If you have never heard the expression, "a fool and his money are soon parted," then boy do the Winklevoss twins have a golden investment opportunity for you.

The wealthy Winklevii, who famously battled Mark Zuckerberg over their contributions to the creation of Facebook, filed paperwork on Monday for an initial public offering of a new exchange-traded fund tracking the price of bitcoins, the unregulated digital currency. The filing says Tyler and Cameron Winklevoss, presumably out of the goodness of their hearts -- and for a small fee, of course -- will use the ETF to make investing in bitcoins easy and fun for the masses.

And it should make for a fantastic investment, if you don't really care about ever seeing your money again.

"It's an IQ test," wrote an anonymous blogger on the investment blog Macro Man. "Bitcoin is anonymous, untaxed (for now) and quite liquid in and of its own right despite all the complexities of a cryptocurrency. A bitcoin ETF is taxed, has fees, may or may not be liquid at all. So, this is really a test: do you want to facilitate the exit of the Winkelvii from an investment at inflated levels which they will soon be taxed upon or do you want to sit this hand out?"

Back in April, the Winklevii revealed that they owned about $10 million worth of bitcoins, or about 1 percent of all the bitcoin wealth in existence.

At the time, bitcoins were in the middle of a sickening crash, tumbling from an all-time peak of $266 per bitcoin to $105 in the course of one trading day. The price has stabilized in recent weeks, but has continued on its downward path, recently fetching about $90. (Story continues below chart, courtesy of BitcoinCharts.com.)

This wild price ride is just one of the many, many risks involved in buying an ETF tracking bitcoins. In fact, the section of the IPO paperwork discussing "risk factors" takes up 18 pages -- longer than the filing's 12-page description of what the heck bitcoins even are.

The unusual risks include the possibility that the ETF's bitcoins, which are just digits stored in a computer after all, could accidentally or on purpose be erased from existence forever. A hacker could possibly figure out how to defeat the ETF's security system. A hacker or evil robot could grab control of more than half the processing power on the Bitcoin Network, the global system for producing and distributing bitcoins, which might adversely impact your investment just a touch.

Various governments could also decide to more closely regulate or outlaw the use of bitcoins, which are attractive to money launderers who like the currency's anonymity. The top bitcoin exchange, Tokyo-based Mt. Gox, has, in separate episodes in recent months, temporarily shut down trading and blocked U.S. users from withdrawing their money. A Winklevoss IPO might help legitimize the currency, notes The New York Times, but it will not affect the currency's Wild-West flavor very much. (If this isn't enough, Quartz's Simone Foxman, Bloomberg View's Evan Soltas and Wonkblog's Timothy Lee have each taken a stab at listing the ETF's many risks.)

Of course, many of these are the same risks that anyone takes when buying bitcoins. And the process of buying bitcoins is a bit tedious and complicated, as New York magazine's Kevin Roose found out recently.

But if for some reason you feel you just have to get in on the bitcoin action, you must decide whether your intolerance for the tedium of buying bitcoins is worth the amount of money you will pay the Winklevii for handling that transaction for you.

Meanwhile, any ETF brings with it the risk that its value will not match the underlying value of the assets it holds, as many ETF investors have recently discovered to their horror.

And buying the ETF means you'll be taking on all the risks of bitcoin without some of the purported benefits of bitcoin, such as keeping your cash away from Uncle Sam and his black helicopters or whatever. In fact, you'll be paying taxes on any money you make in that ETF -- assuming you get very lucky and don't lose it all.

The collapse of Jon Corzine's brokerage firm MF Global has all the traits of your standard Wall Street scandal: Stupid things being admitted in panicked emails, wild risk-taking -- and absolutely nobody going to jail.

In the government case against MF Global, which went belly-up after dipping into customer money to pay creditors, there really seems to be little on which federal prosecutors can hang criminal charges. But a lack of charges will add to the government's sad track record of toothlessness since the financial crisis, and to the growing sense that personal accountability on Wall Street is rare.

A federal lawsuit details how the former major commodities brokerage got itself killed betting heavily on European sovereign debt. These bets were the handiwork of Jon Corzine, a former Democratic New Jersey governor and senator who was brought in to help restore the firm to profitability. Instead, the bets went bad in a hurry. Facing a cash crunch in October 2011, MF Global used some customer money for creditor payments, but quickly went bankrupt -- leaving more than $1 billion in customer money missing.

Even after the fiasco, a civil suit may be all the government can ever muster, the New York Times reported this week, citing anonymous law-enforcement sources. The Times' Ben Protess wrote:

After nearly two years of stitching together evidence, criminal investigators have concluded that porous risk controls at the firm, rather than fraud, allowed the customer money to disappear, according to the law enforcement officials with knowledge of the case.

To its credit, the Commodity Futures Trading Commission probably did the best it could to lay out an aggressive civil case against MF Global, former CEO Corzine and former executive Edith O'Brien. The now-defunct MF Global settled the suit immediately, promising never to be bad again and to pay $100 million in penalties if it has any cash left over after paying off creditors and customers.

Corzine and O'Brien are fighting the suit, which would have them give back their salaries and bonuses and pay penalties for their alleged sloppiness in overseeing $1 billion in customer money that went missing as the firm collapsed. The suit would also bar them from ever working on Wall Street again.

