Great job as always by Eric Byler, who when he’s not busy making movies like 9500 Liberty, helps create (with Annabel Park) “Real Virginians for Webb” and co-founds (also with Annabel Park) the Coffee Party Movement. Does this guy ever sleep? Lucky for us, the answer is “apparently not.” 🙂

P.S. For upcoming screenings of 9500 Liberty, click here.

“I think the market is cleansing itself…” That remark was made recently on CNBC by an apologist for the shenanigans and illegal acts that brought us the financial debacle now unfolding – a spokesman for those who insist that the “free market” can “regulate itself.

The comment totally discounts the disruption in the lives of millions caused by the collapse of the economy, suffering brought about by the rampant greed and manipulation of markets in this latest financial collapse. I wonder…is the market cleansing itself of flash trades…dark pools…unrelenting short selling…problems with derivatives? Can we trust firms like Goldman Sachs to pledge that, never again, will they peddle junk to the rest of us, while their insiders bet that very junk will fail? I don’t think so.

It’s actually in the best long-term interest of the stock market and Wall Street to be re-regulated. As it stands now, the majority of Americans are rightly convinced that the stock market is rigged, a place where insiders have gamed the system so that they alone are sure to win. Elimination of the practices that brought down the whole economy is vital. Without re-regulation, we are destined to repeat the debacle just endured. The very people who cause the problem are never the ones who pay for it. The rest of us are.

So, as the White House begins the arduous job of selling reform of Wall Street against the headwind of ever-present Republican obstructionism, it might pay for all of us to learn a bit about the insider’s gaming of the stock market? Let’s look behind the curtain and reveal some of the actions of the greedy Wall Street Wizards of Oz….

“Perfect information” is one of the theoretical preconditions of an efficient, perfectly competitive market. Economic theory also assumes that market participants act rationally. So, in order to have markets act according to what we were taught in Economics 101, all the market participants are assumed to have good information available. In practice, perfect information is never available in the real world, and some of the shenanigans being used on Wall Street insure that even good information is exactly what we “retail investors” do NOT have. Let’s look at some of them…

In “flash trading,” large financial companies gain access to stock trading information milliseconds before the same information is made available to the trading public. The traders then use superfast computers to trade ahead of pending buy and sell orders, thus gaining an unfair advantage on other traders.

Sen. Charles Schumer (D-NY) has called flash trading one of the things that has turned the stock market into “a two-tiered system” where a privileged group of insiders receives preferential treatment not available to the rest of the market.

A “dark pool” is the act of institutions trading large blocks of stocks over the counter among themselves, so that the public doesn’t see the transaction listed on one of the exchanges. Traders defend dark pools by saying that they avoid influencing a stock or a stock sector. However, the rest of the market is put at a disadvantage since it doesn’t have knowledge of what’s occurring.

Let’s use a specific example. Suppose an investment house or institutional investor decides that it wants to unload a large block of XYZ stock. Let’s assume the stock is selling at $100 per share.

Our seller knows that heavy selling will drive the price of XYZ shares down sharply. That would affect the XYZ shares it is keeping and perhaps other stocks. So, it offers the XYZ shares for sale in the dark pool of other institutions. Perhaps other institutions don’t want to pay $100 per share, so the best price it gets is $94 per share. The trade is executed in the dark pool, off the exchanges.  Here’s the problem for the rest of the market. The value of XYZ appears to be $100, but to large investors in the dark pool the price actually is $94. Anyone buying the stock on an exchange is probably paying more than he would pay in a sale if all the knowledge about XYZ were known.

Another trading tactic is “short selling,” a form of speculation  that is used by a trader to take a “negative position” in a company. The usual practice is for the trader (1) to “borrow” securities from another place, typically a bank or another broker (2), agreeing to return the securities at a future date. The original trader (1) then sells the shares to a third-party buyer (3), who takes full ownership and usually doesn’t have any knowledge of the short transaction. When the trader (1) wants to “unwind” his short position, he buys back equivalent shares in the market and returns them to the lender (2).

Trader (1) is betting that the stock will decline in value, in the hope that he will make a profit by repurchasing shares later when the price has lowered. Because trader (1) is generally required to make a deposit for the full share price with the lender (2), the action also provides the lender with interest on a position that he was not actively trading.

“Naked short selling” is the situation that exists when there is short selling without first arranging a borrow. In the past few years, a number of companies have been accused of using naked short selling to drive down share prices, sometimes with no intention of ever delivering the shares to a third party. Instead, a “fail to deliver” situation arises. This particular tactic is so dangerous to the validity of the market that the SEC banned it, but that action was taken only after Bear Sterns and Lehman Bros. failed.

There was a time when those who wanted to short a stock had to wait until the price of the stock showed an uptick to sell, but during the deregulation of Wall Street, that logical rule was dropped.

“Derivatives” are financial instruments whose value is determined by the price of something else. In other words, derivatives are bets on things, such as the price of a commodity going up or down in a set time. There are all sorts of derivatives with all sorts of names, like options, swaps, interest rate derivatives, etc. Many times businesses use derivatives to buy themselves a form of insurance.

