The author describes a phenomenon called The Blob which is an indistinct but active shape made up of both regulators in government and those who lobby and seek to manipulate them, such as banks like Goldman Sachs. It is The Blob that decides how and when a regulation is made or broken and it communicates in BlobSpeak. The writer gives us examples.
The following article by Paul Vigna discusses how The Blob works and how it undermined (and undermines) the way democratic government should work. Here we have another explanation of why regulators are ineffective in investigating and prosecuting the CEOs and CFOs that caused the financial crisis of 2008.
'The Payoff": Wall Street Wins, Again
By Paul Vigna - The Wall Street Journal (MarketBeat)
. . . .
In August 2009, Sen. Kaufman wrote SEC Chairman Mary Schapiro to urge her to study how dramatic changes in the stock market in only a few years time had led to an explosive growth in computerized trading. The response was texbook “Blob”:
Ted’s letter to Chairman Schapiro helped draw the media’s attention to dark pools and HFT, which began to receive extensive (and concerned) coverage in the financial press. The letter also transformed Ted from a virtually unknown Senate newcomer into a brightly flashing blip on Wall Street’s radar screen.In response, Wall Street scrambled an entire air wing of bankers and lobbyists to buzz Capitol Hill. Soon, squadrons were swooping into our office, anxious to thwart new regulations following the financial crisis and, particularly, to prevent a crackdown on HFT. They were numerous (we typically met with five high-level Wall Street executives at a time) and unanimous. Whether a megabank, broker-dealer, or a hedge fund, they all said they believed that the stock market had never functioned better. “Competition has driven down the costs of trading,” said one. “The spread between a stock’s asking price and offer price has never been so narrow,” said another. “There’s always enough liquidity — even during times of market stress — to ensure that trades will almost certainly be executed,” said a third. The refrain “mom-and-pop investors have never had it so good” was intoned by nearly all of them.As a former lobbyist, I almost had to admire the way they unswervingly stayed on message.
Read the rest of the article hereThe pushback from Wall Street was intense and multi-pronged. The Blob oozed through the halls of government, seeking, through its glutinous embrace, to immobilize the legislative and regulatory apparatus, thereby preserving the status quo. The executive jets of the Wall Street air force flew sortie after sortie, transporting high-ranking emissaries from new York to Washington.
See the linked video here