According to a Bloomberg report, one of the most voiceful critics of high-frequency trading (HFT) and one of the most famous World Bank economists who got fired, Joseph Stiglitz, has been excluded from a Securities and Exchange Commission (SEC) panel designed to advise the government about modern day issues affecting the US stock market.
The Nobel prize-winning economist and professor of economics at Columbia University stated in a phone interview with Bloomberg, “I think they may not have felt comfortable with somebody who was not in one way or another owned by the industry.”
Considering the statements made by Mr. Stiglitz in the aftermath of the global financial crisis from 2008, about the role of the government in steering the economy, the Republican backlash is hardly surprising.
Joseph Stiglitz and His Markets History
Mr. Stiglitz is notorious for claiming that free markets don’t work and proclaimed in the past, “One of the main lessons from the financial crisis is that the state must play a key role in sustaining economic development.”
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Making statements like the above can certainly make you unwelcome at pretty much any Republican hosted event – and let’s face it, with both the house and the senate now being Republican-led, they dictate the rules of the game.
However, we don’t buy the argument that the dismissal of Stiglitz from the SEC HFT panel is due to him having a voiceful stance on the issue. So do panel participants Brad Katsuyama and Republican Senator from Delaware Ted Kaufman, who also served as Chairperson of the Congressional Oversight Panel.
Conservatives Taking a Milder Approach
Mr. Katsuyama has devised a free market solution for those willing to avoid dealings with predatory HFT by working to create the alternative trading system, IEX, which is pursuing to become a fully regulated exchange.
Mr. Stiglitz will not be taken seriously by the conservatives in U.S. Congress after repeatedly advocating state intervention, when the same state was the main cause for the creation of a decades-long housing bubble thanks to government sponsored Fannie Mae and Freddie Mac.
For that matter, ill devised regulations were the main reason for the appearance of high-frequency trading, as exposed by Michael Lewis in his bestseller book ‘Flash Boys’ which came out in April last year and triggered a heated debate.