“Calling Wall Street to Account”
by Alan F Kay, PhD © 2011
In 1967 I started “AutEx” with a name that reflected the function of my Company. Automation would bring computerization to the financial industry way beyond an Exchange, a place where floor traders went face-to-face to complete a transaction.
Brokers, dealers, and other financial institutions subscribing to AutEx’s growing network of computers operated with high-speed telephone transmission lines, paid monthly fees to buy and sell each others financial instruments (stocks, bonds, etc.) in the comfort and convenience of working in their own offices throughout the US and elsewhere. My company, AutEx, provided a neutral electronic trading platform before there was an internet. It was in the black every month, expanded its customer base in the financial industry, and had no competitors. Customers were welcomed to offer helpful suggestions for the various services provided. I listened gratefully, enjoyed discussions, and explained everything customers wanted to know about how AutEx worked. Mike Bloomberg of Salomon Brothers wanted more detail on how AutEx worked than anyone else. With enormous financial backing wisely used, he successfully developed many useful financial services without competing against any AutEx services. Mike Bloomberg in time became a multi-billionaire.
I sold AutEx after 15 years of running the company, which later became part of Thomson-Reuters. After 1982, I had no further commitments to assist its new owners. Citibank had been a moderate investor at the start of AutEx and persuaded me to put together a new company called “On Line Markets – OLM” to help Citibank find large profitable acquisitions. In the two or three years with Citibank, OLM evaluated over a hundred potential acquisitions. Only those companies that Citibank judged were strong with annual revenue of over $100 million were seriously considered for acquisition. At that time I had no idea that large banks, by the rules of the Federal Reserve System, since 1913 created most of the money in circulation as loans. This form of private money-creation provides enormous profits for banks. Why did Citibank seek such multiple acquisitions of large companies? Citibank saw this strategy as a route to faster growth and did grow by trillions. Later, it received a multi-billion dollar bailout in the TARP while it unofficially still remained too big to fail! I had numerous discussions with the top people at Citibank who never verbalized but assumed that they and their shareholders expected even more profits. I did see one important thing while with OLM: Citibank’s customers, with very few exceptions, got no benefits or opportunities for sharing revenue. This is the model that Wall Street still favors today: not only are customers often short-changed, so too are investors and shareholders. The Dodd-Frank reforms of 2010 pushed the details onto the regulators – now besieged by thousands of well-paid Wall Street lobbyists.
In 1996 I was invited by the United Nations to make a presentation focusing on what I had done personally to make the world a better place. I dug into my records and found that in the intervening 31 years (’65-’96) I had grossed $12 million while dropping a total of $4 million in taxes, and distributing another $4 million to pro-bono and non-profit causes. I was thereby left with a net worth of $4 million at that time. Since then, I and my partner, Hazel Henderson have jointly financed the social enterprise, Ethical Markets Media (USA and Brazil) with Hazel still serving as its pro-bono CEO (see a case study in Earth Capitalism, foreword by Bill Gates, 2009).
Ethical Markets Media hosted a group of financial experts and philanthropists in 2010 that produced a Statement on TRANSFORMING FINANCE which has now been signed by 86 world experts. We invite additional signers at www.transformingfinance.net . In the Statement, we affirm that finance is a part of the global commons. We accuse the financial industry of mis-using public infrastructure provided by taxpayers, .i.e., the internet, communications satellites, global fiber optics, etc.
I now regret being the first to bring computers to Wall Street and creating the first trading platform on AutEx. This is part of the global electronic platform which the financial industry now mis-uses: cheating customers and investors, speculating on commodities, causing hunger and hardship to millions and indulging in front-running their customers through high-frequency trading. I am saddened that my introducing computerized trading on AutEx – all those years ago – has led to this monstrous misuse of markets and technology. Further financial meltdowns will surely occur if real reforms are not made. Since these markets are now interlinked in today’s global casino, regulations must now start at the G20 and be global.
Ethical Markets CEO, my co-author Hazel Henderson, and I have proposed financial transactions taxes since 1995. (See for example, the “Foreign Exchange Transaction Reporting System (FXTRS)” Futures, Elsevier Science, UK, 1996; “Curbing Financial Trading” CSRWire 2010). We co-founded the Global Commission to Fund the UN, and published its report The UN: Policy and Finance Alternatives, Elsevier, UK, 1995. Hazel’s most recent articles are now published by InterPress Service. Financial transaction taxes are supported by many heads of state, financial analysts, and NGOs (www.EthicalMarkets.com). Now is the time to enact a less than 1% financial transaction tax which will not harm investors but can discourage speculators and begin to curb high-frequency trading and other misuse of financial and commercial technologies. Best of all, it is the easiest tax to collect online and the best way for strapped governments who bailed out the big banks to restore some funds to their suffering taxpayers.
Alan F Kay, PhD, mathematics, Harvard (1951); director-emeritus of the World Security Institute; former board member of Green Seal; secretary-treasurer of Ethical Markets Media (USA and Brazil)