Even Heroes Can Make Mistakes - Commentary on Gary Weiss
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Posted by: guestblog 1/25/2006 10:33 AM
Gary Weiss is slated to release a book in April of 2006 based on the idea that naked short selling is good for America. However, there are some key points that he seems to have overlooked in his writing.
In a time when immigrants were welcomed to the shores of America but not into the heart of its businesses or policemen, an organization arose called the Mafia. The Mafia’s original intent was to protect the people from what they perceived as anarchy and oppression, to give the streets order by using crime to regulate the daily lives of the population. It was a noble start, yet too soon protection taxes turned to mere taxes, and power corrupted the young men and women involved. The Mafia evolved to the point where when reporter Gary Weiss recently uncovered their actions in the stock market, nothing good could be said about them. But in an interesting juxtaposition, that same author has shown these origins to perhaps hit a bit closer to home than one would think reading his previous work.
“Weiss argues that the indifference of regulators toward small-cap stocks has promoted a lawless Wild West dominated by stock promoters and sleazy underwriters. The only remedy against such ‘bacteria’ is to short these stocks mercilessly.”
This is a quote from the New York Post review on Gary Weiss’s new book “Wall Street versus America”, which focuses on the positive aspects of illegal naked short selling. It is interesting that Weiss has taken it upon himself, in the opinion of the New York Post, to declare rogue justice on the American financial markets. Vigilantes have appeared at many times throughout the centuries, but never to positive effect. The problem that often arises, that without evidence and proper legal proceedings, it is too easy for innocent persons or companies to be punished for something they did not do. Even in the case of persons or companies that are guilty, often mob rule can overstep its bounds and exact vengeance on the guilty party which does not fit the crime.
Gary Weiss is of course an American hero, who, by digging deep under the skin of the American markets has been able to bring things to our attention that previously garnered little to no attention at all. He has uncovered Mafia connections within Wall Street and crusaded against corrupt governments – all of this in an extraordinarily professional manner.
The state has a monopoly on the exercising of both legal force and justice. This is a basic tenant of political science, and refers to the ability of a government to solidify its hold on jurisdiction over its citizens. When the use of vengeance is transferred to those outside of the bureaucracy, this is a sign of a faltering state. When the monopoly starts to break up, instability infiltrates all parts of society. To state that people outside of the government approved regulatory agencies have the responsibility to use illegal methods to try and solve what they see to be a problem: this is symbolic of such a break up of power.
Weiss should be respected for his work, and one can be sympathetic to his cause of trying to bring order to fairly unregulated markets. Yet he does not have a law degree nor has he passed the bar in any state. He has not been appointed judge, and in the United States that is what is required to pass judgment on men or companies suspected of crimes. One might try and refute this by saying that perhaps he is some sort of informal juror, that common people in America often pass legal judgments, but his judgments are just that – informal.
It is difficult to deal with this kind of well-intentioned mistake. However, there are others ways of dealing with what you see as a problem in society. You can address the police or regulatory powers – even hire private investigators to acquire evidence to turn over to the police/regulators – or you could perhaps think of getting the attention of local legislators through a lobbying organization. These actions are currently being utilized by others that see a problem in the securities system, some of them related to NCANS (the National Coalition against Naked Shorting), some that have never heard of this issue in their life.
Last week during the Canadian federal election at a candidates forum in Montreal, Quebec, for instance, the question of weak securities regulations in Canada – one of the situations which American stock market manipulators have been able to use for decades to get what they want – was brought to the table. A member of the three major national parties of Canada replied to what they were planning on doing about the lack of major regulatory powers in Canada. The representative from the New Democrat party had in fact worked on Wall Street in the late nineties, ran a 1.2 billion dollar mutual fund, and not only agreed that it was a problem, but expressed personal experiences running into such issues.
The representative from the outgoing party (the Liberals) and at the time Minster of Intergovernmental Relations stated that Canada was in fact currently trying to come up with a better national plan in terms of securities regulation, and that they were in the midst of talks with the provinces. The representative from the now ruling party (the Conservatives) also stated how her party was dedicated to giving more muscle to regulatory agencies in Canada. The Canadian government has begun to recognize its part in the international securities market and has even moved forward with trying to advent possible solutions. The international securities market may be imperfect, but there are agencies and governments within it currently working for change.
Working within the government there is a possibility of permanent change, but a vigilante can only affect a situation temporarily. Once he is no longer participating in his method of justice, even if it was to beneficial effect, there has been no change in the infrastructure in the system which would force any change in behavior. The vigilantes that Weiss advocates risk making worse what he believes they wish to improve.
The most popular story about going outside the bounds of typical behavior to attempt to stop a crime in recent decades is that of former FBI man Mark Felt. He witnessed wrong doings in the White House and after trying to stop the criminal actions through the bureaucracy, felt he had to go out into the public square and leak the information to the media. Some laud his efforts that brought down President Nixon, some revile them, and his alter ego ‘Deep Throat’ became a point of controversy for decades after his actions. Yet there is one thing that must be remembered: the conclusions to Felt’s efforts were the indictments and imprisonments, legal decisions passed down on guilty parties within the court system.
