Prior to the Democratic primary, political news from Chicago usually concerned the latest exposure of corruption, and a good deal of it was linked to the Daley Administration(s). But riding on a white stallion, Barack Obama blazed forth out of the windy city promising to “change the world,” “transform this country,” and create a Kingdom right here on earth.”
To help him achieve all the above, Lynn Sweet at the Sun Times, reports that Obama has brought with him to the nation’s capitol a startling number of old friends from Chicago’s 51st Ward:
WASHINGTON -- It's a Tuesday in June, and I am in one of the high-ceiling big rooms of the old office building next to the White House.
As I look around the room at the players assembled here -- including this scribe -- I'm thinking that with a few twists of fate, this all-Chicago gang could be huddling in Mayor Daley's City Hall.
It’s not terribly reassuring to be reminded of the Chicago influence on the guy steering the ship during a global financial meltdown and rising concerns about health care reform. And there probably aren’t any direct links from Chicagoland to what’s happening on Wall Street these days as described by Robert Kuttner’s recent piece at Huffpo:
The New York Times recently reported that the latest scheme--or scam--on Wall Street is something called High Frequency Trading. Very sophisticated financial firms, such as Goldman Sachs, are tipped off by the New York Stock Exchange's own computers to pending buy and sell orders. Armed with ultra sophisticated computer algorithms, the insiders anticipate the direction of the market based on what they learn about supply and demand for a given security. They can make an extra penny here and an extra penny there at the expense of us suckers, adding up to billions.
"Nearly everyone on Wall Street is wondering how hedge funds and large banks like Goldman Sachs are making so much money so soon after the financial system nearly collapsed," wrote the Times' Charles Duhigg in a front page piece that was the talk of New York and Washington. "High-frequency trading is one answer."
As debates in the blogosphere in the last couple of days have made clear, there are a couple of possibilities of what is at work here. One is that Goldman and others are literally using privileged information to make trades ahead of markets, in which case they are committing a felony. Specifically, the abuse is known as "front-running," or trading ahead of customers, and it is an explicitly illegal form of market manipulation. Front running is epidemic on Wall Street--the whole point of an investment bank trading for its own account is to take advantage of its specialized knowledge of markets--and the SEC or the Justice Department shuts down front-running when it becomes too blatant to ignore.
If the financial crisis has proven anything, it is that capital markets have become an insiders' game in which trading profits crowd out the legitimate business of investment. The whole business-models of the most lucrative firms on Wall Street are a menace to the rest of the economy. Until the Obama administration recognizes this most basic abuse and shuts it down, it will be more enabler than reformer.
More enabler than reformer? I hate to break the news, but that sounds a lot like the Daley machine’s modus operandi in Chicago.