President Obama Nominates Mary Jo White for Chair of the Securities and Exchange Commission
But Lewis and Katsuyama were not the first to blow the whistle on rigged U.S. stock markets. Sal Arnuk and Joseph Saluzzi, Wall Street insiders and co-founders of Themis Trading LLC literally wrote the book on Broken Markets in 2012 and have been exposing details of the rigging on their blog ever since.
Wall Street Journal reporter, Scott Patterson, mapped out the exotic and corrupt order types permitted by the stock exchanges to fleece the little guy in his 2012 book, Dark Pools, which follows the trading career of Haim Bodek, who has set up his own web site to blow the whistle on just how badly the stock market is rigged.
Following all the media hoopla, the FBI has recently announced that it has opened an investigation into the allegations. But under the Securities Exchange Act of 1934, the FBI is not in charge of rigged stock exchanges - the Securities and Exchange Commission is. But according to insiders, the SEC has stood down in much the same fashion that it ignored warnings about Bernard Madoff from whistleblower Harry Markopolos for years. The explanation for the SEC's inaction, many traders feel, is that the SEC itself is rigged against Main Street in favor of big Wall Street firms. That view has found support among the SEC's own insiders.
Since 2006, four attorneys at the Securities and Exchange Commission have put their reputations and family interests on the line by blowing the whistle on corrupt cronyism that is now so ingrained at the Nation's regulator of stock exchanges and securities markets that it's become part of the SEC's business model.
Last week, James Kidney, an SEC trial attorney who retired at the end of March, set off pandemonium inside the SEC by giving an interview with Bloomberg News and releasing the full text of his March 27 retirement speech in which he castigated the SEC's upper management for policing "the broken windows on the street level" while ignoring the "penthouse floors." Kidney said in his speech that "On the rare occasions when Enforcement does go to the penthouse, good manners are paramount. Tough enforcement - risky enforcement - is subject to extensive negotiation and weakening."
News of the speech was quickly amplified by the New York Times and multiple business press outlets.
Kidney blamed the demoralization at the agency on its revolving door to Wall Street as the best and brightest "see no place to go in the agency and eventually decide they are just going to get their own ticket to a law firm or corporate job punched." (Retirement Remarks of SEC Attorney, James Kidney (Full Text).)
Kidney's interview with Bloomberg came one day after American Lawyer published excerpts from 2,000 pages of documents it had obtained from the SEC under a Freedom of Information Act (FOIA) request, which showed that Kidney had pushed the SEC to investigate up the chain of command in the Goldman Sachs Abacus 2007-AC1 investment scam. Goldman Sachs knew that Abacus was designed to fail and allowed a hedge fund, John Paulson & Co., to bet against it while recommending it as a good investment to its own clients. The SEC only pursued a mid-level employee, Fabrice Tourre, while settling with Goldman Sachs for $550 million.
John Paulson was never charged officially by the government but he was named in the Securities and Exchange Commission's outline of the crime. New York University, which has followed closely in the footsteps of the SEC's brand of crony capitalism, allows Paulson to serve as a Trustee and has named the first floor lobby of Tisch Hall and the Stern School of Business auditorium in Paulson's honor.
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After the collapse of this flawed system, there will be another built by the very people who abused this one.
The Psychopaths never go away, they just get richer.