WALL STREET ... STILL MOCKING AMERICA AS THEY DESTROY THE MORAL JUSTIFICATION OF CAPITALISM

According to the FBI the big financial players are at it again (then again, did they ever really stop?). Rather than bore you with the details behind what's happening I'm going to explain the concept with an easy to understand "Would you be upset?" scenario.

As you can imagine our biggest financial institutions are gaming the system, again.

Let's say you live in a small town and want to buy a house. Many of your family members are also thinking about buying new homes. So are your friends. They all live in the same community too. In fact, you know so many people that might be in the market to buy a house that you throw a house party, as it were, because every one's just so excited.

You invite your real estate agent and mortgage lender. They learn that that your family and friends are interested in purchasing homes too. By the end of the party they represent all your friends, family, etc. You are all ready to go on a house buying safari.

Things, however, aren't going to go so well for you and yours.

After the party the real estate agent and mortgage lender get together and buy up all the houses on the market. They don't tell anyone that they've done this, and don't really have to because they set up a subsidiary under their dog's name, and call it Fido Inc.

The dog gets involved and does the woof inspections (I know, I know ... I couldn't resist).

Anyways, since the market for houses has just about disappeared, the price for any available house goes through the roof. No one really understands what's happening but they still make purchases as Fido Inc. makes houses available from time to time. But everyone spends 20-40% more in the process.

Question: Would you be upset if you learned what happened?

Of course you would. In fact, you'd be pissed off because you just got scammed.

In the real world what I've just described is called "front running" and it's one of the oldest tricks in the book on Wall Street. Simply put, if an investment firm knows that you (and others) are going to purchase something and then gobble up the product(s) they are going to recommend or sell to you it is a crime.

Well, guess what? Bank of America was caught front running clients in the derivative markets (for interest rates).

Without getting into the details behind front running in derivative markets (it's quite complex) it's sufficient to know that news of the FBI investigation came out last month. They just recently named Bank of America as the bank that's been front running their clients. The FBI is also telling us Bank of America's actions has "resulted in profits of $50 million to $100 million for the bank."

In the larger scheme of things this really isn't much. It's only a few million dollars, so BoA could get a pretty stern warning from the Feds. A wag of the finger might be in the offing too.

Seriously, I'd be surprised if anything happens.

I'm explaining all of this not because these kind of activities are new. They're not. Market manipulating tricks have been around for quite some time (as I described with "repo" deals and faux Wall Street lemon laws here, here, and here). Heck, the 2008 market collapse was the product of Wall Street becoming little more than a rigged casino. And it's happening again.

Unfortunately stories like this have become to so common after 2008 that most Americans pretty much just mumble and carry on.

My point is to remind everyone that our nation's biggest financial firms are making a mockery of our markets (again), and destroying the moral justification of capitalism in the process.

Sigh ...

- Mark