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Sep 17, 2008 3:59 pm

An irreverent Wall Street Blog
by Bill Singer
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As Woody Allen Said
Written: September 16, 2008

By Bill Singer

Many of you have phoned and written to me in recent days. Some of
the stories have been heart wrenching: the closing of your firm, the
loss of your job, the loss of your savings. The personal and
professional carnage is considerable; however, after nearly three
decades on Wall Street, I am no longer surprised when the pendulum
swings, as it now has. 

As most of we old hands know, this is not simply another recession or
another bear market. No, this is a more fundamental change--it is the
likely death of Pax Americana: the post-War ascendancy of the United
States of America to the role of world's sole economic and military
superpower. Although I doubt that the USA is headed for third-world
status or even that of a second rate power, there is no question that
we must now become accustomed to sharing power and more accustomed to
flexibility on the world stage. One always hopes in times such as these
that we learn the lessons. Unfortunately, those who brought us to this
precipice always seem to retain the reins of power and simply wheel the
carriages around for another run off the edge and into the abyss. If I
sound despondent, it is because I am. 

The ancient Greeks told the story of the Trojan princess Cassandra,
with whom the god Apollo fell in love. In the throes of his
infatuation, Apollo gave Cassandra the gift of prophecy. However, when
she failed to return his affection, Apollo cursed her so that no one
would ever believe her. Imagine Cassandra's anguish when she warned her
fellow Trojans that the Greeks were hiding in the Trojan Horse and
would destroy the city.

Wall Street is no different than ancient Troy. The Cassandras of our
age have long warned against lax regulation, against ineffective
regulators, against the corruption that permeates our political and
regulatory system. To some degree, I too stood on the ramparts and
pointed at the wooden horse being wheeled into our walls. Pointedly, I
have warned that the old NASD and its recent emanation as FINRA were
socially engineering small member firms out of business. I warned that
we were headed for a securities industry populated with mega-firms and
that when the firestorm came, as it inevitably would, that those
monsters would melt. I warned that we would need smaller,
independent/regional brokers to fuel our return to financial health,
and their diminishing numbers raised troubling concerns. 

Yet those fools opened the gates for that damn wooden horse! And now they wonder why the city is burning down around them.

What would I propose to replace our current system?  I re-state the long
published cornerstones of my decade-old calls for industry reform:

End self-regulation of Wall Street Promote the independent/regional brokerage firm model and restore local
capital formation Professionalize the hundreds of thousands of registered persons in the
securities industry End the practice of making the public customer the property of the
Broker-Dealer Ensure that a registered person is unencumbered by conflicts of interest
and pressures to sell house product Create a national auditing agency to monitor the integrity of assets and
risk management policies across the financial community Insist that regulators promulgate fair regulations, engage in effective
regulation, and pursue education and remedial measures in addition to

Sadly, I harbor few expectations that any of the measures above will be
implemented.  In recent days, all that comes to mind is a wonderful quote
from Woody Allen.  Perhaps in times such as these, all we are left with is
a cynic's sense of irony:

More than any other time
in history, mankind faces a crossroads. One path leads to despair and
utter hopelessness. The other, to total extinction. Let us pray we have
the wisdom to choose correctly.

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