The American Dilemma and How We Can Fix It

 A salesman was returning from a long car trip and was driving on a mountainous two-lane road when he had a flat tire. He got out of his car, opened his trunk and pulled out the jack and the spare. As he looked up he saw a man standing at a tall fence. At the top of the fence was barbed wire and the sign, “Sunnyvale Sanitarium for the Insane.”

 The man began to change his tire, feeling a little eerie that this individual at the fence was watching him. He appeared to be one of the patients in the facility. He jacked up the car, removed the hubcap and loosened the four lug nuts holding his defective tire to the vehicle. He then put the lug nuts in the hubcap and began pulling the bad tire from the axle.

 In the process he accidentally knocked the hubcap and the lug nuts over the side of the mountain. He could see them falling perhaps two hundred feet or so – and because the descent was so steep – he realized that there was no way he would be able to retrieve them.

 He began cursing, wondering what he was going to do in order to get his car operational and get home.

 As he was going on about his situation, the man inside the fence spoke up.

You know there’s an auto repair company about six miles down the road,” he said. “If you take one nut off each of the other three tires you can use them to secure the fourth tire. Then if you drive slowly, you can go there and get four lug nuts and be on your way.”

 The salesman was struck by the fact that this solution had come from a man who was committed to a mental institution. He warmed up to this fellow and said,  “You know – maybe I’m the one who should be in there and you should be out here. How did you ever think of that?”

 To this the patient replied, “Just because you’re crazy doesn’t mean you have to be stupid.”

 In the late ’90’s I began a new career as a stock day-trader. The first year or so was torture. I had succeeded in finding a way to lose money on a consistent daily basis – and it was my money that I was losing. Had it not been for the fact that other traders in the office were making a healthy living, I would have quit. These successful people were an inspiration to me and the reason that I kept at it. I knew there was a way to becoming one of those success stories. I merely had to find it.

 Well about this time, a day-trader in the Atlanta office of another firm obviously had a worse day than I had ever experienced. He finished his day, went home and returned to the office with a gun and shot several of his fellow traders  dead. This horrible tragedy was immediately seized on by the media.

Any number of television stations began running special reports on the evils of day-trading. These reports featured people who had tried it and had failed. Story after story emerged about this person who had put up their life’s savings and had lost it or that person who just didn’t get it and complained that the firm through which they were trading didn’t provide enough training.

 I never saw any of the successful traders in my office in any of these interviews – but as we all know, bad new sells.

 Well the SEC took action. They decided to make sure that there was never a repeat of the Atlanta tragedy. They determined that all day-traders take the Series 7 exam. (It’s the one your stockbroker has to pass to allow him to deal with you as a client). So the firm I was with told us that we would have three months to pass the exam or we could no longer continue trading.

 By the way – the exam had absolutely no relevance whatever to day-trading (or psychiatric competency).

 I began investigating educational programs that were designed to help people pass this test – which I was told was extremely tough. Supposedly, only about 40% of the people achieved the passing grade of 70 on their first try.

 All of these programs cost between $500 – $1000 – money which I didn’t have. So I went to Barnes & Noble and found a volume in their reference section which was cleverly entitled, “The Series 7 Exam.” I purchased it for $20 and went home to start learning the material.

 I went through the book in a week, took all of the tests at the end of each chapter as well as the three “Sample Exams” which the book contained to prepare its readers for the six hour SEC exam. I was scoring in the mid-80’s but wasn’t sure that this exam accurately reflected the actual test with which I would be faced. So I went through the book again and scheduled myself for the test a week later.

 I arrived at the test site about 20 minutes before my appointment and signed in. There were four or five other people in the waiting room who were scheduled to take their tests. One of these was a young lady – probably in her mid-20’s – who was taking it for the third time. This did not instill a lot of confidence in me as I sat there.

 The young man with whom she was talking asked her, “What will you do if you don’t pass the test this time?”

She answered, “I’ll probably enroll in a cosmetology school. You can make really good money giving manicures.”

 I couldn’t help thinking that, for the sake of the investing public on whom she might be unleashed, cosmetology school might be the way to go.

 The receptionist called my name and took me to the cubicle where I was to start the first part of the test. She explained how to mark my answers on the computer screen, how to review my answers and how to record my answers. And so I began.

 I found myself at the last question of the first part of the test and realized I must have messed up – perhaps skipped some questions or something. Only an hour and ten minutes had gone by out of the three hours that had been allotted. So I looked at the bottom of the screen and found out that I had answered all 90 questions. And I hit the record button.

 I left, picked up my study book (which had been confiscated on my arrival) and went to lunch. Since I had over two hours to dine, I went to a nearby restaurant and pulled out my manual.

 Returning to the test center after my grilled cheese sandwich (one of my favorite comfort foods), I hunkered down for part two. I completed this in just about an hour.

At that point I was done. I now had a momentous decision to make. Should I review the answers I had entered or just push the finish button? I pushed the button.

 I scored a 94 on the exam.

 So I had now earned the right to continue what I was doing before – and to pay the Federal Government (the SEC) about $1000 a year in fees for the privilege of doing that.

 That’s okay. I believe that in a free economy there will always be people who try to take advantage of others.  I support the concept of  having informed and effective regulations and regulators to keep the public from harm. 

 But let’s look for a moment at the SEC as an example of the way government often operates. (I would have chosen the word “works” – but I believe that is inappropriate).

 Founded by the Securities & Exchange Acts of 1933 and 1934 – the SEC was designed to protect investors from unscrupulous manipulation of the movement in the prices of stocks.

 It’s first chairman was Joseph Kennedy (father of President John, and Senators Robert and Teddy). He was selected because he was one of the most egregious stock manipulators in the history of America. I presume that FDR’s theory in choosing him was that since Kennedy had figured out how to manipulate the system to his own advantage – he would easily be able to ferret out other crooks. 

Kennedy had a distinguished pedigree in skulduggery – having made his fortune as a “rum runner” during prohibition. How could you ask for a better candidate to oversee the regulation of America’s securities markets?

 Most of the SEC’s funding comes from the people whom they supervise – those “fat cats” on Wall Street. Fat cats like me who risked their own money on an every day basis to make a living.  And I didn’t have a problem donating my thousand bucks a year toward helping them achieve their goals of keeping the public safe from the unscrupulous.

 But I wonder, when you hear about a Bernie Maduff – who was reported to the SEC by an informant three years before the truth of his ponzi scheme was finally brought to light – and then only by self-admission not because of the SEC – I can’t help but wonder…

 Are the people at the SEC crazy – or just stupid?

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