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Lehrman Institute Chairman Lew Lehrman on the recent cyber attacks on U.S. banks and the need to restrict high speed trading.
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Week well joining me now Wall Street legend American historic lows -- chairman of alarm and institute former chair of the Reagan gold commission.
And it's great to have you here to be here in the first let's talk about these cyber attacks.
Apparently there -- some view.
-- in the banking industry that -- a little closer to being able to really do some damage than anyone had -- So for no damage lasting damage at all oh your parts -- -- Attacks in general and -- and not only industrial espionage pickings are American industry that is also been and you know on a full scale assault.
On.
The most important of our defense proprietary information so would that not since they've done a lot of attacks but are they trying to operate on that.
The equity exchanges with.
Especially designed algorithms in order to disrupt trading that might be another question.
Yeah and in -- -- on Wall Street is having quite enough success on its own thing Q and disrupting trading using those algorithms.
High frequency trading.
Are highly sophisticated.
A series or programmatic -- running out of nano seconds.
Last week 4% of the -- Estimated have been because of one algorithm.
Are carrying out false trades if you will going out.
They -- program on the idea.
On the market.
I mean this is getting stupid is it not.
Well -- the bill Wall Street the job in this.
Out program and you say is a euphemism for an attempt to manipulate equity markets and a particular way within vast amount of trading at -- very short period of time.
70% of the volume on these changes as -- as high frequency trading so they can be easily disguised in this massive.
-- market gained by high frequency trading.
It's a danger and the exchanges have got to do much more about curtailing it.
Yeah and I.
And I think we should be very clear with our audience year high frequency firms are often.
Associated with and our part all -- in fact.
They ownership of the exchange itself.
-- often in co location their servers with those of the exchange.
This is a nasty.
Nasty set of relationships.
That doesn't seem to be functioning as.
And and -- an exchange should in my opinion at least.
Your view.
Well it certainly is not arm's length anymore -- having a brokerage operation or an investment proprietary arrangement.
With in a commercial bank I mean there's simply no.
If you will golden door separating.
-- or barriers to.
You know -- operations so yes it should they be separated in some walled off way of course.
And the SEC.
You.
They did they act as if they don't even comprehend the reality of what is happening there carrying out an investigation I understand.
But -- Each of these firms has the ability upon subpoenaed to tell them exactly what's going on because they are the ones doing.
And apply and penalties -- they be fines.
Taxes.
Rules against this type of domination through high frequency trading of a particular set of security and I think in the particular occasion talking about maybe five as many as 500 securities and then just several seconds -- that is -- we examine how to deter.
The exactly in -- -- it's extraordinary pay in yet we hear nothing from Timothy Geithner.
We hear nothing.
Any real substance from the SEC.
If there was a time.
Word forgive me for being nostalgic when -- president had sufficient credibility.
And trust on the part of Wall Street that he could actually talk to the leaders of the exchanges.
At the firms and say.
Folks this is not the way we're gonna do business we're gonna do it this way and it's for -- and good.
In business and it's for our good as a country.
That's an impossibility.
Me and it's very similar to what you this suggested about the relation -- between the exchanges on the one hand.
And the high frequency trading firms on the other one of the problems with our federal government the Treasury Department the Federal Reserve System.
Is that.
They're so entangled with -- Wall Street with their sixteen primary dealers with all of the and an incredible -- -- -- you wouldn't call -- inside information in the way in which one talks about that which is a legal.
Which you can say that they're able to front run the Fed front run the treasury because -- accessed in the information far ahead of the public.
Perhaps not illegally gain but they get it.
Your sense of the market right now we're looking at projections of falloff in earnings from last year -- about.
Two and a half percent.
I was shall take us out of the lowest level since 2009.
That's creating some concern and anxiety in addition to the -- security that's created by high frequency trading and all the other uncertainties.
External to the market what what are your thoughts about the next.
The next few weeks and months well for what it's worth we have earnings down in our firm next year from more than just two or 3% as much as 10% 50%.
And -- -- come November this court this over this quarter earnings might -- just be if fraction of that down maybe 34% because the fourth quarter and -- economic growth should be consistent with.
The very last lackluster performance of the entire year maybe one and a half to 2%.
But next year could -- -- weakening further weakening further and off for production actually down the necessary capacity utilization.
Down.
Unemployment not improving.
As the Friday of a report might have suggested just in a one off a month a very -- and startling.
Report by.
The Labor Department in any event.
I don't our earnings down but -- GDP.
Output is flat.
And giving a false hope -- become places where your perch.
The river six -- into it.
We've worked speed now we need -- Romney rally that's what we really need.
Is always.
Our bipartisan -- of the Wall Street -- goods thank you so.
