Tuesday, April 15, 2014

‘In Bed with Wall Street’ (Book Review)

Ever hear of the legal cartel theory of regulation? Its proponents argue that some industry regulation, rather than making a market more competitive, actually aids firms in securing market power, protecting profits, and keeping out new competition. This immediately came to mind while I read Larry Doyle’s In Bed with Wall Street: The Conspiracy Crippling Our Global Economy (Palgrave MacMillan, 2014), a timely exposé on America’s financial industry, calling for some radical changes in how it is policed and judged.

Looking at the facts behind recent financial disasters, Doyle, a former mortgage-backed securities trader and current blogger on Sense on Cents: Navigating the Economic Landscape, exposes the government and private regulatory agencies’ failure to protect American investors from the self-interested financial industry. The problem, he shows, isn’t too much or too little regulation, but inadequate and corrupt regulation, rife with conflicts of interest. The Financial Industry Regulatory Authority (FINRA), as a self-regulatory organization, has too much stake in the status quo, and the U.S. Securities and Exchange Commission (SEC), figuratively “sleeping” with the enemy, has failed to curb “insider trading” and protect “whistleblowers” from harm.

What’s the solution? Doyle puts forth ten “financial regulatory reforms” and four public policy proposals,” most without comment as to their feasibility and likelihood of success. Many have to do with the workings of FINRA. For example, he advocates forcing the organization to become more transparent by subjecting it, a private agency, to the Freedom of Information Act, something that would surely have long-term unintended effects. What Doyle apparently doesn’t recognize is that we don’t need the government micro-managing this private agency, but an attentive and efficient SEC that will monitor the financial industry and investigate potential law violations by FINRA, brokerage firms, and individual investors. Doyle should just accept FINRA for what it is: one of many self-policing or self-regulatory organizations (SROs) that can potentially suffer from conflicts of interest, just like the American Bar Association, the American Medical Association (AMA), and the National Association of Realtors (NAR). And like any private entity, it shouldn’t have the final word on matters of law.

Now, I should add a disclaimer here. Law and finance are far from being my specialties. I approached In Bed with Wall Street as a mildly-interested lay-reader not intimately familiar with particularities of the agencies and events discussed. It’s likely that someone better informed on financial markets will find it easier to embrace – or poke holes – into Doyle’s recommendations. I finished Doyle’s book feeling a bit bored and dissatisfied. The author appealed to the reader’s emotion with comments from his blog readers and stories of persecuted “whistleblowers,” something I’m particularly sensitive about. And he even sounds vindictive when fantasizing about banking executives being “disgraced and discredited.” I honestly had to question whether or not the book offered a truly balanced look at the problems it raised. In addition, a time-consuming process like book writing doesn’t seem to be the most efficient way to get the word out about a politically urgent matter to a largely uninformed and disinterested public. Will In Bed with Wall Street actually initiate change to a flawed and corrupt system? Or will it merely serve as a resume line for the author and be bought, read, and shelved by his fans in due time? I’m inclined to believe the latter.

Disclaimer: I received this a copy of First Reads giveaway winner on GoodReads.com. There was no obligation to write a review.

2 comments:

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  2. Good vibes. Everyday, all day.
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