Wall Street Reform

Okay, so you don’t like any of the candidates for president – but we have to vote for someone. Due to all the poor in the country and the Occupy Wall Street (OWS) protesters, I’m going to talk about a Ponzi scheme and the Dodd-Frank Wall Street Reform (DFWSR). (Remember - Gingrich said that Dodd and Frank should be jailed for their ties with Freddie Mac.) DFWSR is a recent law that attempts to address future Ponzi schemes by enacting protections for whistleblowers who alert authorities when they find evidence of fraud. The law also creates a new Investor Advocate and Investor Advisory Committee within the Securities and Exchange Commission to detect and investigate future Ponzi schemes. According to Time magazine’s Joe Klein, the President did sign the watered-down, overly complicated and difficult to enforce reform that has left Wall Street morally hazardous and financially toxic as it continues to allow the promoting of finances over production. Before I get into what this means in plain English, I’m going to try and explain what a Ponzi scheme is.

The Ponzi scheme was named after Charles Ponzi; although he did not invent the scheme he became notorious for using the technique in 1920. The original scheme was based on the buying of international reply coupons (IRCs - introduced in 1906 at a Universal Postal Union congress in Rome) and the selling of them at a higher price for postage stamps in a different location (postal rates are different in every country); Ponzi then diverted investors' money to make payments to earlier investors and himself. FYI - The purpose of the IRC is to allow a person to send someone in another country a letter, along with the cost of postage for a reply. The current IRC will become obsolete on December 31, 2013 but users can exchange these until said date for the new issue.

Today, a Ponzi scheme is any fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from any actual profit earned by the individual or organization running the operation (like the Pyramid Scheme). The system is destined to collapse because the earnings, if any, are less than the payments to investors. The buying and selling of unregistered securities can include bills of exchange, Certificates of Deposit or stocks and shares for the same purpose of deceiving investors as Ponzi originally did.

Because of the Dodd-Frank Wall Street Reform, it was reported on November 12, 2011 that the Security & Exchange Commission disciplined 8 employees with pay cuts and suspensions for failing to detect Bernie Madoff’s Ponzi scheme. And, on November 22, 2011, a former trader for Bernie Madoff pled guilty to fraud going back to the 1970s. However, according to Time magazine the Republicans, at the bankers’ request, are trying to gut the Dodd-Frank Wall Street Reform and the bankers are putting their money on Mitt Romney who says he will repeal the law. This is of no surprise as ThinkProgress reported that Mitt, his son and his brother are linked to Solamere Capital that worked with the Stanford Financial Group (SFG). In 2009 SFG collapsed with charges of massive and ongoing fraud against its investors; the Ponzi scheme bust was second only to Bernie Madoff. Mitt Romney and his son still have extensive financial and political ties to 3 men who allegedly participated in the SFG scheme.

Okay, in English, the Dodd-Frank Wall Street Reform law still leaves a lot of room for money in making deals rather than in making products which is not a recipe for long-term success. We need stricter regulations to stop the Wall Street scammers. This will not happen with any Republican. Time magazine (October 31, 2011) reported that 1% of Americans earn an average of $1,530,773 a year; if you make somewhat less than this you are in the 99 percentile.  So, even if you don’t understand it, you should support the OWS movement and should not vote for a Republican.

If you think the government should do its part in reducing the financial gap between the 1% rich and 99% not so rich (don’t forget that 15% are poor), then you must vote for a Democrat and that just happens to be Obama. Perhaps if Obama is reelected, he will take the painful path of real Wall Street reform as supported by former Federal Reserve Chairman Paul Volcker and consumer-credit reformer Elizabeth Warren.