Untaming the Horse: Financial Regulation in America

Banks and financial institutions have been able "innovate" faster than the regulators. They have been able to capture regulators to their will. The history of these continued failures speak to the need for robust and proactive regulation. These are some of those stories. 

I.

There is a story in the days before the Federal Reserve about the panic of 1907. There was a run on a bank – the Knickerbocker trust. There was a worry that it would spread, as panics often did. Instead of letting the failure of one bank topple over the whole system, JP Morgan got a bunch of other bankers in the library of his personal headquarters at Madison Avenue. He wouldn’t let his peers, the lions of the turn of the century financial world, leave the building until they had pledged their own capital to the banks to stop the panic. Peace was restored.

There is another story in which there was another panic, this time with the stocks dropping and other banks failing, and Morgan’s son tried to do the same thing. The market kept dropping. More banks closed, Roosevelt was elected, and the depression lasted a decade until massive federal spending picked up with the beginning of US involvement in the second world war.

There is a third story, as the financial crisis came to a tipping point in the fall of 2008. Bernanke, Paulson, and Geithner gathered up the leading lights of the turn of the new century in a room. This room was at the headquarters of the New York Federal Reserve, an institution created in the shadow of the panic of 1907 and the fall of the Knickerbocker trust. This time, the leaders were government employees, working for the Federal Reserve or the Department of Treasury. They were being asked not to put up their own capital, but to accept capital from the government. Some bankers were reluctant, as accepting capital was a de facto admission that their banks were insolvent, or at the very least were having liquidity problems. No one wanted to admit that they were having problems or exposed to counterparties with their own issues. But ultimately, everyone did. They even changed the charter of a couple of the institutions so that they could formally accept money from the Federal Reserve because technically up to that point they weren’t even banks. So Goldman Sachs became a bank, that it could fall under the Fed’s preview and take the Fed’s money even though if you asked any at Goldman the crisis hadn’t touched them, they were not to blame, and their hands were clean, thank you very much. Even though it’s been a decade, it might be too soon to be bringing judgement on if this intervention worked or not. Will we be able to tell what’s next?

II.

Two statues sit outside of the headquarters of the Federal Trade Commission in Washington DC. In the gloriously neoclassical and overly didactic symbolism of the capitol, these statues show a man wresting a horse, both subjects with rippling stone muscles. It is called Man Controlling Trade and shows the mission of the FTC. But it can also be seen as a metaphor for all the regulators in Washington and New York. Capitalism is this wild horse, who can rampage but be put to product use. It is up to the functionaries to make sure that this raging horse is harnessed so that its capabilities are put to good use and it doesn’t rage about the countryside, putting people out of jobs and homes.

You see, Man Controlling Trade is at best an ideal. If our sculptors wanted to represent the actual relationship between the individual business and their regulators, it would not be a man wrestling with the stallion, but instead a person in constant pursuit of the stallion. One thing that capitalism is very good at is innovation. But innovation is not necessarily ultimately for the public good. It is innovative and it isn’t passive. It actively uses the levers under its control to avoid and subvert regulation. Often, there is not the separation between the man chasing the horse and the horse itself. They lose their antagonism and work together.

III.

More stories, more concrete. A woman was chairperson of the Commodity Futures Trading Commission. Her name is Brooksley E. Born. During the Clinton years she saw that derivatives could become a destructive force in the economy. So, she said that these instruments needed to be traded on exchanges. Their terms and their prices needed to be transparent so that the markets could work their magic. Pressure came from above from the banks and through other federal workers who should have been working for the benefit of American Citizens and for the functioning of the economy as a whole. Instead of being pro-market, they protected their specific friends in business. These are names you recognize: Alan Greenspan, and Treasury Secretaries Robert Rubin and Lawrence Summers. They ruined her career. And Brooksley Born was right, as we saw a decade later as these very instruments were key to bringing down the entire financial apparatus.

Alternately. Banks called Savings and Loans fight their regulators, to be allowed to offer higher interest rates on deposits because in part money market funds were offering higher interest rates as the 70s became the 80s. They took these deposits and started offering as many loans as possible. They needed to make the loans to get the money to pay their depositors. This works until there’s a local downturn. The oil market goes south in the 80s, so people can’t pay their loans so the S&L’s can’t pay their depositors. So many of these small banks go bankrupt that the federal insurance institution set up to ensure depositors didn’t lose too much money went bankrupt itself and had to be bailed out. This cost the federal government billions of dollars.

