What to do
So, how do we make it less challenging to keep this greedy band of Wall Street bros in check? Here’s a summary of what came out of our conversations. If you want to go whole hog, click here for our Take Action page.
Crowdsourcing corruption busting
Organized rebellion, like the GameStop stock surge, has shown that retail investors are far from “dumb money” — they’re actually smart enough to bring the entire system to its knees. But let’s be real: While their success is inspiring, it shouldn’t be entirely on the apes of Reddit to reform our market one meme stock at a time. Still, there is a role for retail investors to play: grassroots power can be used to hold firms accountable. We can demand that firms aren’t able to exploit the market and we can press Congress and other government bodies to properly regulate it.
Show everybody everything
Our panelist J Brown made the point that in order for things to be fair, retail investors need to have access to the same information that the firms dominating the market have. There shouldn’t be off-exchange trading that’s out of view from your average person. Politicians shouldn’t be able to trade stocks based on information they appear to have special access to. Seems basic, but it still happens.
Reform! Reform! Reform!
As Dave Lauer outlined on our panel, the structure of the market is ultra complex, and that’s by design. The more obscured things are by complexity, the harder they are to regulate. And to make matters worse, at the moment many of the rules that are in place are “self-regulatory,” meaning these institutions are meant to keep themselves in check. Really flawless plan. It’s working like an absolute charm, clearly.
Lauer is leading a grassroots campaign called We The Investor to mobilize investors and push Congress and the SEC to fix our extremely rickety market structure and bad practices like Payment for Order Flow. There are also nonprofit organizations like Better Markets that push for financial reforms that will make the market fairer for everyone.
More money for enforcement
Something that came up in our interview with Gary Gensler and also on the podcast with Rob Jackson is that the SEC needs more resources to function at maximum efficiency. You can have as many rules in place as you want, but they’re useless unless someone is able to enforce them. They could especially use a boost in funds when it comes to keeping up with the technology needed to effectively police the firms that are constantly evolving. A beefed up SEC would also make it easier for retail investors to interact with them. The decision to give the SEC more money is one Congress has to make.
Waaaaay less money on lobbying
There’s a big, honking reason why Congress is very resistant to making the SEC a more powerful agency, and — no surprise!— it’s that Big Finance spends an incredible amount of money lobbying them to keep regulations to a minimum. In 2020, Wall Street spent almost $3 billion on campaigns and lobbying efforts. It’s often called the Acela Economy, because it runs between Wall Street and D.C. Basically lawyers move in and out of working at the SEC and representing financial firms, both defending them and lobbying them.
Disclosure of the amount of money that is spent influencing members of Congress is possible to find buried in records, but you basically need the digging skills of a journalist to do it. This means your average investor likely has no idea how much money a given company has contributed to PACs or spent lobbying this committee chairman or that one. So this, too, is much needed transparency. And would be relatively easy to make into law, since this information could be easily published in a firm’s annual report — if only members of Congress would vote for it...
No more trading stonky bois for those in charge!
A final, *crucial* wrinkle here that needs to be ironed out is that members of Congress, people who work at the Fed, and even the SEC commissioner are freely allowed to trade stocks while in office. Rob Jackson learned that one firsthand when he took the job and was flabbergasted to hear that he was fully allowed to trade stocks WHILE HE WAS IN CHARGE OF POLICING THEM as long as he disclosed it later.
Members of Congress and their spouses are also frequent stock traders. They’re supposed to disclose these trades quickly, but they often do not comply with the rules. Sen. Dianne Feinstein (D-CA) took months to disclose her husband bought five figures worth of stock in a polling company. Sen. Rand Paul (R-KY) waited a whopping 16 months to disclose that his wife bought stock in a pharmaceutical company that made a treatment for COVID-19.
There is actually a law that House Democrats are currently drafting that would ban stock trading for members, and there are several similar bills in the Senate as well. While the specifics on what it would prohibit aren’t yet determined, there is a chance it could pass by the end of the year. Assuming it has some teeth, that would be a great start to making the regulatory system less corrupt.
We can all win if some of us stop cheating
As J Brown emphasized repeatedly during our panel, this isn’t a case of one side losing so the other can win. Rob Jackson explained on the podcast that the current mindset in D.C. and in the financial industry is that you can’t have investor protection AND grow capital. But that’s simply not true. We can have both!
But that won’t happen as long as those who are making fucktons of money (yes, that’s an exact amount) by keeping the market unfair are in charge of the rules and policing themselves. What we need is for everyone in the market to work together to make the entire system better for everyone. Oh, and if anyone replies that Crypto will save us, we will call the police.