Faith in markets?

Last night, on the BBC program Business Matters, I argued that the Securities and Exchange Commission’s settlement of the insider-trading case with SAC Capital Advisors was just a slap on the wrist—a fine of $1.8 billion that still allows Steven A. Cohen to keep the bulk of his estimated $8-9 billion wealth.

But it was a necessary slap on the wrist in the sense that it was intended to restore faith in markets, not unlike the law establishing insider trading as a crime when the SEC was created back in 1934. Cleaning up financial markets then, five years into the First Great Depression, was designed to rebuild confidence not only in financial markets but in capitalism more generally.

And it worked—alongside the other programs of the first and second New Deals, and of course the recovery created by World War II.

But, I added, I’m not sure it’s enough now. Yes, the SEC is seeking to levy large fines (on Steven Cohen’s SAC and probably on Jamie Dimon’s JPMorgan Chase). However, the people who have been most affected by the financial meltdown—who lost their homes and jobs, and are struggling to put food on the table and send their kids to college—have every right to say, “Been there, done that. We’ve tried investigations, fines, and regulations before and look at the mess we’re in again, in the midst of the Second Great Depression.”

And so maybe, they’ll be singing along with The Who:

And I’ll get on my knees and pray
We don’t get fooled again
Don’t get fooled again