One more. Again, in the Clinton era. Citibank announces that it will buy Travelers group, which sells insurance and other financial products. The problem is that this merger is against the law. The Glass–Steagall Act was put in place after the last time the financial crisis brought all of society down. It explicitly kept separation between banks and investment banks so that banks would not speculate with depositor money. The idea was to keep banking boring and stuck at the 3-6-3 rule, where you borrow at 3%, lend at 6% and are out of the office by three o’clock. What was the reaction to this transaction? Did they disallow it, throw its architects in the stockade? Of course not. A compliant congress passed the Gramm-Leach-Bliley Act to make this combination legal after the fact. Then of course a decade later the economic system crashed again.

IV.

The story of regulation for the last century or so seems to be this cycle, where there is a crash and then rules and regulations are put into place, and then capital fights and evades the rules, setting up the next crash. They capture regulatory agencies and the hodgepodge of these agencies have trouble coordinating – banks and financial institutions are regulated by the Federal Reserve, the FTC, The Department of Justice, the SEC, The Department of Treasury, the old OTS, the OCC among others. Having this sort of spread of agencies means that there is the possibility of searching for the lightest touch, a form or regulatory arbitrage in setting your charter so the least active regulator is your regulator. This is also seen at the state level where so many banks are incorporated in Delaware or South Dakota because they have low taxes and low levels of expected consumer protection.   

What this leads to is what I was talking with about statue of the horse in that the regulator, if it is even interested in doing its job and not fully captured, is always working from behind. The political power of these big financial institutions cements themselves so that they become essential. To big to fail is not just a thing that happened, but the outcome of years of decisions concentrating that political and financial power.  The next crisis is already brewing, but even if someone is sounding the alarm right now, the regulators will be asleep at the wheel. Because the problem is the cycle of crash then regulate then remove the regulations has been accelerated under the Trump Administration so we might just be hard up against the next crash. What will cause it? 

Against Scale in Banking: The Problem with the WalMart Effect

One of the problems with the financial system leading up to the crisis was not just the interconnectedness of the system, but also the scale of the system. The lead to an inversion of the saying that if you owe a thousand dollars to the bank, you have a problem – but if you owe a million dollars to the bank, the bank has a problem. This turned to the banks owing each other billions of dollars, and being not just dominoes, but huge dominoes that needed to be propped up. One proposal to fix this was to broaden who could open banks, with companies like Walmart trying to open branches, but the problem would be a different one of scale, but on the customer-facing side. You get economies of scale, but at a cost.

If Walmart opened a bank, it would be like the effect Walmart had on other small-town service providers. They would be able to use their scale to be able to undercut existing community banks. They could offer lower rates on loans and higher rates on savings, with the offer of branches in multiple places. Overall, this would be good for individual consumers in that they would save a marginal amount of money or be able to make a little bit more. That’s in theory. I’m not sure how much more already existing mega-banks use their scale to act as a financial supermarket. I am a Chase customer because I was a WaMu customer and everything got passed to Chase a decade ago and switching costs are just a high enough hurdle I haven’t bothered switching to a Credit Union like I know I should.

Photo by Fancycrave.com from Pexels

I have checking, savings, and a credit card with Chase, and the rates really aren’t competitive. Even after the Fed has been raising rates for a while, the rate on the savings account is essentially at a zero rate, while for some reason the rate I would have to pay on borrowed money has increased in lockstep automatically with every rate raise. It will take a minute to follow the Fed down though. I also have a credit card and savings account with Discover. The benefit of Discover is that they don’t maintain branches, so there is less overhear. And I see that in their offerings, so though the savings account pays less than treasuries, it is close, and the ease of transactions justifies that spread. 

The problem with a Walmart bank would be if the competition with community banks led to the closure of community banks, because what Community banks do in a way that Walmart would have no incentive to do is invest in the community. Where I live, the First National Bank of Brookfield is helping the Library’s new capital project with a three-million-dollar unsecured loan with a good rate. None of the larger national banks would do this, but the Library Director and Board have a good relationship with the President of the bank, and they made a deal. What Walmart has been shown to do is destroy capacity in the towns that they open in, closing smaller shops and making them the only option for whatever service they offer. This is not to love too much on mom and pop stores. They often can be worse employers than Walmart since as small shops they aren’t subject to the same sort of labor laws that Walmart is subject to. However, most people would rather live in a vibrant community with many providers of goods and services than live in a town with a Walmart just outside of city limits with a Main Street fully of empty shops and boarded up windows.   

