Majestic Research

St. Petersburg Times

Gekko's Back, but Don't Bank on Big Bucks

By Robert Trigaux
Published: March 05, 2007

It’s been 20 years since the Oliver Stone movie Wall Street introduced Main Street America to corporate takeover/insider trading character Gordon Gekko and his oft-remembered mantra: Greed is good.

Maybe it’s time for Wall Street II. Insider trading—illegal profiting in stock trades using information meant to be nonpublic—is back and being paraded in the news to a general audience.

Last Thursday, in the same week the Dow posted its worst performance in four years, federal authorities unveiled an insider trading scheme involving at least 14 people, major Wall Street firms UBS, Morgan Stanley, Bear Stearns and Bank of America, as well as three hedge funds, and at least $15-million in illicit profit.

Wait a minute: $15 measly million? Wasn’t that the size of last year’s bonus awarded to the cafeteria lady at Goldman Sachs? It’s just not the shocking sum it used to be.

The bloggers on Wall Street are hooting that part of this latest insider trading scheme transpired at the Oyster Bar restaurant in Manhattan’s Grand Central train station, as if such a humdrum rendezvous serves to show the feds could never even get a reservation at the types of elite spots where real insider trade talk happens.

My, how the giants of 1980s’ insider trading, from Ivan Boesky to Dennis Levine, must be savoring the news. See, lots of people do it. You just don’t catch them often. Enron ex-CFO Andy Fastow and lifestyle mogul Martha Stewart are among the few tagged for insider trading.

Let’s not get carried away with the insider trading parallels between ‘87 and ‘07. Last week’s nab by the feds seems legit, if not high-profile. Personally, I’m pleased to see occasional signs of regulatory policing. But the truth is, this one is startlingly small potatoes.

Many who closely cover Wall Street activity say the difference between profiting from “insider” trading and profiting from privileged information is whether the feds choose to make an example of you.

Last year, the New York Times studied 90 mergers and found 38 showed unusual trading patterns just before the announcement, when no other factors accounted for the activity.

Last month, the Securities and Exchange Commission said it was investigating whether major brokerage houses were tipping off hedge funds to the trades the brokers handle for mutual funds and other big clients.

A recent Fortune article suggests some Wall Streeters can see how the stock game is fixed. “Privileged information is the real currency that runs Wall Street,” Doug Atkin, the former CEO of Instinet and now the head of research boutique Majestic Research, told the magazine.

“With what the traders at the big firms know,” Atkin said, “my 11-year-old son could make tons of money.”

Hey, Wall Street used to run a lot cleaner. Back in Gordon Gekko’s day, somebody’s son had to be at least 14 before he was assured a ton of trading dough.