nothing to see here, with the emphatic proclamation that “The stock market isn’t rigged…” The cold, hard facts backed by 80 years of copious documentation, like cancelled checks from the 1930s’ Senate hearings, where business … Continue reading →

By Pam Martens: April 2, 2014 During this past Sunday evening’s 60 Minutes segment on how high frequency traders in combination with stock exchanges selling high-speed access have rigged the stock market, one stock exchange was called out by name: BATS. The program explored charges made in bestselling author, Michael Lewis’ new book, “Flash Boys.” Yesterday, the President of BATS Global Markets, Inc., William (Bill) O’Brien appeared on CNBC to debate Michael Lewis and the young entrepreneur featured in his book, Brad Katsuyama, who has opened the IEX trading platform that promises to level the playing field by putting in speed bumps that slow down high frequency traders. O’Brien came out of the gate hurling charges at Lewis and Katsuyama for making false accusations, spreading fear, and scaring investors. O’Brien repeatedly interrupted when Lewis and Katsuyama attempted to speak, jabbed his fingers in the air at Katsuyama and appeared generally … Continue reading →

By Pam Martens: April 1, 2014 Two of the chief culprits of aiding and abetting high frequency traders, the New York Stock Exchange and the Nasdaq stock exchange, failed to come under scrutiny in the much heralded 60 Minutes broadcast on how the stock market is rigged. This past Sunday night, 60 Minutes’ Steve Kroft sat down with noted author Michael Lewis to discuss his upcoming book, “Flash Boys,” and its titillating revelations about how high frequency traders are fleecing the little guy. Kroft says to Lewis: “What’s the headline here?” Lewis responds: “Stock market’s rigged. The United States stock market, the most iconic market in global capitalism is rigged.” Kroft then asks Lewis to state just who it is that’s rigging the market. (This is where you need to pay close attention.) Lewis responds that it’s a “combination of these stock exchanges, the big Wall Street banks and high-frequency … Continue reading →

By Pam Martens: March 31, 2014 “All the Presidents’ Bankers: The Hidden Alliances that Drive American Power” by former Wall Street veteran, Nomi Prins, is a seminal addition to the history of continuity government between the White House and Wall Street from the days of Teddy Roosevelt and the Panic of 1907 right up through the Panic of 2008 and the Presidency of Barack Obama. (Don’t be intimidated by the 69 pages of footnotes; while meticulously researched, this is a captivating read for anyone seeking clarity on why Wall Street can collapse, get bailed out by the taxpayer, cause a Great Recession and still call the shots in Washington.) The hefty hardcover deserves instant classic status for two reasons: like no other tome before, it explains through original archival material why the mega Wall Street banks are coddled by Washington and have been allowed to survive a century of public … Continue reading →

By Pam Martens: March 27, 2014 It only took three press releases over as many days but the Federal Reserve finally spit out the truth yesterday on its stress tests of the big banks: Citigroup, the largest bank bailout recipient of 2008, still doesn’t have its house in order more than five years later. How many more years of economic malaise will it take before the delusional Fed admits to the public that only the restoration of the Glass-Steagall Act, separating banks holding insured deposits from gambling casinos on Wall Street, will put our financial system back on sound footing? The Fed’s comments on Citigroup yesterday included the following: “While Citigroup has made considerable progress in improving its general risk-management and control practices over the past several years, its 2014 capital plan reflected a number of deficiencies in its capital planning practices, including in some areas that had been previously … Continue reading →

By Pam Martens: March 26, 2014 There’s a few Golden Rules that most Wall Street traders intuitively know never to cross: “Don’t fight the Fed,” “Cut your losses short and let your profits run,” “Never pick a fight with people who buy ink by the barrel,” and the one coined just last week: “Don’t bet against the folks with a military budget larger than the next ten biggest spenders combined.” Of course, traders have egos and can sometimes forget the basics. The London Whale traders at JPMorgan elected not to cut their losses short and let them run to $6.2 billion, which led to press ink by the barrel, multiple Congressional hearings, indictments of traders, a $920 million settlement by JPMorgan and the trials have yet to start. Now, once again, it seems that common sense has escaped the Masters of the Universe on Wall Street. Last Tuesday, Jay Carney, … Continue reading →