Only One Domino Needed to Fall: The Interconnectedness of the Financial System

One of the fun things about the financial crisis was getting to see how interconnected everything was. Bear Stearns had to be saved because it had so many counterparties, though it was a smaller investment bank. Lehman should have been saved under the same sort of criteria, but the Fed didn’t step in and let it go bankrupt. What that meant was that even though the collapse had been going in slow motion from the summer of 2007, with Bear going under in the spring, unless you were really paying attention the financial crisis didn’t really start until mid-September.

The interconnectedness is because debt doesn’t exist in a vacuum. You borrow money, yes, but you borrow it from someone. That means that the debt you owe is sitting on someone else’s books as an asset of theirs. As long as you are making payments on that debt, the people you owe money to are receiving a revenue stream and it is working as anticipated. The problem starts when the debtor cannot make those payments anymore. Not only is the borrowing institution in trouble, as well as their capital holders and depositors, but so is anyone that has lent money to that institution. Bad debt can be passed on so that the lender who stops receiving their payments on the assets they hold, in turn can be seen as risky in whatever debt they hold. The more linkages like this, the worry stops being about the individual institutions but the system as a whole.

This is why back in there was a vocal and passionate minority of people who just wanted to see everything crash, echoing Mellon’s supposed words to “liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. Purge the rottenness out of the system.” The problem is that everything would have failed, creating real human costs – and no politician facing reelection anytime soon wants to see real human costs for people in their districts. As amazing at it seems, this meant that the response was to reward institutions and the people who ran those institutions that had gambled with the stability of the system by recapitalizing those very institutions. In one of the most egregious instances, we can look at the insurance company, AIG. One small arm of AIG, their financial products division run by Joseph Cassano sold credit default swaps to everyone. All the people who bought these as insurance products against default, went on with their business thinking they were protected. Alas, Cassano and company were not holding enough capital to pay off these instruments. They were taking the revenue stream people were paying and letting it go to the bottom line, but not holding a buffer. Like so much in the run up to the crisis, it didn’t matter if you were lying to your counterparties or our auditors or your regulators, as long as you were making money. But then asset prices start to fall, and these linkages start to really matter. Institutions that thought they were insured were not insured, and AIG finds themselves being insolvent because of this one division. What’s the regulatory response? Do you shut down AIG, send Cassano to jail for fraud? No! You bail out the company, essentially nationalize it, and then you don’t bat an eye when they pay out six figure performance bonuses six months later. Of course, it was a bad choice, but at the time it was a version of the least bad choice. Then you step back and then make regulation to try to make sure that the next time will be different.

The Consumer Financial Protection Bureau was Built to Look Out For You

After the financial crisis, one of the complaints was that often ordinary consumers were not savvy enough to know what they were buying in terms financial products. Economic theory assumes that both parties in an economic transaction have full and complete knowledge, but in terms of getting a credit card, or getting a mortgage, what happens in reality is an gross information asymmetry in terms of the financial institution having much more knowledge of what they are offering than what the consumer knows. This is, in part, what we can point to as a cause of the financial crisis. The adjustable rate arms resetting on people who didn’t know that the rate would pop like it did, doubling the monthly payments and driving that loan into default – but the originator didn’t care if they weren’t holding that loan on their books anymore.

So, it was situations like this that led the Harvard Law Professor, now Senator and presidential candidate to say, “There ought to be a law”. Her proposal for a regulator facing consumer to institution transactions helped lower that informational asymmetry. One of these initiatives is in implementing the Credit Card Accountability, Responsibility and Disclosure Act Of 2009. This law was put into place to eliminate abusive lending practices and let consumers know the cost of fees and penalties. Specific parts of the legislation include information about how long it will take to pay off a balance at a minimum payment rate, limiting marketing towards college students, and helps limit interest rate hikes.