The question is whether the many, many dumb emails and recorded telephone calls presented as evidence in the CFTC's lawsuit demonstrate that either executive committed fraud. That is in the eye of the beholder.

Notre Dame law professor Jimmy Gurulé, a former Treasury official, said he thinks there could be enough to prove wire fraud and a conspiracy to commit fraud. Although MF Global apparently didn't intend to take money from clients, it did intend to borrow that money in a way that clients probably didn't expect: to keep itself alive.

"You could make the argument that there was a scheme to defraud the customers and to transfer their money for purposes they did not authorize, that they didn't consent to," Gurulé said.

On the other hand, the word "fraud" is never mentioned in the CFTC's complaint. An anonymous lawyer suggested to Reuters that there didn't seem to be much in the way of actual fraud in the case.

A spokeswoman for the U.S. Attorney's office in Manhattan declined to comment. Neither Corzine's attorney, Andrew Levander, nor O'Brien's attorney, Evan Barr, responded immediately to requests for comment. In a statement to the press on Thursday, Levander wrote, “After 20 months of thorough investigations by the Department of Justice, two bankruptcy trustees, and the CFTC, no evidence has been found that contradicts Mr. Corzine’s sworn testimony before Congress. Mr. Corzine did nothing wrong, and we look forward to vindicating him in court.”

The most damning evidence in the complaint against Corzine still seems too ambiguous as a hook for criminal charges. In this exchange in a recorded phone call printed in the legal complaint, Corzine seems to tell an employee to use client money to help the firm in a short-term borrowing market called the "tri-party repo" market:

Corzine: We have a money management account at Chase, if my memory serves me.

Employee # 1: Yeah, it's the JP Morgan Trust account, but that's cash seg for clients. It has nothing to do with greasing our wheels for Chase to move.

Corzine: I understand, but you put it in a tri-party, and then once the securities have started moving, then you move it back to the, um-- this is the same thing we did last night, they left it in the tri-party, the seg money.

This exchange will probably not win Corzine any awards for customer care, but it is possible that Corzine did not think he was suggesting doing anything illegal with client money.

There is also the not-small problem that using limited amounts of client money for trading in some instances was actually permitted under CFTC rules at the time all this was happening, believe it or not. MF Global had a firm-wide policy not to mingle the money, but abandoned its principles when the going got rough. That made it risky and sloppy -- but not criminal.

O'Brien, the chattiest MF Global official when it came to discussing questionable things in email and phone calls, probably has immunity from prosecution "for now," the NYT reported. In her many recorded conversations, the line between "dumb" and "fraudulent" is pretty blurry.

In one instance, O'Brien emails the Bank of New York that it is totally legitimate, from a regulatory standpoint, to shift some client money into an MF Global account. She doesn't loop anybody else at MF Global into the email exchange because, as she tells a colleague in a recorded phone call, "I don't want to take anyone down with me." Hardly confidence-inspiring -- but you could also see it as evidence there was no conspiracy to defraud anybody.

In another phone call from the complaint that will go down in dumb Wall Street communication infamy, O'Brien bemoans just how irretrievable some "borrowed" client money has become. In the following quote, "seg problem" refers to a problem with having too much client money sucked away from segregated client accounts:

O'BRIEN: It is a total clusterf*ck .... They have to move half a billion dollars out of BONY to pay me back .... Tell me how much money is coming in and I will make sure it gets posted. But if you don't tell me, then tomorrow morning I am going to have a seg problem .... I need the money back from the broker-dealer I already gave them. I can't afford a seg problem.

Again, this doesn't look great. But it also doesn't necessarily look criminal. It could just be that O'Brien is frazzled dealing with a legally approved practice gone wild.

Given these many ambiguities, proving fraud beyond a reasonable doubt -- the standard in a criminal case, higher than in a civil case -- might be too high a hurdle for prosecutors.

So the Justice Department may have legitimate reasons for not prosecuting in this case. The problem is that it has lost all credibility after giving a free pass to so many banks and bankers after the financial crisis and the Libor scandal. The involvement of the politically connected Corzine does not help matters, and cynicism and distrust of Main Street toward Wall Street and Washington will only grow.

Wall Street's top securities watchdog has made a big show of finally forcing wrongdoers to admit wrongdoing when settling fraud charges. But so far that's all the change looks to be: for show.

The Securities and Exchange Commission will take extra care, and its own sweet time, implementing the new policy, according to a report by The Wall Street Journal's Jean Eaglesham (subscription required). Though the SEC claims to be pulling together a "hit list" for its "landmark change" that "could start to bite within weeks," it also seems to be limiting its application of the new policy to small, nearly bankrupt firms that have little reason to fight back, the WSJ suggests.

The SEC also "hopes the first deal to include an admission of wrongdoing could come before Labor Day," Eaglesham writes. Here's hoping! But, hey, no rush.

It has only been SEC policy for several decades now that banks, hedge funds and other bad actors running afoul of securities regulations are allowed to settle charges against them without admitting or denying wrongdoing. The idea is that these perps would rather fight the agency in court for years than admit to evil deeds and open themselves up to criminal charges or private lawsuits. By letting them off the hook, the SEC avoids blowing its meager resources in court and gets money back to investors more quickly.

