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Fleecing the lambs

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Christopher Elias graduated from the Columbia University Graduate School of Journalism. As editor of the magazine of the New York Stock Exchange he observed the manipulations of this private corporation in plotting and conspiring to violate the Exchange's rules and national laws in order to grab more wealth and maintain control over the financial world. Elias was fired when they found out he was writing this very readable book. This is a shocking report on the many firms of Wall Street, and will alert the public to the frauds that victimize them. Is the NYSE the most powerful and dangerous organization in the United States? You should read this book before buying stock.

Wall Street is full of arrogant people who regard the average investor as a "sucker" to be swindled or defrauded by selling them stock that the rich and powerful don't want (p.ix). Their main rule is "never give a sucker an even break" (p.x). The power of the Exchange is shown by the fear of those who work there (p.xi). This power prevents criticism and honest reform. Millions of Americans own shares indirectly through pension plans. Most Wall Street firms are partnerships or privately held corporations and have no public accounting (p.5). They are greedy, incompetent, shortsighted, and even dishonest. Page 8 notes the mismanagement of the later 1960s, and their pay-offs to Nixon (p.9); page 10 tells of their crookedness. Wall Street's biggest fear is not regulation, but competition from institutional investors (p.11). Are large institutions given inside information before individual investors (p.14)? Is the average investor gullible and greedy because of an urge to get rich quick? Does Wall Street "create wealth" by taking from the poor to give to the rich?

Chapter 3 provides a short history of Wall Street, and why "It Was Always That Way". It explains the origins of the short sale, the corner, watering stock (pp.32-34). Between 1919 to 1933 the public bought $25 billion in worthless stocks (p.35)! Page 38 tells of another bank swindle. The Exchange enabled swindlers by listing stocks to make them appear legitimate (p.46). The battle against Federal regulation in the 1930s collapsed when the President of the Exchange was caught stealing (p.43)! Chapter 4 tells of the mismanagement and back office losses in the late 1960s. The average investor should stay out of the market and buy shares in an investment plan (p.77). In 1963 the SEC concluded that Wall Street's research was merely a selling tool (p.78). Page 82 explains how selling new issues results in lucrative profits for insiders and underwriters (p.88). The market price of a stock does not represent its value (p.92).

The collapse of the back offices in 1968 shows why Wall Street can't regulate itself. Greed, mismanagement, or other errors were to blame (p.96). There were many problems (pp.98-99). Thefts added to the disorder (p.103). Proficient and honest management are needed for a well-run system (p.104). The author advises people to hold on to their stock certificates (p.105); a receipt is not a tangible asset. Chapter 8 discusses the loose ethics and dishonesty among salesmen (p.107). They sold stock not suited to the investors' needs; they churned accounts, and made unauthorized trades (p.108). Complaints by customers are called "idiot mail" (p.112). This book was written before the devaluation of the dollar in 1971, so dollar figures are outdated. The first half was more interesting.