Photo by rawpixel.com from Pexels

Personally, I try to limit holding a balance on credit cards, but this might have helped me when I was younger. I first signed up for a card so I could get a basketball hoop on my dorm. I spend and didn’t always pay off the balance, and I missed deadlines, so my interest rate was almost 30% annualized on a balance that was near the limit. I had to keep paying more than the limit to keep the interest rate from adding to the principal, which would take me over the limit and incur more fees.

There are critics that say that the CARD act didn’t go far enough in limiting deceptive practices, but if they couldn’t get the full wish list passed in 2009, there’s no chance of getting more robust consumer facing regulations passed in today’s regulatory environment. Just one example of how large financial institutions exercise their power over consumers. Just a couple of weeks ago, I received an email about changes to my user agreement with Chase, in that by continuing to use my Chase Card, I implicitly accept. In this agreement, buried deep, was a notice that one of the terms changings was an acceptance to join in mandatory arbitration if I had any disagreement. The banks write into your contract the right to sue them being removed. And the only way to opt out of this part of the agreement is to write a letter to the bank by a certain time. I want to do it, but even though I think of myself as a savvy consumer and I don’t like those terms, I most likely will not remember to sit down and write a letter to the bank and then mail it in. (And I worry about them not receiving it. Do I need to send it certified mail?). So even though we have an institution newly in place, the banks and other financial institutions are doing their best to circumvent the regulations and the regulators. This, of course, is being aided and abetted by the people in charge at a higher level, where the ideology is that government can only do bad things, and corporations are always acting in the best interest of society by maximizing shareholder value. 

A Diseased Heart Still Pumps Blood: Securities Markets in the Economy

Over the past week, I have been thinking about the role of the securities markets in an economy. Overall, I am of two minds when I think of the securities market. The predominate one, the animalistic firing in my amygdala is that we should be fearful of the securities markets. You see, for someone of my age and upbringing, for the most part my entire life was one where the economy was mostly working. I was born in 1981, so I don’t remember the downturn associated with the inflation and the Volcker shock. I vaguely remember the recession of the early 90s that helped put Clinton in and secured the third way liberalism of Clinton and Blair. There was 9/11 and the tech bubble bursting with Enron and WorldCom and Tyco being exposed as cheats, but Bush came in, and gave everyone tax cuts and the economy recovered.

The economy worked in such a way that I didn’t have to think about it or even be curious about how well it worked. It worked so well that I had the confidence with all my intellectual gifts that I would be safe in majoring in English with a creative writing component without really worrying about what kind of job would be available on the back end.

What I didn’t know, as I was in college and then in grad school was that there was something going on in the securities markets. The stock market was growing, and housing prices were going up. If you have American cable 15 year ago, you couldn’t avoid televisions shows about house flippers extolling the get rich quick properties of property. Incidentally, this retrospective thought triggered “Mihelic’s First Rule of Finance” in that if a television commercial exists for a product, you are the one getting scammed. Gold, Reverse Mortgages, Quicken Loans? All there to take your money at a rate above what a savvy investor would be able to do if they weren’t relying on television commercials. What was going on that housing prices were not just rising. They were being pulled up by the creation of demand for loans. The loans were sliced up into securities and sold onto other investors, and maybe this process was done again and again. You also had companies like AIG Financial Products writing credit swaps on the loan derivatives that they did not have the capital to back up. So, this demand drove banks and other originators to lower their credit standards so that they were offering loans to people with poor credit and no jobs and no way to pay the loans. They sold loans that were negative amortization loans, meaning that the monthly payment did not cover how much was added to the loan in interest so that the amount outstanding on the loan grew every month even if people were staying current. They sold these loans at high rates and with teaser rates that were going to reset, and they sold these loans to people who could have qualified for better rates but got a horrible deal because they were in traditionally underserved communities. While this was going on there was lax underwriting and undocumented transfers on the chain of title of loans and property. And none of it mattered as long as house prices were appreciating.

But it did matter when the house prices stopped appreciating. Everything blew up, and to mix my metaphors, Chuck Prince of Citi famously justified all of it by saying that “As long as the music is playing you have to get up and dance,” but then the music stopped and we saw who was wearing no clothes. None of this would have mattered if, like the tech bubble, it was just a handful of people on Wall Street and Sand Hill Road that lost money, but because they were pulling from the real economy, when the music stopped people lost their homes, people lost their jobs, and the government felt that the best way, the only way to intervene was to recapitalize the banks and financial institutions that created the mess in the first place. It is no surprise that this led to populists reactions on the right and the left from the Occupy Movement to Tea Party candidates in congress and the political rise of Bernie Sanders and Donald Trump. Something was fundamentally broken in a way that was not evident for the whole of the Great Moderation. And I know this because I was affected by the wave that washed over the economy. I was unemployed for two years and sent out thousands of job applications and ended up with only a handful of interviews as I read everything I could to try to figure out what happened. So that means that the lizard brain part of me thinks of the securities market what I want to do is burn the whole thing down.