While short sellers have in the past developed evidence that has been used in court, the use of illegal naked short selling was not the tool with which any of that evidence was garnered. The use of illegal naked short selling may sometimes help to bring down a company that has not been processed properly by the authorities, however it is not solely used against corrupted companies and is not a legitimate process of exacting compensation for the victims of the few corrupted companies that illegal naked short selling does help to bring down.
In the end it is simply against the law to break the law. For Weiss to advocate breaking the law is contrary to his previous efforts to help bring criminal actions to the attention of the authorities and the public. If illegal naked short selling has been used to counter other illegalities, one must wonder how analogous an action this might be to burning a witch at the stake. No doubt alchemists roamed the woods of America at one point or another, yet few were ever caught, and far more than their entire population suffered inconceivable pain at the hands of the mob. In his most recent work Mr. Weiss has seemed to have lost sight of his once keen eye for justice. An eye for an eye does make the whole world go blind, hopefully that is not what has happened to author Gary Weiss.
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Re: Even Heroes Can Make Mistakes - Commentary on Gary Weiss By mhelburn on 1/25/2006 1:45 PM
I hope that you will be a frequent poster here.
The SEC sends it's fines and fees to the Treasury and it gets its funding through the Treasury. Lately, I think that it is underfunded. And we, the people, have to tell our Congress how we feel about that. Spitzer has said that hedge funds shouldn't be regulated because vetted investors with large holdings are their clients. This implies that their investors are savvy enough to take care of themselves, but omits all the shenanigans that unregulated or even self-regulated organizations perform. Stiffer fines and penalties could make a much larger enforcement mechanism pay for itself and the small investor would stand a fighting chance in the market. I doubt that we even have to throw more money at the SEC. There are computer programs that could be written to monitor such things as tape-painting and fails to deliver. We don't have to create a beomoth, but make the whole process more transparent and efficient. Enforcing the laws that are already there would be a start.
It is up to law abiding citizens to support and influence our regulators and law enforcement people. The premise that rampant naked shorting is good is like sending Alley Oop out with his club to teach dance class. (Am I showing my age?)
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Re: Even Heroes Can Make Mistakes - Commentary on Gary Weiss By nabrum on 1/25/2006 3:40 PM
Guest.
You should copy your entry into Gary's blog. It would be interesting to read his reply.
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Re: Even Heroes Can Make Mistakes - Commentary on Gary Weiss By rtway on 1/28/2006 7:29 AM
When I read about Gary Weiss, two things come into mind. One, he uses the age old trick of all magicians. Watch my left hand waving the bright red flag, while the left hand is doing something else that no one is watching. The left hand is the reality move that really makes things happen. After reading about his stance on this, I come up with the conclusion that he is complicit in this.
He is the left hand. If WHOEVER were to act on his revelations they would probably come up with a person who is hardly a household name in the news, and use this person to be the sacrificial lamb to say to the press and the public"We caught them". While in the background it would be business as usual for those whose names can never be tarnished, and are household names.The fraud would continue and there would be years before another investigation. Secon thing that comes to mind, is he a Trojan Horse that you would want to break bread with because he claims to have found the scoundrels, I think not.
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Re: Even Heroes Can Make Mistakes - Commentary on Gary Weiss By rtway on 1/28/2006 7:39 AM
In regards to Mary,s statement about the funding of the SEC she makes very strong sense about how much easier it would be to regulate what you can see. Stevey Wonder would have a hard time as a school crossing guard. I beleive that most investors would have no problem paying an extra dollar for trade to pay their sherrif, if they knew how much the bank has been robbed in the past and also that the sherrif would have to report to the public weekly on what he sees. The people would also elect the sherrif.
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Re: Even Heroes Can Make Mistakes - Commentary on Gary Weiss By James Cummins on 1/31/2006 10:46 AM
In response to the last comment on my article, I totally agree. Efficiency is not an adequate excuse for the inability to regulate, most likely the solution to this issue is indeed going to cost the investor something. However, it is either that or the risk of losing everything. People pay insurance on their homes every year, few homes ever burn down, but it just makes sense. I see a strong analogy here.
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Re: Even Heroes Can Make Mistakes - Commentary on Gary Weiss By virakiller on 2/20/2006 4:42 PM
Gary Weiss is just caught in the "vice" of greed like many in business today and we are free to tell our tale of corporate malfesence and the truest of all crimes the destruction of American mid size and small business
Gary Weiss and all at SEC and DTCC and our regulators with exception of Ralph
and Mr Bennett are all terrorists like bin laden because they are responsible for funding these terror masterminds with the money to committ their "acts"
If an order stays open and isn't closed what happens to money in that account that is "unsettled " ? EXACTLY
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