But the practice has created thunderheads of criticism and cognitive dissonance in recent years, with the too-big-to-fail set able to tiptoe away from the financial crisis with relatively small fines and no blemishes on its permanent record. In perhaps the most infamous case, Goldman Sachs admitted no wrongdoing in 2010 when it settled claims that it misled investors in building mortgage securities full of toxic junk hand-picked by hedge funds betting against the investors.

Citigroup cut a similar deal over toxic securities in 2011, but that was finally a settlement too far: It was brutally rejected by U.S. District Judge Jed Rakoff, who wrote, "An application of judicial power that does not rest on facts is worse than mindless, it is inherently dangerous."

The SEC's new policy, announced last week by new SEC chief Mary Jo White, is designed to quiet the critics who warn the agency is creating moral hazard by letting banks get away with financial murder with only minor fines.

But given all the constraints the SEC is reportedly putting on this new policy, that is all the shift seems designed to do: Quiet critics. It does not seem designed to actually address the problem of creating moral hazard. The biggest banks and hedge funds, which have too much to lose if they admit wrongdoing, will not just roll over as long as they know they can crush the SEC beneath the weight of their well-paid lawyers.

The SEC appears to know this, too. White has admitted already that her awesome new policy will be used sparingly, in only a few cases. Legal experts tell the WSJ that these cases will include only the most flagrant lawbreakers, along with companies that have one foot in bankruptcy already and don't much care who sues them. From this pool will likely come some handy scapegoats, but it looks like the status quo will not be disturbed.

In the days since Harvard economist Gregory Mankiw inflicted his paper, "Defending The One Percent," on the world, Paul Krugman and others have written thousands of words ripping the paper to shreds. But this can also be accomplished with just one chart.

Mankiw, a former top economic adviser to President George W. Bush and Republican presidential candidate Mitt Romney, makes many outrageous claims in his paper, including that the wealthiest Americans are simply more productive than everybody else and that their money-making smarts are genetically inherited -- so tough luck, Poors, you can't fight Mother Nature. New York Magazine's Jonathan Chait has a two-word retort to these arguments: Paris Hilton.

One less-ridiculous argument Mankiw makes is that the rich are richer because they are better educated and thus more highly skilled. The growth in income inequality over the past few decades is mainly the result of massive technological changes that rendered old job skills obsolete, and only the educated have been able to keep up, according to Mankiw.

This argument sounds a little more reasonable, at first, although one obvious counter is that the already fabulously wealthy naturally have an easier time getting good educations, helping them cement their position at the very top of the income chain forever.

But one chart, produced on Tuesday by the Economic Policy Institute, a left-leaning think tank, blows away this argument, too. It tracks the income advantage of the college-educated against the income advantage of the top 1 percent of earners.

If Mankiw's claim is correct, then these two lines should track each other closely. But they don't. (Story continues below chart.)

As you can see, the income advantage of the 1 percent has been much bigger than the income advantage of the merely college-educated for most of the past couple of decades. The gap opened in the mid-1990s -- a time when the income advantage for the highly educated actually flattened briefly.

What happened in the mid-1990s that might have led to this gap? Why, it is the dot-com boom, which mostly benefited the very wealthy. But even after the dot-com bust, the top 1 percent kept their income advantage, which recovered as the stock market recovered. Their advantage faded again with the financial crisis, but the 1 percent never lost their lead over the college-educated. As the stock market rebounded after the crisis, the 1 percent's wide advantage over the college-educated rose again.

In an earlier paper, EPI economists asserted that gains in "capital income" -- income from investments -- account for about a third of the growth in the 1 percent's share of the total income pie in recent decades. So the 1 percent aren't simply taking advantage of their better education and higher productivity -- they are increasingly taking advantage of low tax rates on investment income to get richer and richer in financial markets.

This new method of extreme wealth-generation is the result of the runaway "financialization" of the world, with banks and financial markets being de-regulated, increasingly complex and expensive financial instruments being created and tax rates on investment income being slashed. It suggests that most of the rise in inequality is not due to the unique qualities of the 1 percent, but to their ability to game the system -- to "seek rents" in the economic lingo -- to enrich themselves.

In "World War Z" (and most other zombie movies, let's be honest), Brad Pitt fights a seething swarm of tireless zombies bent on global destruction. This is precisely what it is like watching austerity fans in action.

In the latest episode of the economic theory that refuses to die, the Bank for International Settlements, which is basically the central banker for all the world's central bankers, has published its latest annual report on the state of the global economy. And guess what? Apparently the problem with the lousy global economy is that there has not been nearly enough austerity. And the BIS has the discredited research of Harvard economists Carmen Reinhart and Kenneth Rogoff to prove it.

Our world's troubling austerity deficit is actually not the main message of the BIS' 76-page opus, but an entire chapter, "Fiscal sustainability: Where do we stand?" is dedicated to the topic. And this chapter sounds a rallying cry for more austerity, early and often.

"While progress has been made towards reducing fiscal deficits, many economies still need to increase their primary balances significantly to put their debt on safer, downward trajectories," the BIS frets. "The success of these efforts relies crucially on measures to curb future increases in pension and health care spending."

In addition to making sure that we don't spend any more money on the greedy elderly, the BIS argues that governments should cut spending instead of raising taxes. The BIS admits that cutting government spending does more damage to economic growth in the short run, sure, but it also demonstrates how serious your government is about fighting debt, and it also means you can cut taxes even more in the future! It's just a perfect outcome, unless you are unemployed today or end up unemployed, elderly or unwell in the future. In that case, too bad for you.