However, there is a more analytical part of me. Once the signal from the amygdala clears, then the frontal lobe gets its say. Securities markets, like all institutions, exist because at their founding they filled a niche that needed to be filled. I think of the origin story of Wall Street, how dealers met at in the shade of the buttonwood tree on Wall Street to clear transactions. It was easier to have one central place to meet instead of having young boys just running through the city all day. New York was not even a city as we think of what a city is now. The tallest building was a church and most of uptown was still farmland, yet there needed to a central place to trade shares in businesses.

Securities markets do have two key roles in the economy. The first is that they provide liquidity and working capital. A business can offer shares for sale or bonds and then they get an infusion of cash. This cash can be invested in productive activities in the real economy instead of the business waiting for investable cash through business activities. The business does give up some right to future cash flow in terms of what the bond’s coupon is, or what the expected dividends are, but this offering is like a bank in that liquidity is key because sometimes you have a good business but it is cash limited. The other important role is in both the primary market when a business sells on securities and in the secondary market when securities owners buy and sell existing shares or bonds, is that the market is a continual process in finding prices for existing businesses, and in the aggregate it becomes a way for everyone to know what the right price is for these securities. The price discovery mechanism makes it easy to invest in public, security offering companies, distributing ownership to anyone who can buy a share and potentially democratizing the economy.

The problem is that at some point from a nascent institution coming into being to fill a niche, as it grows and evolves to meet the needs of the environment it is in, it can move from being a useful part of the economy to being a drag on the economy itself. In addition to this, path dependency means that something like the securities market insinuates itself in parts of the economy where it is a net harm but where it is impossible to create policy that just rolls back the clock to whatever imaginary point where it crossed the line. So, as much as I still want to blow up the whole thing, I realize that there are problems with ripping out the institution root and branch because it does have a productive purpose to play as long as we have capitalistic social relations. Ultimately, the securities market in the economy is like a diseased heart in an individual. It may kill the person one day, but up until then it still pumps blood.

Ultimately, can the market be beat?

And if someone can beat the market, how do you find the people you entrust your money to. I think it is John Bogle, the founder of Vanguard, who liked to talk about a coin flipping competition. If you have thousands of people who are all flipping coins, statistically, you will find people who have amazing streaks. If someone flipped a coin that landed heads thirty times straight, we might then assume that that person has a great aptitude for flipping coins. But we know that in coin flipping, this is a completely random chance of happening, and will happen if there are enough instances of flipping. 

Photo by Lukas from Pexels

But when it comes to stock picking, we move from the idea that the stock was picked at random and instead had a group of skilled analysts behind it. Then we start to build a narrative and say that we can look at the history of some “Firm X” and then judge if their return less fees beats a benchmark consistently. If so, maybe we can say they have their skills and I should trust them with my money. The thing is, there is always that disclaimer that past performance is not indicative of future success, so even if they are good stock pickers (coin flippers) their run might end. If the market is truly random, it will end.

I think that the financial research shows that there are factors that are often undervalued, and for times, investing in these factors – momentum, company size, P/E ratios, etc. – can have a return that is greater than the overall market. The problem is that these factors are not everywhere and always relevant. Sometimes they are in effect and you can make money above the market, and sometimes you can lose relative to an index. I’m skeptical that anyone can beat the market consistently, but I don’t think it is truly efficient (so if you see a hundred-dollar bill on the ground, it makes sense to pick it up). I’m not sure the discipline is convinced on if the EMH exists and if it does just how strong it is, to the point that Thaler and Fama won their Nobles in the same year when they were largely notable for having competing theories of how markets work. For me, I think it is somewhat efficient, but I personally don’t have the skills or time to spend on watching the day to day movements of financial markets, so I do have my retirement in broad-based index funds with low fees. 

The Government's Gold Pile

For some reason the gold in Fort Knox gets trapped in some mythical idea of a hoard.

