Money never sleeps
by digby
Kathy Geier has a nice piece up about the latest book that has the chattering class all excited, Michael Lewis'. She writes:
Lewis is making headlines by charging that “[t]he United States stock market, the most iconic market in global capitalism, is rigged.” High-frequency traders use lightning-fast computers to rip off investors by “front-running” trades: taking advantage of advance knowledge of an order for their own gain. Front-running can be enormously profitable, and though it’s illegal, it’s difficult to detect. In short, in the words of Janet Maslin, who reviewed Lewis’s book for the New York Times, high-frequency trading has opened up “immense new opportunities for skimming, kickbacks, secret fees and opacity.”
None of this is new, however. In recent years, everyone from finance journalists to finance bloggers to Nobel Prize-winning economists have warned about the serious problems with high-frequency trading. Besides being a rip-off for investors, these trading practices also increase the vulnerability of financial markets to systemic risk. This is why the parade of notables vying for the Captain Reynault Memorial Award and declaring themselves shocked (shocked!) at corrupt practices within the high-frequency trading sector is mystifying, to say the least. For example, Maslin, describing what she deems Flash Boys’s “shock value,” claims the book is “guaranteed to make blood boil.”
I don't know. It usually takes decades for this sort of thing to penetrate the elite consciousness so this may actually be happening at warp speed.
But Geier's larger point is about the book itself which seems to portray some kind of Wall Street battle between the white hats and the black hats replete with a hero who says,“It feels like I’m an expert in something that badly needs to be changed. I think there’s only a few people in the world who can do anything about this. If I don’t do something right now—me, Brad Katsuyama—there’s no one to call.”
That's the least believable quote I've heard since George W. Bush's "If some tinhorn terrorist wants me, tell him to come and get me." As Geier says,we'd laugh at such comic book dialog in a movie. (But then, I'm going to guess that's the whole point of Lewis' book: a movie deal. These Wall Street stories have been pretty easily greenlit over the past few years.) But this isn't the first book to feature some youthful swasbuckling traders defying the evil elders to make Wall Street safe for God, mother and apple pie. Kevin Roose's Young Money tells a similar tale.
I suppose it's natural to yearn for heroes. But I'm afraid that most of us aren't going to be able to suspend our disbelief enough to buy that Wall Street is the place where you can find them.
That's not to say you can't make a good movie about it:
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