What's more, the BIS showers restorative praise on the work of Reinhart and Rogoff, the king and queen of zombie economics. As you may recall, their seminal pro-austerity paper, "Growth In A Time Of Debt," was recently driven to the edge of town and shot repeatedly by other economists. They found it not only full of errors, but also full of crap, declaring sans proof that high government debt leads to slow economic growth, when in fact the causation could well work in the opposite direction. Their paper was employed by policy makers around the world as justification for imposing crushing austerity measures that have slowed economic growth, kept unemployment high and killed people.

After this paper's apparent welcome end, anti-austerians prematurely declared victory, high-fiving each other about the end of the age of austerity. Even some former austerity supporters decided to surrender, not only because of Reinhart-Rogoff, but also because of the clear evidence that austerity had been an utter failure.

But wait! This terrible idea still lives! Pro-austerians still shamble forward, moaning hungrily for sweet, sweet braaaaaiiinnsss. "Evidence" and "shame" have no effect on them, as they seem driven by a near-religious fervor. And now among their ranks is the Bank for International Settlements, which trots out Reinhart-Rogoff, along with a handful of other studies, to restate the discredited case that high levels of public debt are a for-sure drag on economic growth forever and always, amen.

The BIS does address the controversy over the Reinhart-Rogoff research, in a tiny footnote to a sidebar commentary on page 46. It also acknowledges, in that same tiny footnote, that one study one time found that there might be a minor problem with the pro-austerity reading of Reinhart and Rogoff's data -- namely, it showed that slow growth caused high debt, rather than the other way around. Subsequent research has found the same thing.

But the BIS swallows whole the self-defenses of Reinhart and Rogoff. Which is sort of what you would expect, given that, as the Wall Street Journal notes, BIS chief economist Steven Cecchetti has a personal stake in the whole thing: He worked on his own, less-famous version of the Reinhart-Rogoff study in 2011, declaring that "countries with high debt must act quickly and decisively to address their fiscal problems."

When Ben Bernanke speaks, the bond market listens. And panics, lately.

Bond prices have plunged -- sending interest rates, which move in the opposite direction of prices, soaring -- since the Federal Reserve Chairman first hinted back in May that the Fed could curb its program to buy $85 billion per month in bonds to keep rates low. The bond-market bloodbath has gotten gorier since last week, when Bernanke confirmed that the Fed indeed planned to taper its bond-buying, known as "quantitative easing," or "QE," or "bond-market meth."

Since early May, the yield on the benchmark 10-year Treasury note has jumped one full percentage point, from 1.62 percent to 2.62 percent on Monday morning. This represents a 62 percent increase in borrowing costs for the Federal government -- and also for mortgage borrowers, because mortgage rates are directly tied to the 10-year note rate -- in just a month.

It is the biggest single move in interest rates since at least 1962, according to Dan Greenhaus, chief global strategist at the New York brokerage firm BTIG.

Thanks to this rise in the 10-year note yield, the average going rate for a 30-year fixed-rate mortgage has also risen by a full percentage point, to about 4.4 percent, according to Walter Schmidt, a mortgage strategist at FTN Financial in Chicago.

The surge in rates will likely squeeze mortgage refinancing and borrowing and could smother the recent rebound in the housing market, which has largely been driven by investors taking out cheap loans to buy cheap houses. Regular borrowers were already having a hard time finding loans, and they'll have an even harder time now.

In normal times, a sell-off in super-safe Treasury bonds might be accompanied by gains in riskier assets, like stocks and commodities. But those have been pounded, too. The Dow Jones Industrial Average was down another 200 points on Monday, its third big swoon in the past four trading days. The Dow is down more than 5 percent from its closing record high on May 28. Other U.S. stock indexes are down by a similar amount. Gold prices, meanwhile, have tumbled 28 percent from their peak in early October.

Breaking an addiction -- meth, or QE -- is hard and involves a painful adjustment period. Interest rates had been at record lows and were bound to rise eventually. That didn't have to be the end of the world.

"If interest rates go up for the right reasons, that is both optimism about the economy and an accurate assessment of monetary policy, that's a good thing," Bernanke said in his June 19 press conference to discuss the Fed's latest monetary policy decision. "That's not a bad thing."

But Bernanke also said that the bond market seemed to have gone a little too far in pricing in slower bond purchases, something he said left him "a little puzzled." At the time he spoke, interest rates had risen by about a half a percentage point. In just the few days since, they have jumped by that amount again, which should leave him more than a little puzzled.

It seems clear that Bernanke and the Fed had no idea just how much the market would freak out about their plan. Right or wrong, the market doesn't seem to believe that the economy is anywhere near strong enough to withstand a Fed pullback. Job growth is steady but anemic, with unemployment at a still-high 7.6 percent. And unemployment has mainly been falling because people have left the labor force in despair.

So the Fed is failing at one half of its dual mandate, creating full employment. It's also failing on the other half of its mandate, keeping inflation steady: Investors in the market for Treasury Inflation Protected Securities have driven 10-year inflation expectations down below 2 percent, the level of inflation the Fed has targeted. In other words, the bond market expects the Fed to fail for the next decade.