The gold there is held under the US Mint, which is part of the treasury, an executive branch office. It seems that it was accumulated in the mints for coinage, but the gold at Fort Knox is there just to be stored. This goes back to when the dollar was backed by gold, and theoretically you could exchange a dollar for an equivalent amount of gold. There were increasing limits on this, from Roosevelt making it only so that sovereigns could trade in their dollars, to the point where there were no more trade-ins after Nixon decided to close the gold window. The US does hold gold elsewhere – but at the mint cities of New York and West Point, and there is a vault under the Federal Reserve office in New York City where countries keep their accounts. 

With the current free-floating currency, holding onto a hoard of gold most likely involves costs that are not necessary since the currency is not backed by gold. I can’t think of a good reason that we should hold it, but I can think of two reasons that probably inhibits the selling of the Knoxian gold. First, if the US government started unloading that much gold, it would be a sudden glut of supply in the gold market, so people who are involved in the gold market and have their own little hoards most likely would not like to see the price of gold driven down, as one thing that gives gold its value is its relatively rarity. The other reason that we most likely don’t sell off the hoard is that there is a very vocal minority who want to move back to the gold standard so that there is something backing the currency other than the full faith and credit of the US government. These people would be loud voices against any selling off the gold at Fort Knox.

AAA Dilemma: What if the Ratings Agencies Disappeared?

In general, there’s a conflict with the ratings agencies because they are a bit of a proxy regulator, given power through the federal government to rate bonds and other financial instruments, and so many other bodies can’t invest their money in a financial instrument unless it has a certain rating from certain ratings agencies. Moody’s, S&P, and to a lesser extent Fitch have a stranglehold on the system because they’re written into law and there are high barriers to entry to starting a new rating agency. Anyways, there is the conflict because they exist in a market, but the companies that they rate pay them. 

Photo by energepic.com from Pexels

So there is this question about how independent the ratings are, since if they don’t get the rating, they like from one agency, they can just walk down the street to another. And then there is the prestige issue, where the people packaging financial instruments have more power because they work at Goldman and make multiples of what someone at a ratings agency does. Overall, I think this relationship had a big effect in the run up to the financial crisis because the CDOs were being rated AAA for even their riskiest tranches because there was a fundamental lack of underwriting going on and the ratings agencies were not ready to push back against these banks to say that you’re selling people trash that will blow up. Of course being real close to the day to day activity, you really don’t have the perspective to say that this will be one of the things that makes the whole house of cards fall down, but at least you can say that the credit on these mortgages is too bad, and you’re not taking in account correlation risks, and there is a chance that house prices may go down. The riskiest 5% of these are not as good as treasuries.

Thinking if the ratings agencies went away for some reason, the first thought is to say good riddance. But the second thought is that there is a lack of information in the marketplace by not having these quasi-independent bodies, overall it would drive up costs in the market and make borrowing more expensive for everyone. What it would more likely would do is make a mirror of the equity market. The larger companies would get independent research done, so Disney and US Steel could issue bonds, but for smaller and less liquid offerings, that is where costs would go up the most – bifurcation the market so that the rich got richer. Hopefully the state would step in to offer truly independent ratings until that agency got captured.

The Market: A Positive Sum Game

When financial markets channel funds from savers to investors, who benefits?

The simple answer to that question is that everyone benefits when financial markets channel funds from savers to investors. The saver, who might have very few options about where to put her money – in the book the author jokes about putting it under the mattress – with a functioning financial system can achieve greater return on her money. The investor wins because they now have capital. Having an idea to make or do something novel to fill a niche in a marketplace is worthless unless you have capital to invest. With a healthy financial market, you can go and get funds to facilitate your new idea that helps you undercut the local taxi market or local hotel market. Your idea can come to fruition when previously you had top hope to be individually wealthy or have the right connections.

Photo by Lorenzo from Pexels

 But there’s more! By facilitating that transaction, where the savers and the borrowers benefit, it is not isolated to those parties. Society benefits, as there is now the thing that was not existing in our alternate world without good financial markets. You have Uber instead of calling a cab and hoping that their credit card machine isn’t “broken”, and they are ok with driving you to your neighborhood at that time of night.

And then, for their efforts, the financial market makers get a nice little sliver of the action to reward them for their coordination efforts. Just a little though.