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Donkin's World: Rotten to the Core?

...We should accept that there has always been something roguish about a system that allows its market to be run as a race-course betting operation...

Author and journalist Richard Donkin comments on unscrupulous stock market traders who spread rumours to force down the price of a partcular share.

Do please visit Richard's well-stocked Web site

Details of his book Blood, Sweat and Tears which is acclaimed world-wide can be found here http://www.amazon.co.uk/Blood-Sweat-Tears-Evolution-Work/dp/1587990768/ref=sr_1_2?ie=UTF8&s=books&qid=1214554429&sr=1-2

For two days now I have been reading of the damaging speculation that has hit the UK's high street banks such as HBOS. The bank saw 17 per cent knocked off its share price due to rumour mongering explicitly designed to drive down the share price so that traders shorting the stocks could make a killing.

One hedge fund is believed to have made 100m on such trades in a single day. Such market manipulation is illegal but will anyone be convicted down the line? I very much doubt it.

This kind of trade today is international. What hope does the Financial Services Authority have of collaring a so-called "rogue trader" in Singapore, where some of the manipulation is alleged to have taken place? Precious little is the answer, but you are unlikely to hear that from anyone among the regulators.

Some have described this kind of manipulation as a "modern day bank robbery" but you don't get treated like Ronnie Biggs http://en.wikipedia.org/wiki/Ronnie_Biggs when you wear sharp suits and work in a City trading room.

Indeed there are some former City crooks - such as Ernest Saunders http://en.wikipedia.org/wiki/Ernest_Saunders - who have never accepted that what they did was in any way illegal. Saunders, you may remember, made medical history when he recovered completely from the debilitating effects of pre-senile dementia, a condition that secured his early release from prison. Not since the New Testament has anyone made such a Lazarus-like recovery.

Such is the City's willingness to look after its own that Saunders was able to find consulting work, once his mind had recovered its former sharpness.

So don't be fooled by the "bank robber" headlines. They are designed to shock the ordinary mortals who have building society deposits, not to put the slightest fear in to the hedge fund manipulators.

While we might talk of rogue traders, as if these people are in a minority, we should accept that there has always been something roguish about a system that allows its market to be run as a race-course betting operation.

Yes, something needs to be done. But that's what is always said after every financial crisis and every downturn when the worms are shaken out of the rotten apples. But the gamblers, the manipulators and the rogues will always find a way to beat the system.

The reality is that these people are ever present and in the good times they are tolerated, indeed they are highly rewarded. If you don't believe me, just read the Alex cartoon http://www.alexcartoon.com/ every day in the Daily Telegraph which is never short of material for its cynical representation of the City. The point is that we laugh with Alex. Only today it doesn't seem so funny.


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