Given these conditions, it is a mystery why Bernanke decided to tell the market he planned to withdraw stimulus. St. Louis Fed President James Bullard, who made a rare show of ripping Bernanke's communication strategy to shreds last week, was right.

Bernanke left the door wide open to change his mind, and even to increase stimulus if the economy worsens. He seemed to think that hedging was more than enough to calm the market. He was wrong: He gave the market a blueprint for the future, one that involved less bond-buying, and markets responded accordingly.

The Fed is clearly disturbed by that response, telling Wall Street Journal Fed scribe Jon Hilsenrath that it thinks the market has misinterpreted its plans.

It is actually Bernanke and the Fed (aside from Bullard) who have an interpretation deficit. The market may soon force Bernanke to see things its way a little more clearly.

Does it feel unusually hot to you today? That is because all of your money is on fire, thanks to the Federal Reserve.

And it didn't have to be this way! Blame Fed economic forecasts that will probably be useless, along with chronic miscommunication between the markets and the Fed.

The Dow Jones Industrial Average tumbled on Thursday by 353.87, or more than 2 percent, to 14,758.32, the index's worst single-day selloff since November 2011. All 30 of the Dow's components were in the red. Thursday's pummeling followed a 200-point drop on Wednesday, adding up to the worst two-day selloff since November 2011. The broader S&P 500-stock index and the tech-heavy Nasdaq both fell 2 percent, as well.

More worrisome for the Fed, bond markets were also taking a beating, driving interest rates, which move in the opposite direction of prices, to their highest levels in nearly two years. The Fed has been buying up $85 billion worth of bonds per month in an effort to keep interest rates low. It cannot be happy watching the yield on the 10-year Treasury note surge to 2.44 percent -- the highest since 2011, according to data tracker Tradeweb.

And the pain wasn't limited to stocks and bonds. Gold was just getting flat-out massacred, down nearly 7 percent. Foreign markets were also a sea of red, with Europe's top stock index down nearly 4 percent and Japan's Nikkei index down nearly 2 percent. Investors are also fleeing emerging markets like Brazil and China, with its juggernaut of an economy lately showing troubling signs of a slowdown.

All of this follows Fed Chairman Ben Bernanke's announcement on Wednesday that the Fed thinks the U.S. economy is enough on the mend that it can start slowing down its bond-buying program known as "quantitative easing," or "QE," later this year. Bernanke warned that the Fed might yet be wrong in its relatively rosy outlook, which could mean more QE, not less. Markets are choosing to go stark-raving bananas first and wait for the economic numbers later.

Markets probably need not worry. The Fed is in fact chronically awful at predicting the economy, notes the Washington Post's Dylan Matthews. And since the end of the Great Recession, it has mostly been too optimistic about growth.

At first glance, the bond market seems to agree with the Fed: Higher interest rates can be seen as a sign of optimism about the economy. The yield on the 10-year Treasury note has jumped all the way to 2.44 percent from 1.63 percent back in early May. That would seem to be an awful lot of optimism indeed.

But there's something funny going on in the bond market: Namely, inflation expectations are disappearing. One reason bond traders like to drive up interest rates is if they think inflation is going higher. They want to get paid more money in the future, to keep up with rising prices.

Instead, market expectations of future inflation, as measured by the spread between 10-year Treasury yields and the yield on Treasury Inflation Protected Securities (TIPS), have tumbled from more than 2.5 percent inflation growth per year in early May to about 2 percent recently, as you can see in the chart below. (Story continues below chart.)

"If bond markets believed the Fed’s new policy reflected stronger growth prospects, they would have raised inflation expectations," Charles Dumas, chairman of the London consulting firm Lombard Street Research, wrote in a note. "These have in fact dropped sharply."

The Fed may of course turn out to be right, and economic growth and inflation might pick up. But financial markets aren't buying it, obviously. And if they throw enough of a tantrum about the Fed, driving interest rates higher and hammering asset prices, then their pessimism might turn out to be a self-fulfilling prophecy.

This isn't the first time the market has thrown a hissy fit after Fed warnings about possibly choking back on stimulus. In the past, Bernanke & Co. have taken to speeches and the media to clarify their previous clarifications. You'd think they might have figured this communication thing out by now.

If you get busted doing bad things to investors, you had better watch out: The nation's top securities watchdog might, on very rare occasions, actually make you admit that you did something wrong.

This tough-as-nails new stance by the Securities and Exchange Commission was announced on Tuesday by its new chairman, Mary Jo White, a former federal prosecutor renowned for her reported toughness. At the Wall Street Journal's CFO Network Conference in Washington, D.C., she told the WSJ's Francesco Guerrera that the agency was no longer going to just settle all of its fraud and abuse cases by letting the accused get away without admitting or denying wrongdoing. In some cases, she said, the SEC will actually try to force some admissions of wrongdoing.

"We are going to, in certain cases, be seeking admissions going forward," White said in a video of the interview (see above). "Public accountability in particular kinds of cases can be quite important."

Lest we get too excited about what the WSJ calls a "watershed change" to "decades-old" SEC policy, White made it abundantly clear that she really prefers letting accused firms get off without admitting or denying wrongdoing.

"You can settle quicker, you have no litigation risk," when companies settle without admissions of wrongdoing, she said. "In terms of investors, you get money out quicker. I think that's always going to be a major, major tool in the arsenal."

