A letter I sent to Holman Jenkins, in response to Warren Buffett, Softie

While I cannot challenge your observation that our insider-trading law is screwed-up, I wish to quibble with your assertions that Mr. Sokol’s behavior did not wrong the public and that Mr. Rajaratnam’s alleged actions harmed no one.

If the American Empire is to dodge the fate of the Soviets (not to mention that of the Holy and unholy Romans, the Ottomans, the British, etc.), it will need to maintain the viability of the markets for its public-sector obligations and its private-sector obligations and equities.  Yes, every small, individual investor now knows that you have to be nuts to try to make a living by following Jim Cramer’s TV show or by otherwise trying to pick winning stocks rather than by buying indicies or funds, but that does not mean that our markets do not need to be clean.

Even the Big Boys do not all have equal access to inside information, and if midsize and largesize domestic and foreign institutions develop a perception that the game is rigged in favor of the Buffetts/Sokols and Rajs (not to mention the Goldmans and the US government), they, too, will lose their appetite for funding the US economy – just as they have done from time to time with other bigtime wannabies like post-Gorbachev Russia.  Meanwhile, I am personally offended by the fact that we have apparently grown a cottage industry of petty thieves into a Thing That Has Eaten Wall Street.

Granted, our governmental efforts at keeping our markets clean have been farcical.  (They remind me of the Woody Allen line:  the food in this restaurant is terrible, and such small portions!)  We virtually kill the golden goose with meaningless wallpaper like SarbOx and with Nader-inspired disclosure requirements that ultimately immunize the issuer rather than informing or protecting the investor, and then we allow critical issues, such as the legal question of whether Sokol and Raj are actually guilty of anything, to remain wrapped in such ambiguous laws and regulations that everything is punted to the judicial calendar.