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Home Publications Blogs Beat the Press David Brooks Doesn't Believe We Should Jail People for Stealing (At Least on Wall Street)

David Brooks Doesn't Believe We Should Jail People for Stealing (At Least on Wall Street)

Thursday, 10 April 2014 22:35

Everyone thought David Brooks was a conservative. But in today's column on high frequency trading and the fact that it has often been used to support front-running in which traders effectively engage in inside trading, Brooks tells readers:

"You can’t tame the desire for money with sermons. You can only counteract greed with some superior love, like the love of knowledge.

"Third, if market-rigging is defeated, it won’t be by government regulators. It will be through a market innovation"

So there you have it. According to Brooks, if people are stealing on Wall Street we shouldn't look to try to have regulations and punishment, we should go after them with love. It will be interesting to see if Brooks shows the same attitude towards people's whose greed leads them to steal cars or burglarize houses.

Comments (12)Add Comment
How the "Market Innovation" of David Brooks Works in America Today
written by Last Mover, April 11, 2014 5:49

Imagine that. David Brooks appeals in effect, to the creative destruction of Schumpeter, or the countervailing power of Galbraith to justify the power of free markets to achieve efficiency. Anything but government to oversee the process beyond the guarantee of property rights to creatively destroy each other with countervailing power.

Consider where America has come since those days when at least the argument of creative destruction and countervailing power was plausible, in the sense there really were two or more unregulated opposing powers clashing with each other to take over a market.

No more. The economic predators have evolved to the point of avoiding even this form of crude "competition" among each other, rising to the top of the political structure to control all things economic.

Consider for example David Cohen, VP of Comcast telling the Senate recently why "big was better" regarding the Comcast-Time Warner merger, asserting with a straight face that the "consumer was in the driver's seat".

Then consider this from Wikipedia:
With $18.8 million spent in 2013, Comcast has the seventh largest lobbying budget of any individual company or organization in the United States.[35] Comcast employs multiple former US Congressmen as lobbyists.[36] The National Cable & Telecommunications Association, which has multiple Comcast executives on its board, also represents Comcast and other cable companies as the fifth largest lobbying organization in the United States, spending $19.8 million in 2013.[35] Comcast was among the top backers of Barack Obama's presidential runs, with Comcast vice president David Cohen raising over $2.2 million from 2007 to 2012.[37][38] Cohen has been described by many sources as influential in the US government,[39] though he is no longer a registered lobbyist, as the time he spends lobbying falls short of the 20% which requires official registration.[40] Comcast's PAC, the Comcast Corporation and NBC Universal Political Action Committee, is the among the largest PACs in the US, raising about $3.7 million from 2011-2012 for the campaigns of various candidates for office in the United States Federal Government.[41] Comcast is also a major backer of the National Cable and Telecommunications Association Political Action Committee, which raised $2.6 million from 2011-2012.[42][43] Comcast spent the most money of any organization in support of the Stop Online Piracy and PROTECT IP bills, spending roughly $5 million to lobby for their passage.[44]

Comcast also backs lobbying and PACs on a regional level, backing organizations such as the Tennessee Cable Telecommunications Association[45] and the Broadband Communications Association of Washington PAC.[46] Comcast and other cable companies have lobbied state governments to pass legislation restricting or banning individual cities from offering public broadband service.[47] Municipal broadband restrictions of varying scope have been passed in a total of 20 US States.[48]

Not to worry America. As David Brooks and other sock puppets for the economic predators who run America would say, market innovation will contain and discipline the market power of Comcast and Time Warner won't it.

Don't worry your pretty little heads over such matters America. Just just keep doing the right thing. Keep big government out of the picture and things will be just fine through market innovation.
written by djb, April 11, 2014 9:15

I can't worry about this, I am too busy trying to enjoy the value of suffering that wall street has created for all of us
Tough love
written by David Brooks is an idiot, per usual, April 11, 2014 10:04
Hey, Brooks, you know what tough love is, right? You kick the addict out of the house, you don't coddle them. You don't wait for market innovations to teach them that their addiction is destroying themselves and everyone around them. You don't expect your love to stop them from thieving anything they can to feed their addiction. Only hard consequences to their stupid decisions make a difference. Your proposed inaction will only embolden the addicts to fleece our pocketbook and bank accounts. An undisciplined market will not be rectified by philosophy ("love of knowledge") or any other type of love, you feckless, hopeless, thoughtless, compassionless, intellectually-and-morally-bankrupt turd.