White said the SEC will decide case-by-case when to seek admission, depending on "how much harm has been done to investors, how egregious is the fraud."

But again, just in case there was any doubt, she made it clear that most of the time, there would be no such admissions:

"Again I emphasize how important the no-admit no-deny protocol also will remain for the majority of cases," she said.

The SEC's reluctance to get firms to admit to their misdeeds has become discomfiting since the financial crisis. High-profile cases involving toxic mortgage-backed securities sold by Goldman Sachs and other banks have been settled without such admissions. That has raised the ire of the public, lawmakers like Elizabeth Warren (D-Mass.) and some federal judges, like U.S. District Court Judge Jed Rakoff, who rejected an SEC settlement with Citigroup because of a lack of admission.

No-admit settlements help the banks avoid being sued by investors, the WSJ points out, adding to a general sense that the government's top priority is to treat the banking sector with tender loving care, rather than seek justice. It goes hand-in-hand with the government's reluctance to bring criminal charges against banks or bankers. Attorney General Eric Holder recently vowed that no bank was too big to prosecute, but it is still doubtful that the government would actually ever prosecute our biggest banks.

It is also doubtful that the SEC would ever force our biggest, most important banks to admit wrongdoing in a fraud case. That really would be a watershed.

High-frequency trading is bad for everybody, including high-frequency traders, according to new research from a university that produces economic reports that are sold early to high-frequency traders.

Congratulations, world, these are your modern financial markets. The study, by the University of Michigan's engineering department, focuses on one particular tactic of high-speed trading, known as "latency arbitrage."

This is the practice of gaming the split-second lags between the time trades are made and the time those trades are crunched by a central clearing house called the Security Information Processor into a price quote called the National Best Bid And Offer. Traders with super-fast computers can calculate the NBBO faster than the Security Information Processor can do it, and they take advantage of the tiny gaps between the old NBBO and the new NBBO.

The researchers say this trade somehow reduces the total amount of profits in the system -- in other words, it not only hurts regular, slowpoke investors, but also other high-speed traders. Whatever profit each individual robot makes on a latency arbitrage trade is less than the amount of profit that is destroyed by the practice, according to the report. This is just more evidence that zapping thousands of trades per second does nothing for society.

High-speed trading's defenders, including academics whose research is bankrolled by high-speed trading firms, claim that this sort of foolishness improves market function and makes trading cheaper for everybody, which gives investors more money to spend on puppies and charity and whatnot.

But the University of Michigan researchers, who were paid by grants from the National Science Foundation, say the latency arbitrage trading they studied actually hurts market efficiency by widening the spread between the prices that buyers will pay and the prices that sellers will accept.

Ironically, the University of Michigan has recently been involved in a scandal-like brouhaha involving high-speed trading. The university produces a monthly consumer-sentiment index that it sells to Thomson Reuters for $1 million per year. For a fee, Reuters gives traders a look at these sentiment numbers five minutes before the rest of the suckers on Wall Street see it. For an even bigger fee, high-speed traders can get the numbers five minutes and two seconds before everybody else, giving them time to make high-speed trades on the numbers.

The university told CNBC that it thought the arrangement didn't violate any regulations and that it could not produce the sentiment index without the money it gets from Reuters. Reuters said it has always made these arrangements public knowledge.

It's not clear just how much money high-speed traders can make on sneak peeks at consumer-sentiment data, or on latency arbitrage or other shenanigans. Obviously trading firms think there is gold in them thar milliseconds, as they have been steadily ramping up their efforts to trade ever faster, using lasers and microwaves.

Still, there are signs that the growth of high-speed trading has stalled, Bloomberg Businessweek noted earlier this month, with trading volume and profits falling. Maybe traders are figuring out they're mainly taking from themselves.

At long last the downtrodden, disrespected 1 percent have a hero to make their case: Harvard economist Gregory Mankiw.

The former economic adviser to President George W. Bush and wannabe president Mitt Romney has a new paper, called "Defending The One Percent," arguing that income inequality is not as terrible a thing as liberals make it out to be. And even if it is, fixing inequality is really hard to do in a way that is not totally unfair to the wealthiest 1 percent of Americans.

Mankiw's basic argument is that the 1 percent are richer than you probably because they are better than you. It's just science! Even the children of the wealthy are probably wealthier and better-educated than you at least partly because their genes are just better than yours, he suggests, and not because these people won the cosmic birth-family lottery that let them be born into wealth and privilege.

Mankiw reveals his simplistic mindset right off the bat, inviting readers to imagine a world of perfect income equality that is suddenly disrupted by the rise of an entrepreneur -- think "Steve Jobs as he develops the iPod, J.K. Rowling as she writes her Harry Potter books, or Steven Spielberg as he directs his blockbuster movies" -- who gets rich because everybody loves his or her products. Suddenly there is income inequality, egads!

"In my view, this thought experiment captures, in an extreme and stylized way, what has happened to U.S. society over the past several decades," Mankiw writes. "These high earners have made significant economic contributions, but they have also reaped large gains."

Well, in that case, inequality is easier to stomach. We all love our iPods and Harry Potter books and Spielberg movies and most of us probably don't mind watching their creators get rich.

