Wallace Turbeville

Wallace Turbeville is a former vice president of Goldman Sachs and a fellow at Demos.

Recent Articles

Brinksmanship and the Return of Financial Crisis

A government shutdown once again loomed, and familiar deadlines and ultimatums flew around Washington. And Congress just used the threat to loosen the rules created in the wake of the financial crisis, a victory for Wall Street banks in their constant and well-funded campaign against reform. The rules they have targeted are designed to reduce the risk of another financial meltdown, like the one that drove us into the Great Recession and could have been much worse. Though the repeal has been styled by some as a technical amendment, nothing could be farther from the truth. Think about the best way to decide legislative policy in the devilishly complex and risk-laden area of derivatives. These are the financial contracts that brought down AIG, the event that triggered the crisis. You might imagine careful deliberation and debate, leading to a thoughtful vote in Congress in which elected representatives must stand up and be counted so that they could be held responsible for a difficult...

Detroit Moves to the Next Phase

(AP Photo/Carlos Osorio, File)
The largest municipal bankruptcy in history has come to a close in Detroit after a year of proceedings, ending in a flurry of compromise. Yet there was plenty of conflict in the last year, far more than could have been predicted. In November 2013, Detroit became the largest city in the country to file for bankruptcy. When the proceedings started, the negotiation of the settlement—and that is really what the bankruptcy became—was a discussion between an emergency manager, from a law firm dedicated to the financial sector, and the financial sector. The people tried to get a seat at the table, but the emergency manager had a monopoly on the information and for the first four months of the process his was the only story available. The people were long on outrage and short on evidence. That all changed when the public became empowered to express its views based on data and analysis. Raw emotion and outrage was the most important factor, but engaging on the issues was essential...

The Shadow Derivatives Market Lives On

Flickr/Leader Pelosi
Tomorrow, the public interest will take a loss and the largest banks will chalk up a win. The shadow market for derivatives was a t the heart of the financial crisis. By far, the largest component of this market was the $60 trillion per year swaps market, with more than $700 trillion of swaps outstanding. Compare that with the 2012 U.S. GDP of about $15 trillion. These markets influence interest rates, currency values, credit costs, share values, and commodities, including food, fuel and precious and base metals. The shadow market was oligopolistic and became a goldmine for the big banks. Almost all swaps have a bank on one side. And the Office of the Comptroller of the currency has consistently found that four banks hold well over 90 percent of all derivatives. As would be expected in such a large oligopolistic market, bank profits have been staggering. Financier Bertrand de Pallieres has estimated that two-thirds of all trading revenues come from derivatives. This has syphoned...

Wall Street's Grand Bargain

Flickr/ White House
Three developments in finance cropped up in the last days that must be read as a single story. First , Blankfein, Dimon, and the rest of the Wall Street bigwigs visited the White House to meet with the president and his team. That team consisted of Denis McDonough (Chief of Staff); Valerie Jarrett (Senior Adviser); Cecilia Munoz (Domestic Policy Adviser); Gene Sperling (National Economic Council Director); and Alan Krueger, (Chairman, Council of Economic Advisers). The meeting was secret, but we can deduce much from its attendance. The White House appears to want Wall Street support in the policy/politics battles to come. This is not far fetched, especially coming on the heels of steak dinners served to Republican Senators earlier this week and the Obama budget that grabbed the “third rail” issue of Social Security. But every conversation has two sides. What did the power brokers of Wall Street want in return? High on the list is a roll back of financial reform. Industry...

Industry-Funded High-Frequency Trading Study Falls Short

I recently published an article in response to a study of high-frequency trading (“HFT”) by Professor Charles M. Jones of Columbia Business School and an opinion piece he published simultaneously in Politico . My article focused on the funding of the research by Citadel LLP, a major HFT user. It also pointed out broad concerns about the study, which asserts that computer-based algorithmic trading provides substantial net value to the economy. Keeping in mind the Professor Jones’ funding source, it is useful to look into the studies on which the professor relies (his independent work was limited to interpretation). These should be compared with other academic work that draws alternative conclusions. The studies that he cites as supportive are generally based on conventional views of the efficiency of markets. These studies identify lower trading costs that have been experienced during the years that HFT has emerged as a dominant force in the equities and commodities...