Derivative trading can result in huge losses. In fact, AIG and the subsequent bailout of that company by the government was a result of AIG having mega losses because it had “insured” risky mortgages. Another example of just how dangerous such investments can be occurred in the 1994 debt crisis in Orange County CA. Republican county treasurer Robert Citron had made derivative investments that totaled over $1.5 billion. When the investments went bust, it caused the largest municipal bankruptcy in American history.

President Obama has said that he will veto any financial reform legislation that does not contain regulation of derivatives because of their ability to destroy vast amounts of wealth and to put whole segments of the economy at risk.

It seems to me that the Goldman Sachs – Paulson & Co. Abacus deal the SEC recently brought charges over was a combination of derivatives fraudulently marketed and short selling by those in the know. John Paulson joined Goldman in selecting a group of mortgages that they felt were destined to fail. Goldman then bundled them together and sold derivatives called collateralized debt obligations based on the mortgages to unsuspecting investors who had no knowledge of how bad the investment was. (That’s the alleged fraud.) Goldman and Paulson both then shorted the instruments and made a cool $1 billion each.

This nation needs strong regulation of the greed that permeates Wall Street. We’ll see if we actually get it. Right now, the Republicans in the Senate are saying they will stop efforts at reform. Perhaps that’s because the money from Wall Street is betting it can preserve the rigged game that is in play now.

1890  the birth of Adolph Hilter

1999  the shootings at Columbine High School

Either could be an occasion to look back – in horror or in sadness.

Instead I look ahead. To the words of a man born around this time – we do not know for sure when, only that he was baptized on April 26.

And for this day, one set of his words seems appropriate, at least in my mind:

When in disgrace with Fortune and men’s eyes,

I all alone beweep my outcast state,

And trouble deaf heaven with my bootless cries,

And look upon my self and curse my fate,

Wishing me like to one more rich in hope,

Featured like him, like him with friends possessed,

Desiring this man’s art, and that man’s scope,

With what I most enjoy contented least,

Yet in these thoughts my self almost despising,

Haply I think on thee, and then my state,

(Like to the lark at break of day arising

From sullen earth) sings hymns at heaven’s gate,

For thy sweet love remembered such wealth brings,

That then I scorn to change my state with kings.

The rest of this diary will be a meditation on this, one of my most cherished poems.

When in disgrace with Fortune and men’s eyes,

I all alone beweep my outcast state,

And trouble deaf heaven with my bootless cries,

And look upon my self and curse my fate,

I have, since early adolescence, been prone to depression.  I can be very much of a pessimist, seeing all my failures, and how the future may bring events that will dwarf even these.  It is easy to look back and weep at the mistakes I keep making, to find myself wondering why I should keep going.  When I was younger I had frequent thoughts of suicide, pondering the different methods of disposing of myself.  In early adulthood I often felt so alone I wondered that if I died in the small apartments or rented rooms in which I lived if anyone would even notice until my body began to stink.

Wishing me like to one more rich in hope,

Featured like him, like him with friends possessed,

Desiring this man’s art, and that man’s scope,

With what I most enjoy contented least,

I was jealous of others.  I was never all that popular.  I did not have a single date in my first two years of high school.   While later I might be able to start relationships, I could not sustain them.  Intuitively I knew that if I wanted friends I had to be a friend, but I did not seem to know how to accomplish that.  There were things at which I could excel, and there certainly were things I enjoyed but from which I fled, because they seemed to mark me as different, thereby increasing my sense of isolation.

Yet in these thoughts my self almost despising,

Haply I think on thee, and then my state,

(Like to the lark at break of day arising

From sullen earth) sings hymns at heaven’s gate,

I did seek a magic solution.  I imagined that I would encounter the one person, the one relationship, that would make everything perfect.  Sometimes when I lived in Brooklyn Heights I would take a cab from the upper East Side bars at which I spent too much time and money and have it drop me off on the Manhattan side of the Brooklyn Bridge and walk across, somehow imagining that in the hours well after midnight I would encounter that person and all would be well –  it was rare that I encountered anyone else walking.

And this seeking of a magic solution in one person was in large part why so many of my attempts at relationships failed.

But I said that I choose differently.  That is true today.  It became true decades ago.  I began to accept myself, in part because I allowed myself to feel vulnerable.

The last six lines of the poem could apply to my relationship with Leaves on the Current, begun on September 21, 1974, when she was 17 and I was 28, eventually leading to our marriage on December 29, 1985.  She is my best friend, my most trusted adviser, my truest love.  And the words would be true, but they would be an incomplete expression of my understanding of them.

Incomplete, not wrong.   Because without that relationship, her love, I would never have had the courage to completely change the direction of my life, to follow what my heart had often called me to, but which i feared doing, despite having enjoyed the occasions where I had tried it.  Without Leave, I would not have left a career that paid decently but left me unsatisfied, and become a teacher.

The four lines before the final two apply as well to my teaching – certainly in my writing about teaching my state sings hymns at heaven’s gate.