The trouble with Mankiw's imaginary world is that it looks nothing like the real world, where the Jobses and Rowlings and Spielbergs are not the only people getting fabulously wealthy. In this world, many people get fabulously wealthy who do nothing for our general welfare, and possibly even hurt it.

Mankiw at least knows this could be a problem (emphasis added):

If the top 1 percent is earning an extra $1 in some way that reduces the incomes of the middle class and the poor by $2, then many people will see that as a social problem worth addressing. For example, suppose the rising income share of the top 1 percent were largely attributable to successful rent-seeking. Imagine that the government were to favor its political allies by granting them monopoly power over certain products, favorable regulations, or restrictions on trade. Such a policy would likely lead to both inequality and inefficiency. Economists of all stripes would deplore it. I certainly would.

But of course, this is exactly what is happening. The wealthy have used campaign contributions, lobbying and think-tank founding to skew the political process to keep the system working in their favor. Mankiw admits to the existence of this on Wall Street, at least:

[S]ome of what occurs in financial firms does smack of rent seeking: when a high-frequency trader figures out a way to respond to news a fraction of a second faster than his competitor, his vast personal reward may well exceed the social value of what he is producing.

And he admits this could be bad for the economy:

The last thing we need is for the next Steve Jobs to forgo Silicon Valley in order to join the high-frequency traders on Wall Street. That is, we shouldn’t be concerned about the next Steve Jobs striking it rich, but we want to make sure he strikes it rich in a socially productive way.

But, again, he ignores the evidence that this is exactly what has happened and falls back on standard-issue, shaky arguments that the rich are mostly rich because they deserve it, because they have better skills and education, not to mention DNA:

Smart parents are more likely to have smart children, and their greater intelligence will be reflected, on average, in higher incomes. Of course, IQ is only one dimension of talent, but it is easy to believe that other dimensions, such as self-control, ability to focus, and interpersonal skills, have a degree of genetic heritability as well.

Sorry, Poors, try being born to better parents next time.

Mankiw argues that rich people don't have better opportunities than middle-class people, really. And he knows this is true because he was able to get an Ivy League education despite being from a middle-class family, and now his kids, who have a more privileged life than he did, don't have all that much more opportunity for advancement than he did.

This elides the fact that generations of middle-class Americans after World War II were able to live relatively comfortable lives, owning homes and paying for college educations for their children, because those costs were low relative to their incomes. With the middle class shrinking now and college costs skyrocketing, it is little wonder that Mankiw's relatively wealthy children now have the same opportunities that middle-class children once had.

Mankiw also argues that CEO pay is not too exorbitant, that the wealthy already pay plenty in taxes and that they wouldn't really benefit from paying any more than they already do, because most of the government's money is going to poor people and sick people anyway.

In other words, it is a standard-issue, predictable call to stick with the status quo of inequality, despite evidence that inequality is hurting the economy and that it is at least partly driven by government policies favoring the wealthy.

We have learned, painfully, of the damage derivatives can do to an economy in a financial crisis. But derivatives are hurting the economy even on its best days, according to a new study.

In the crisis, derivatives exposures brought down giant financial institutions and markets, leading to the worst recession since the Great Depression. But derivatives are also weapons of slower, more insidious destruction: They drain cash away from productive segments of the economy into the financial sector, according to a new study by the progressive think tank Demos.

Derivatives can be opaque and confusing to even sophisticated investors, and the market for them is dominated by just a few of the biggest, savviest investors in the world. This combination allows banks to routinely overcharge their customers for the "innovation" of credit derivatives.

"Innovation has become a means to extract value from the markets," writes Demos fellow Wallace Turbeville, the paper's author and a former Goldman Sachs banker. This, he suggests, is sapping the economy's strength.

"Inefficiencies that transfer earnings to the financial sector are like a tax that redistributes wealth upward," he later adds. "This system cannot persist."

Financial derivatives are regularly touted as ways for banks, hedge funds and other investors to shed the risks they take on when they lend money, or gamble on corn futures or whatever. Through the magic of derivatives, these banks and investors have more money freed up to lend and gamble and otherwise just build a brighter tomorrow for us all.

In reality, though, the financial crisis showed that derivatives make the system way more dangerous by encouraging these banks and investors to pile up more and more risk. Their risk hasn't gone away; it has just been disguised.

But when they're not blowing up the economy, derivatives are also a nifty way for banks to funnel a constant stream of cash from their ill-informed customers. This business is dominated by four ginormous U.S. banks: JPMorgan Chase, Citigroup, Bank of America and Goldman Sachs, which together control more than 93 percent of the U.S. banking industry's derivatives market.

It may perhaps surprise you to learn that these banks are not charities! Instead, they extract a fee from the hedge funds or pension funds or other banks that seek the privilege of a derivatives contract for hedging risks or making fat stacks or whatever. What is this fee? Why, it's whatever these four big banks that dominate the market say it is, that's what. And if you don't like it, you can go on down to Mom & Pop & Toaster Savings & Loan and ask them for a derivatives contract and see how far you get.

Actually, this shouldn't surprise you at all. Banks charge interest for loans, so it only makes sense for them to charge a little something for a derivative, which is essentially another form of credit. A derivative contract loses or adds value as the price it tracks changes. When it loses enough value, then the bank will demand that you pony up some money -- the dreaded "margin call" -- just as it does with a regular loan. This was exactly what nearly brought down AIG and the, whaddya call it, global economy.

