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A Market Free of Regulation

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The Portal Market--the dawn of a new investment vehicle for billionaires. And not a moment too soon.

What a great idea! Now the big-hitters can sell junk investments to each other and leave you and me alone. Or is it the other way? They’ll keep all the smooth sailing to themselves and turn you and me loose to navigate the stormy seas of regulated commerce.

(David Cho, Washington Post Staff Writer) Nasdaq is set to launch tomorrow (Aug 15th) what its executives are calling one of the most significant developments on Wall Street in decades -- a private stock market for super-wealthy investors.

Minimum requirement for traders: $100 million in assets.

Any private firm can list on Nasdaq's new platform, which is called the Portal Market, and raise money by selling stock to an elite group of shareholders. These companies would remain private and not have to make public their financial statements or submit to federal regulation, such as the Sarbanes-Oxley corporate accountability law.

It’s agreeably democratic that any private firm can list and any guy or gal with 100 mil can invest. I like that. Wall Street has been entirely too egalitarian.

Apparently those rules are acceptable of drug-lords, dictators from dicey nations, sheikhs newly made rich by Iraqi contracts and Russian oligarchs (I just love the word oligarch, it’s so 19th century). An investment ‘platform.’ The first five meanings of platform are 1) a raised horizontal surface, 2) a document stating the aims and principles of a political party, 3) the combination of a particular computer and a particular operating system, 4) any military structure or vehicle bearing weapons and 5) a woman's shoe with a very high thick sole.

So I’m already a little confused trying to figure out exactly what they mean by this. I'll go with a woman's shoe bearing weapons. A platform can also be a kind of stage from which people are hanged, but that's trap-doorish and unnecessarily pessimistic.

Unluckily, I don’t happen to have a hundred million rattling around in my bank account at the moment, so I guess mine is not to reason why, mine is but to watch and cry.

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Once a tiny influence on the markets, private money has gained unprecedented power on Wall Street. This year, the biggest deals have been swung not by public companies, but by private-equity firms that are spending hundreds of billions of dollars to buy household names, such as Hilton Hotels, Sallie Mae and Chrysler, and turn them into private companies.

For the first time last year, corporate America raised more money -- $162 billion -- from private investors than from initial public offerings, which raised $154 billion from the three major U.S. stock markets -- Nasdaq, the New York Stock Exchange and the American Stock Exchange.

This is the first major public repudiation of the tenets of the famed Harvard Business School and its industry-destruction instruction. The basic premise is the overriding importance of something known as the ‘quarterly profit.’

This famous institution (the school, not the University) was founded in 1908 and enlisted a mere 59 students. In almost no time at all (the 1920s), the class size reached 500 students and was celebrated in its 21st year by people jumping out of windows. In fairness, not all of them were graduates.

But L. Paul Bremer and George W. Bush each hold that distinction and just look at how well that’s worked out for the country.

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Back in the day of corporate giants like Andrew Carnegie, Henry Ford and E. H. Harriman, there was no income tax and little need to sell one’s soul to the short-term stock market demand for quarterly profit. These guys owned banks. That, rather than the market, was their hook to the common man’s money—when and if they needed it, which was seldom.

These days you can’t run a decent company (which might actually require some long-term investment and long-term research and development) because the frigging investors are breathing down your neck every moment.

Well, you just can’t keep a good billionaire down.

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http://www.jim-freeman.com
Jim Freeman's op-ed pieces and commentaries have appeared in The New York Times, Chicago Tribune, International Herald-Tribune, CNN, The New York Review, The Jon Stewart Daily Show and a number of magazines. His thirteen published books are (more...)
 

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