Trust: Easy to Break, Hard to Repair | WSJ

Excellent interview of renowned short-seller Jim Chanos by Jason Zweig. Chanos list three reasons why the average investor is right not to trust the integrity of the financial markets…

First, in recent years financial fraud has rarely been detected and exposed by the people the public might reasonably expect to do so: accountants, regulators and law-enforcement authorities, whom Chanos calls “the normal guardians of the marketplace.” Instead, frauds more often have been rooted out by whistleblowers, short-sellers and journalists.

Second, prosecutions of financial crimes are essential in the minds of investors, but are discretionary in the eyes of government officials….. the so-called too big to jail rationale.

Third, individual investors will never trust the market until these issues are addressed.

To me the list is too short.

Chanos fails to mention the revolving door between Washington and Wall Street where regulators frequently swap sides — working for government the one day and in high-paying jobs on Wall Street the next — and have one eye on their career path rather than focusing on their current job.

Fifth, the massive financial leverage that Wall Street has on Capitol Hill where Congressmen, dependent on fundraisers sponsored by Wall Street lobbyists, allow same lobbyists to write some of the legislation that passes through the house.

Read more at Trust: Easy to Break, Hard to Repair – Total Return – WSJ.