Beware; The Grasso Stare

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[Policing Wall Street]

To understand the mess Wall Street and the U.S. economy is in today we have to know some of the greed and ego-driven nonsense that went down.

Much has been made of the "Grasso stare," which Richard Grasso, Chairman of the New York Stock Exchange (NYSE), used—to express his disfavor with various specialists at the Exchange.  Charles Gasparino in his tome, “King of the Club”, writes of the toughness of Grasso's stare. 

Picture the scene. A 5-foot-3-inch man, even shorter than I am –and I am a short one— staring down people.  Who does he think he is; Helio Gracie, Ju Jitsu Master?

But the reason that Dick could get away with the “stare” was not because of his physical stature. Grasso wielded control, not only of the NYSE Board, but also of NYSE Regulatory.

Recall how the United Auto Workers successfully managed to organize General Motors in 1936 by having a sit down strike in the Flint, Michigan plant, which made the automobile dies for parts of Buicks, Pontiacs, and Oldsmobiles? Dick knew that he had only to control the Legal and Regulatory Departments of the NYSE to control the entire NYSE. 

Why? Legal and Regulatory enforced not only the NYSE rules and regulations, but also, because the NYSE was a self-regulated entity, the rules and regulations of the Securities Exchange Act of 1934.  Thus, by appointing Edward Kwalwasser, a lackluster SEC attorney, as Group Executive Vice President in charge of the Regulatory Group, Grasso knew that he could control the NYSE specialists with the implied threat of an investigation by Kwalwasser. 

Kwalwasser reported to Grasso; his lord and emperor.

Furthermore all member firms of the NYSE, and this included every major brokerage firm including Lehman Brothers, Citibank, Merrill Lynch, and Bear Stearns were regulated by the NYSE- and good ole Grasso controlled the regulation of these firms. 

Thus, if these major firms did not obey the wishes of the Emperor Grasso, he would merely mention their names to Kwalwasser and Kwalwasser would don his leather tunic and pants and investigate. 

Wasser means “water” in German, so Kwalwasser was a good German obeying the wishes of his Emperor.  Please note that Grasso and his friend, Kwalwasser, did such a good job of regulation that many of the firms that the NYSE regulated caused the financial meltdown:  Bear Stearns had to be taken over by J P Morgan-Chase; Bank of America had to take over Merrill Lynch; Citibank is essentially bankrupt; and Lehman Brothers is bankrupt. 

For this oversight and regulation Kwalwasser was paid $1.7 million in 2001 and received a retirement package of $10 million-as was reported in the press.

Every stock which is listed on the NYSE has a specialist.  Prior to and especially during the reign of  Emperor Grasso, specialists made huge sums of money; as much as $5 million per annum for processing orders and trading against these orders, because the specialist had a monopoly on the trading of a stock. In the time of Grasso’s reign, he never hesitated to make it known that he could have a specialist investigated and disciplined. This would affect the business of the specialist-such as the specialist not receiving any new listings.

SEC rules and regulations were violated every day by specialists at the NYSE.  According to the rules and regulations of the Securities Exchange Act of 1934, specialists are not permitted to trade for their own account. Specialists are supposed to step in and make markets when there is a dearth of bids and offers in a stock.  Yes; Gasparino's book refers to specialists as traders, but this is not true-like much of Gasparino's book.  Why?  Because no one from the NYSE would speak to Gasparino if he wrote the truth; just as the NYSE has refused to speak to me because I write the truth about the exchange.

At one time Grasso thought of leaving the executive corridors of the NYSE and becoming a specialist working for his good friend, William Johnston, a senior executive at LaBranche, one of the largest specialist firms on the NYSE.  As a specialist, he could earn $4 million per annum just for showing up at LaBranche. Why? Being a stock specialist at the NYSE does not require a particular talent-just a willingness to bend the rules.

Grasso became so powerful that he controlled not only the floor of the NYSE-but powerful firms, such as Bear Stearns, Merrill Lynch, Lehman Brothers and Citicorp.

Grasso overpaid himself- and no one dared to protest because Grasso would use the regulatory might of the NYSE to smite them. Those firms, blinded by their greed and with Grasso’s tacit approval, have led the world economy into near bankruptcy.

Grasso never cared about the financial ruin he had wrought. He received $190 million. 

There was even a story going around that Grasso could become Treasury Secretary at some point.

A regular Alexander Hamilton!

If any reader knows of verifiable Wall Street malfeasance should contact  or   

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