Many reading this know that I have been honored for my teaching by being my school system’s selectee for the Washington Post’s Agnes Meyer Outstanding Teaching Award.  As news of that has gone around people have gotten in touch with me to tell me how happy they are, to assure me it is well deserved.   Some have been parents of current and former students.  Some are student with whom I have had little contact since I last taught them.   Yesterday I receive emails from two students from years ago.  One I taught as an 8th grader in 1996-97, the other as a freshman my first year at Eleanor Roosevelt, in 1998-99.  Each message is brief.  Each is relevant to my meditation on this poem:

I don’t know if you remember me, but I’d like to wish you congratulations on your award.  I attended Kettering Middle School in 1996-1997 and remember fondly your history class.  I remember how you were always willing to be silly to prove a point.  Thanks to teachers like you students like me are inspired to become teachers ourselves.

You may not remember me, but I was a freshman in your LSN Government class for the 1998-1999 school year at Eleanor Roosevelt High School. I am now a 4th grade teacher at Perrywood Elementary School. When I was a student in your class, I enjoyed it immensely! I appreciated your humor and animated teaching style. Being as though history/government have never been my favorite subjects, I always regard your class as my favorite class and you as my favorite grade school teacher. I had a college professor who displayed very similar teaching styles to you at UMCP and because of this, I became his intern for 2 years. Teachers liks you are hard to find, but so easy to appreciate. I am thankful to have had the chance to enjoy your expertise and congratulations again on your recent award! You deserve it among many others! =)

Both young ladies now teach elementary school in our district.  I have to admit I cannot picture either one in my mind, although even if I could, I am sure as adult women they would appear very different.  I remember both names.  I could go to my old computer files and look up their grades, but that does not matter.  I do know that I was not especially close to either one, and this is the first contact with either since I taught them.  

Perhaps the expression of these two letters might not seem to connect with the final two lines of the poem, but for me they do.   Think of the latin caritas which is a caring for the best for the other person, as Paul uses it in 1st Corinthians, chapter 13, verse 13 (and coincidentally I am a triskadekaphile):  And now abideth faith, hope, charity, these three; but the greatest of these is charity

If you prefer, you can use the word love instead of charity and then perhaps my application of the final words of the sonnet will begin to make more sense.

Teaching is an exercise in faith –  that the young people entrusted to my care will have a future in which they can participate and from which they draw sustenance and in which they can be productive to the society in which they will find themselves, perhaps themselves helping to shape it in a fashion more conducive to love and warmth and leaving the world a better place.

Teaching depends on hope –  we as teachers can never know the full impact we have upon those in our care.  I know that I make mistakes, but hope that these are outweighed by my intentions and care for those before me, not merely that they may do well in my course, but that they may  from having experienced be richer in soul, more believing in their own potential, more willing to be giving of themselves, and perhaps somewhat forgiving to me for the errors I may have committed.

Charity or love –  teaching should be full of this.  I love the subject I teach because it gives me a window with which to connect with my students.  I loved teaching American History – as I did at Kettering Middle – because I could help my students make sense of it, see how it affected them, empower them to make new connections with their own world and lives.  Of greater importance, teaching must always include the care of the students before me, wanting to see possibilities for them, so that they can choose who they will be, what they will become.

We can look back at Hitler and see the horrors he inflicted upon the world.  As one of Jewish background born in the immediate aftermath of the great war he engendered, living as I did among some who had survived the Shoah of European Jewry, I can never forget nor be unaware at the signs of similar hatred and oppression, in other nations and in my own.   As a teacher I can look back 11 years to Littleton Colorado and remember that bullying among adolescents can have tragic consequences, that as a teacher I can not allow a single incident of bullying to go unchallenged.  

But I can also reflect upon Shakespeare’s Sonnet XXIX, the last two lines of which read

For thy sweet love remembered such wealth brings,

That then I scorn to change my state with kings.

Certainly I am enriched by my relationship with Leaves on the Current, approaching its 36th anniversary in September, bound for eternity on December 29, 1985.  Those words apply to her.

They also apply to all the students who pass through my care.  I am richer than any kind because I have the opportunity to affect lives.

And when I receive, out of the blue, communications such as the two I have quoted, I feel richer than Warren Buffett or Bill Gates.  I wish both men well, and hope they will use their riches wisely.

I am rich, I am honored, I am grateful, I am overwhelmed.  And if I begin again to look upon myself and curse my fate I can stop.  I can return to these messages, and similar ones I am receiving face to face from students currently in the building, from parents I encounter in a Starbucks or a Safeway, from my peers in the building – but of course, most of all always from the students, remember the final two lines of the sonnet, and find myself energized for another day, another year in the classroom.

So I choose differently on this day which could be tinged with sadness.  I choose faith, hope and charity.  And if Will will allow me, I borrow those final two lines of Sonnet XXIX and offer them to all my students, former, present and hopefully for a future with many years yet to come:

For thy sweet love remembered such wealth brings,

That then I scorn to change my state with kings.

Peace.