The New York Stock Exchange, the NASDAQ, and the rest of the market exchanges employ Market Makers, humans or computers, which openly list all bids and asks, all offers to buy and sell a particular security. The law demands "best execution" which requires a trader to accept the highest offer, in other words to ensure the end client gets the best and most fair result available in the market place. This requires complete transparency. Otherwise, Goldman Sachs or J.P. Morgan could sell their own positions to the highest bidder while executing their client's trade at a lower price which may also be available (and we all know they would never do that).
Capitalism requires sunlight. This is why our country doesn't like the Dark Pools in which Goldman and Morgan secretly swap stocks and bonds, nor are the citizens comfortable with the Dark Web which possibly protects criminal transactions. But, did you know the U.S. Government demands secrecy when it reaches an economic or even criminal settlement with a U.S. citizen? They say they don't, but let me explain how this works, and show you how this secrecy operating in the shadows impedes capitalism, free markets, and democracy.
Two examples today: (1) For over 50 years, the Securities and Exchange Commission (SEC) has required citizens to sign "gag orders" as part of the final case settlement. Ninety-eight-percent of cases are concluded with settlements, because of the extreme financial and criminal threats which hang over the citizen's head like a sword of Damocles if they take the case to trial. (Note: The government maintains 98% conviction rates by implementing such extreme penalties for going to trial, up to 10-times, to dissuade citizens from forcing the government to bear the burden of proof, and to stop the defense's "side of the story" from being heard publicly. If only 1-2% more of defendants actually defended themselves at trial, the justice system would come to a screeching halt due to the incredible volume of arrests and indictments served daily in the United States), and (2) When a U.S. Federal Judge has been found to have egregiously violated the rights of a U.S. citizen, as determined by the judge's own peers and with corrective action taken, the Final Order contains no names or identifying elements, only a long number-code for obfuscation. A Confidentiality Provision, with the threat of criminal prosecution and imprisonment, hangs over the head of any U.S. citizen who reveals the judge's name, the very judge who is a public servant paid by U.S. tax dollars.
(1) Recently the Cato Institute has sued the SEC claiming the gag orders violate the First Amendment. This think tank, whose name is inspired by Cato's Letters in 18th century England, works for individual liberty, limited government, free markets and peace. This organization is suing to be able to publish a book written by "Mr. X" who "tells the story of how he was the victim of egregious government overreach at the hands of overzealous officials: how he'd personally done nothing wrong, yet the government leveraged the threat of crippling fines and the prospect of years of costly litigation to extract a settlement from him where he ultimately admitted no wrongdoing."
The Cato press release states, "The result is a system where the press and the public only hear one side of the story: The SEC issues press releases detailing its allegations at the BEGINNING of an enforcement action, and then it enters into settlements in which the accused is forced to promise never to dispute any of those allegations in public." Cato's Vice President for Criminal Justice, Clark Neily, states, "The SEC's policy of demanding lifetime gag orders as a condition of settlement flouts the First Amendment and prevents publishers like the Cato Institute from educating the public about the true nature and behavior of government."
(2) The recent misconduct claims against well-known Ninth Circuit Federal Judge Alex Kozinski, which led to his resignation, have re-ignited the calls for court transparency, disclosure and accountability for misconduct claims against federal judges. U.S. Supreme Court Justice John G. Roberts, Jr. has proposed revamping the disciplinary system in order to promote "independent investigations and greater disclosure to enhance public confidence in the courts."
"Transparency should be the default," said Gabe Roth, Executive Director of Fix the Court. "Neither a judge's written response to a complaint nor any disciplinary action should remain private." Charles Geyh, a legal-ethics professor at Indiana University told a panel of 10 judges that the process in which judges discipline each other is "particularly problematic and gives judges too much discretion to look the other way." He concluded with, "The system should be about promoting public confidence" rather than "self-protection."
JAM Views members must understand that pure markets demand transparency, provided by competition, not technocrats. We must also demand transparency from our government, or what then separates us from Russia, from China? Tom Hanks said it best in "Bridge of Spies" in response to the CIA agent demanding, "We need to know. Don't go Boy Scout on me. We don't have a rule book here."
Hanks, protecting his client, responded, "I'm Irish, you're German, but what makes us both Americans? Just one thing, one, the rule book. We call it the Constitution, and we agree to those rules. It's what makes us Americans. It's all that makes us American, so don't tell me there's no rule book...and quit smiling at me you son of a bitch."
This week may you operate in the sunlight and steer clear of the shadows.
"There's no way to rule innocent men. The only power any government has is the power to crack down on criminals. Well, when there aren't enough criminals, one 'makes' them. One declares so many things to be a crime that it becomes impossible for men to live without breaking laws." - Ayn Rand, Atlas Shrugged
* Many thanks to the WSJ, Forbes, & Fortune for the above statistics and quotations.
** For more information on Jeff's Books, Blog, and Legal Challenge, please visit www.jeffmartinovich.com.
** To access JAM Views directly please visit jeffreyamartinovich.blogspot.com
Excellent!! I've also read The Atlas Shrugged after being introduced to Ayn Rand through Jeff. Jeff's blogs are awesome! Thanks for sharing! Godspeed!
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