Wall Street Protests a Sign of the Times

by John M. Curtis
(310) 204-8700

Copyright October 7, 2011
All Rights Reserved.                                         

           Taking to the streets, the “Occupy Wall Street” movement clogged up the Brooklyn Bridge Saturday, Oct. 1, causing the New York Police Department to overreact, arresting 700 peaceful protesters.  Compared the Tea Party movement, Vice President Joe Biden “Occupy Wall Street” set the wrong tone, apparently dismissing the protests as youthful rebelliousness.  Given today’s weak economy, President Barack Obama indicated that the protests reflected legitimate frustration over Wall Street’s unfair practices selling Main Street investors down the river.  Long-term investors, counting on Wall Street to supply predictable investment and retirement income, have watched their portfolios decimated, while Wall Street insiders continue to line their pockets at the little guy’s expense.  It’s beyond ironic that the president empathizes with protestors when he’s the one responsible for regulatory reform.

            Unregulated hedge and private equity funds continue the unseemly practice of short selling where investment funds bet against the stock market, driving lengthy market sell offs.  “It expresses the frustrations that the American people feel that we had the financial Depression, huge collateral damage all throughout the country, all across Main Street,” said Obama.  Signing financial reform into law July 21, 2010, Obama failed to regulate hedge and private equity funds that routinely short the market.  Last year’s halfhearted financial reform failed to reinstate the Depression Era Glass Steagall Act that prevented bank holding companies from risky stock market investing.  Last year’s Financial Reform did nothing to regulate short selling or risky stock market investing by the nation’s biggest banks.  Much of the 2008 financial collapse was blamed on runaway derivative trading.

            As Obama points out, street protesters are fed up with Wall Street’s shenanigans that protect profit for funds and investment houses and sacrifices long-term investors.  If the nation’s jobs market ever stabilizes, it’s going to happen when Wall Street starts showing long-term growth.  Quick profits driven by unregulated hedge and private equity funds create the sideways movement that triggers rapid sell-offs and buying frenzies.  “Yet we’re still seeing some of the same folks who acted irresponsibly trying to fight efforts to crack down on abusive practices that got us into the problem in the first place,” said Barack, not accepting his role.  Protesters can’t pinpoint Wall Street’s corruption, often blaming criminals like Bernard Madoff rather than looking at the system itself.   Allowing hedge and private equity funds to remain unregulated adds to today’s market instability.

            Before the private equity and hedge funds industry get regulated, markets will continue to gyrate in chaos.  Obama must call an economic summit with Federal Reserve Board Chairman Ben S. Bernanke, Treasury Secretary Tim Geithenr, Securities and Exchange Commission Chairman Mary Shapiro and key members on Capitol Hill to crack down on runaway short selling that drives markets into oblivion.  No long-term investor can trust the market when hedge and private equity funds routinely bet against the market to make quick profits.  “His message is that he’s sticking to the party line, which is, ‘We are taking care of the situation.’  But he’s not proposing any solutions,” said Thorin Caristo, a “Occupy Wall Street” street protester from Plainfield, Conn.  “We are 99%,” said the protesters, referring to the vast majority of American investors exploited by Wall Street.

            Unlike the Tea Party movement that’s morphed recently into an appendage of the Republican Party, “Occupy Wall Street” aims to end corruption and shoddy practices across the political spectrum.  Whether Democrat or Republican, no one claims immunity from Wall Street’s casino ways, where the little guys lose and the house wins.  Keeping cash in Wall Streets requires consistent results for long-term investors.  With hedge and private equity funds short selling for fast profits, it defeats the purpose of long-term investing.  It’s counterproductive for hedge and private equity funds to work at cross purposes to mutual funds designed for long-term growth.  “The great thing about Occupy Wall Street is that they have brought the focus of the entire country on the middle class  majority,” said 62-year-old George Aldro a member of local 3235 of the United Autoworkers Union.

            Faced with a tough reelection bid, Obama should make it clear where he stands when it comes to Wall Street.  Showing empathy to Occupy Wall Street protesters isn’t enough.  He needs to hold a White House summit, invite key leaders from government and the business community to do something about creating stability in the U.S. stock market.  As long a one side of the market remains unregulated and capitalizes on the misery of sell offs and profit taking, neither ordinary investors nor publicly held companies can ever trust Wall Street.  To grow the jobs market, companies need markets to steadily rise, not the endless buy-and-sell cycles that leave companies unwilling to hire permanent full-time workers.  Obama must also work with Congress do more to strongly encourage domestic manufacturing in the consumer electronics industry, like they already do in the auto industry.

John M. Curtis writes politically neutral commentary analyzing spin in national and global news.  He's editor of OnlineColumnist.com.and author of Dodging the Bullet and Operation Charisma.

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