Ten Years After: The failure to reform Wall Street

May 6, 2008

Ten years have passed since I helped found the NASD Dissident Movement, when we took our first steps with the historic 1998 contested election for the NASD's Board of Governors.  After fielding four candidates and given little chance of success, our slate won two seats and our fledgling coalition seemed destined to flourish.  Unfortunately, as with many things in life, the loftier the goals, the greater the crash to earth.  Personal disputes and professional differences soon found their way into the movement and things collapsed into a balkanized bevy of self interests. 

It is with great sadness that I look back over a decade's effort to reform Wall Street and see an industry much worse for the wear.  With the blessings of a co-opted regulatory system, the major players built momentum as a juggernaut, which steamrolled all in its path--leaving us amidst  the wreckage of subprime and gridlocked credit markets.  The regulators have spent the decade consolidating their power as a bureaucracy rather than implementing preventative measures and forging a working coalition with the regulated.  Smaller firms, which should have been the bedrock of our financial markets, have succumbed to ill-advised policies and laws.  Our landscape is now bereft of a vibrant independent/regional brokerage community.  Worse, it appears that the major firms and the industry's regulators now stand over the bodies of the indie community and smile at each other - perhaps congratulating themselves on a job well done?

Today the NASD is no more.  We now speak of the Financial Industry Regulatory Authority (FINRA).  And I now speak of the FINRA Dissident Movement.  Alas, too many name changes of little significance.  The deep-seeded problems remain.  The old alliances are frayed.  The new antagonisms begin to entrench.  Worse, where a decade ago I had developed a cordial relationship with Frank Zarb (notwithstanding our professional disagreement on virtually all regulatory matters), his successors seem less inclined to meaningful dialog and more disposed to politics.  The end result of the dissolved industry coalition and gamesmanship of our regulators is that the vitality has been sapped out of reform efforts.  All of which seemed to reflect the immortal words of Shakespeare:

And thus the native hue of resolution

Is sicklied o'er with the pale cast of thought,

And enterprises of great pith and moment

With this regard their currents turn awry,

And lose the name of action

I am fatigued with  the endless bickering and failures.  Wall Street is in a morass--created by career regulators lacking industry experience and too often tempered by the unrestrained  selfish  demands of dominant industry participants. 

I believe in the benefits of independent/regional business.  I patronize Starbucks but deeply miss the neighborhood coffee shop with all its quirks and characters.  I patronize Barnes & Noble but miss the local bookshop where the owner read her titles and knew my preferences.  I miss the mix of mom and pop stores that used to face out upon our streets and avenues, but have now been replaced by a homogenous façade of national chains that repeat every four blocks with numbing regularity. 

I miss innovation.  I miss the clash of ideas in the marketplace.  I miss the differences that add vitality to our lives.  For the comfort of sameness and reliability, we have sacrificed choice and sincerity.  Wall Street has not been immune to the demand of bigger-is-better.  No, Wall Street has been victimized by that imperative in the shape of unwieldy financial services supermarkets and bloated, ineffectual regulators.

Perhaps I am simply too old and too tired to keep tilting at the windmills.  Not finding any credible, national trade group to call home; not finding folks willing to work tirelessly with me; not finding any receptivity for meaningful reform within the regulatory community; and not finding any sincerity among politicians to propose sensible legislation to reform Wall Street-I think it's time for me to follow in the footsteps of Cincinnatus and return to the farm.

In the next few weeks I will populate my blog with my thoughts on issues that endanger Wall Street-for the public investor, for public issuers, for individual brokers, and for brokerage firms.  I will try to explain how to best address the issues that I note, and welcome my readers to bombard me with emails and phone calls with your comments, suggestions, and criticisms.  I will do my best to respond.

Finally, I issue one last call.  To the regulators. To all existing trade groups.  To all folks setting up trade groups.  To the hundreds of thousands of registered persons disenfranchised at FINRA.  To all individuals seeking to reform Wall Street.  Call me. Talk me out of retirement or encourage me into it.  It's now or never.


No sooner did the above hit the Blog-waves than responses began to come in.  I would direct you to http://americanmadness.com/2008/05/06/the-great-bill-singer-throws-up-his-hands/ , a moving commentary that truly "gets" the issues.  I commend the American Madness Blog to all my readers.