Fools is another term that might as well be used for customers. Wall Street is certainly one place where the customer is not king. The king, of course, is Wall Street. How is any of this behavior legal? People are fed up with politicians who defend such activity and then blame the abused. Now that the GOP is preparing to take over it's hard not to look back and wonder how and why the Democrats missed the opportunity to implement serious reform.
A great article (with a video explanation inside) from the Times on this despicable behavior from Wall Street. As Joseph Stiglitz said, "privatized profits and socialized losses is not capitalism."
Here is the deal: Funds lend some of their stocks and bonds to Wall Street, in return for cash that banks like JPMorgan then invest. If the trades do well, the bank takes a cut of the profits. If the trades do poorly, the funds absorb all of the losses.
The strategy is called securities lending, a practice that is thriving even though some investments linked to it were virtually wiped out during the financial panic of 2008. These trades were supposed to be safe enough to make a little extra money at little risk.
JPMorgan customers, including public or corporate pension funds of I.B.M., New York State and the American Federation of Television and Radio Artists, ended up owing JPMorgan more than $500 million to cover the losses. But JPMorgan protected itself on some of these investments and kept millions of dollars in profit, before the trades went awry.
