Alex Guilmartin made a good point in his Thursday column, lamenting the fact that the loud protests of the Occupy Wall Street movement are full of sound and fury yet signify nothing.
The protesters have garnered a lot of attention while raising signs with vague proclamations like, "Share the Wealth," "We are the 99%" or "Jobs for all at Union Wages." (I'm not even kidding about that one.) By now, you have probably seen the photo of a protester using the side of an NYPD patrol car to do his business.
Guilmartin rightly explains that anger itself is not enough to lift us out of our financial mess. So what could the masses of dread-locked protesters do to cause real change? Or to put it more bluntly, what reforms would they call for if they actually knew anything about the financial system?
First, the Occupy Wall Street protesters would call for the Commodity Futures Trading Commission (CFTC) to propose a strict form of the Volcker Rule. The rule would limit the ability of federally insured banks to generate much of their revenue from proprietary trading (trading for their own account). The rule would also limit the big banks' ability to bet on hedge-funds and private-equity funds. For years before the financial meltdown, banks had been using borrowed money to make these bets, effectively multiplying their gains when they bet correctly and their losses when they bet wrong. Most economists agree that this practice, along with risky derivatives trading, exacerbated the financial crisis.
The second thing the protesters would call for, if they knew what they actually wanted, would be restrictions on high-frequency trading (HFT). In this practice, traders make thousands of transactions each second, buying and selling back the same stock in a matter of milliseconds, for gains of fractions of a penny.
Regulators began to scrutinize the practice following last summer's infamous "flash crash" during which the Dow Jones Industrial Average lost almost 1,000 points, only to make up the loss soon after. Experts are still in dispute as to whether HFT actually amplifies the market's ups and downs. What is not in dispute is that HFT gives an unfair advantage to traders with the powerful and expensive computers needed to jump on tiny market opportunities so quickly. Two popular regulations are a "speed limit" on the number of trades one trader can make per second, and a minimum denomination, let's say a penny, for which a stock can be turned around.
Unfortunately, none of the Wall Street protesters are raising signs that say, "Prevent federally insured banks from making proprietary trades with our money," or "Put speed limits on high frequency trading activities".
So until the protesters change their tactics, I guess we'll just have to be content with the old "defecate on a police car" approach.
Matt Colbert is an industrial and systems engineering freshman at UF.