Look how well the love of the Christians did against the lions in the Roman games and think for once in your damned life, Mr. Brooks.
written by JDM, April 11, 2014 11:13
It's worth noting that the front loading part of HFT is even worse than insider trading. In insider trading, someone tells the trader that, say, a company has a big deal being signed, or that earnings are going to be announced as up or down, etc. it's very likely that the market will react to this news in a predictable way, and the insider trader takes advantage of that. But it isn't absolutely certain.

Front loading is absolutely certain. In this case, someone us hiring you to buy or sell an item, and you step in and buy or sell it first knowing that the big buy/sell will definitely move the market. It's even more dishonest than insider trading.
shooting fish in a barrel
written by jeff S, April 11, 2014 11:52
David Brooks lives in his own private idaho, a universe where there are no facts or evidence. The only thing floating around are his thoughts which are completly divorced from reality.

One could make a career just critizing his NY times columns.

David Brooks is living proof that there is an aristocracy in the meritocracy but no merit.

written by Thomas Bub, April 11, 2014 2:28
I can't believe anyone still reads this clown.
How is front running stealing, Low-rated comment [Show]
written by liberal, April 11, 2014 3:34
"Third, if market-rigging is defeated, it won’t be by government regulators. It will be through a market innovation"

This is entirely correct. For the same reason, we need to legalize murder, robbery, theft, etc; they also clearly won't be defeated by government regulation.
Over Ire?
written by Larry Signor, April 11, 2014 9:27
David Brooks is not my most esteemed pundit, but not the most reviled. If he had stopped six paragraphs into his column, he would have been fine. It's that 2000 word minimum that ruins him.
front-running destroys market credibility, even when it's not stealing
written by Squeezed Turnip, April 12, 2014 4:50
How is front running stealing
written by Floccina, April 11, 2014 2:55
How is front running stealing? What did they take that was mine?

Brokers, floor traders, and dealers aren't supposed to take advantage of their customers. Read about it here. Even better, read Larry Harris' book on trading and markets (referenced in the wikipedia article). If people come to distrust a market they won't use it. The exchanges want to stay open, so front-running on information obtained by client-broker privilege is going to be discouraged.

But also, just because they didn't take anything that was yours doesn't mean it wasn't stealing. Nor does it mean that it has no effect on your trading costs and opportunities. Read Harris' book.
Perhaps we should unify two recent David Brooks columns.
written by John Wright, April 12, 2014 10:26
Perhaps Brooks does have some answers after all.

In one recent column, Brooks maintains that suffering can be a "fearful gift" and per this column, attempting to enforce correct behavior via government regulations doesn't work.

Let's attempt to do a Brooksian two-fer.

1. Add some character building "suffering" to the financial industry.
2. Help the funding concerns of Social Security.

The solution is a financial transfer tax. This should qualify as suffering for the financial industry, as each time a financial tax is proposed, the industry pushes back strongly, perhaps because it is not viewed as maximiming the industry's happiness (it causes financial suffering, one could say).

In Brooks' words, perhaps a financial transfer tax would
function as a gift to the financial industry as "The suffering involved in their tasks becomes a fearful gift and very different than that equal and other gift, happiness, conventionally defined."

It might build good moral character in the financial industry.

Then use the proceeds to shore up the shortfall in Social Security.

And if the financial industry does not appreciate its newly imposed suffering, at least Social Security would still be better off.

This does not attempt to regulate the financial industry's behavior, it is simply a mechanical tax calculation applied to financial transactions.

Maybe Brooks will lead the way?
written by Pinkybum, April 15, 2014 12:26
@shooting fish in a barrel
There is someone making a career out of criticizing David Brooks although he doesn't get enough enumeration for his toils - that would be Driftglass:

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.