The laissez-faire approach to market regulation under President George W. Bush’s Securities and Exchange Commission led to the collapse of Bear Stearns, Lehman Brothers and AIG , Cramer said Thursday. The SEC also failed to catch convicted Ponzi schemer Bernie Madoff, which cost his investors billions and billions of dollars. The end result? An environment of immense anger and mistrust toward Wall Street.
But with President Barack Obama in office, the government’s watchful eye is once again focused on Wall Street. And the administration has an ally in the Senate, namely Democratic Senator Ted Kaufman of Delaware.
Kaufman has pushed for more scrutiny of electronic trading, including tougher rules on “naked access.” This is the practice where brokers that are licensed to operate on the exchanges charge their high-frequency trading clients for direct access to those exchanges. As The Wall Street Journal said, it’s like “members of an exclusive club charging others to use their pass.” And while it cuts down on the time needed to push through a transaction, the exchanges and regulators can’t determine who in fact is making the trade.
Beyond naked access, Kaufman has also taken up a crusade close to Cramer’s heart: the reinstatement of the uptick rule, which forces traders to wait for a stock’s price to tick up before they sell it short. The rule’s repeal under the second Bush administration allowed for the bear raids on banks that we saw during 2008, Cramer said.
Cramer called Kaufman “one of the smartest, most savvy legislators in Congress,” so it makes sense that he appear on Mad Money to discuss these issues. Aside of his Wharton M.B.A., the junior senator from Delaware served Vice President Joseph Biden in the Senate for 19 years as his chief of staff and was his closest advisor for 36 years. If regulation is needed to restore faith in the markets, then Kaufman will tell Cramer what to expect.
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