So far, no big deal: Banks charge interest for loans, and they charge something like interest for derivatives. What's the problem?

The problem is that banks regularly charge up to 10 times as much in rent for derivatives as they do other forms of credit, the Demos paper suggests.

"Because the pricing of derivatives was so complex, customers almost never understood how much a bank charged for entering into the derivative," Turbeville writes. "This constitutes a massive distortion of the credit markets."

Demos sadly does not try to put a dollar amount on how much banks are draining from the economy with their derivatives business. "Many, many billions" seems like a safe guess. The paper cites a study by independent researcher Andrew Kalotay, who found that state and local governments had been overcharged $20 billion by banks between 2005 and 2010 alone. And that's just state and local governments, like the Denver Public Schools and Jefferson County, Alabama, two infamous municipalities that ended up as derivative roadkill. This estimate does not include the many, many other users of derivatives, from hedge funds to pension funds to other banks.

No wonder banks love derivatives so much and have fought so hard to keep them from being regulated. The Dodd-Frank financial-reform act tried to price derivatives more clearly, but banks have lobbied for and won so many exemptions that the law is pretty much useless, Turbeville writes.

He recommends closing the Dodd-Frank loopholes and setting up some other safeguards, including stricter accounting rules and maybe a new federal agency to keep an eye on how banks are fleecing state and local governments with derivatives. Probably none of these things will happen, at least until after the next crisis. In the meantime, the economy will continue to pay the price.

Japan's stock market is in the process of getting destroyed, and U.S. investors are treating it like an entertainment that is only partly scary and mostly funny, like a Godzilla movie with rubbery monsters and bad dubbing.

This is either a rational response or a clueless response to what's happening. If investors are being rational, then the Nikkei stock index's 20 percent collapse since May 23 is nothing much to worry about. If they are being clueless, then the Nikkei's bear market is a warning sign that the rubbery monsters are going to cross the Pacific and start stomping on U.S. markets, too. Not so funny then!

Here's the case for not worrying so much about Japan: The Nikkei's collapse is happening mainly because investors are starting to wonder whether Prime Minister Shinzo Abe is going to be able to effectively work his plan to ply Japan's lousy economy with espresso and brisk face-slaps until it finally starts moving around again like a normal economy. This program, which actually involves a lot of monetary and fiscal stimulus, rather than coffee and slaps, is known as "Abenomics." High hopes for Abenomics had fueled a wave of optimism about Japan's economic prospects in recent months, but that confidence has wavered recently.

This was the case made by Dan Greenhaus, chief global strategist at the New York brokerage firm BTIG, on Thursday morning, when the Nikkei dropped 6 percent to officially enter bear-market territory (market lingo for a decline of 20 percent or more). Greenhaus claims that investors have been spooked by a series of comments from Abe and other government officials that made it seem like Japan was starting to go squishy on Abenomics. All those officials need to do is convince the market that they're serious about waking up the economy, and all will be well.

The Nikkei's recent collapse should also be put in a little bit of perspective: It's still up 43 percent from November, having done nothing but rally for more than six straight months. The Nikkei hardly stopped for breath on the way to an 80 percent rally to its peak in May. It was overdue for a selloff.

Now that it's gotten one, analysts suggest the only place for it to go is back up. The Japanese bank Nomura raised its outlook on the Nikkei on Thursday, forecasting an eye-watering 45 percent gain by the end of the year. Goldman Sachs, unashamed by its recent call to buy Japanese stocks, doubled down on that call on Thursday.

But here is the case for worrying about the Nikkei: Its collapse is at least partly driven by worries that the U.S. Federal Reserve is going to slow down its own out-of-the-box stimulus program, known as Quantitative Easing. This particular case is a whole lot easier to make, given that the Nikkei is not the only asset class suffering these days. U.S. stocks, U.S. bonds, emerging-market stocks, commodities and other asset classes are in turmoil -- all consistent with the idea that the market is freaking out about the Fed withdrawing some of its free money.

And let me make that point clear: The Fed is not talking about withdrawing all of its stimulus. Not by a long shot. It's merely thinking about maybe easing up slightly on the stimulus that it will doubtless keep supplying for many more months. It will still be buying bonds and keeping its target interest rate near zero.

If this is how the market reacts to the Fed's gas-pedal foot just getting a little bit lighter, then that suggests the market has been built on hot air.

Even if the Greenhausian view is correct, and the market is merely freaking out about the Japanese stimulus, that's not very comforting either, is it? It's still a sign that markets are dependent on central-bank stimulus rather than real economic activity.

All of this may be a moot point, because the market may well be overestimating the likelihood of the Fed letting up on its stimulus any time soon. The U.S. economy is widely expected to lose some of its strength this summer, and growth is slowing in the rest of the world. The World Bank on Wednesday cut its forecast for global economic growth to just 2.2 percent this year. That's a dismal number.

We won't be shed of the Fed's influence any time soon, and contrary to market belief, that is not a good thing.

While everybody talks about how Kanye West compared himself to Apple founder Steve Jobs, we found the more apt comparison: JPMorgan CEO Jamie Dimon.

Stay with me! The parallels with Dimon came into focus in his recent amazing interview with the New York Times. After reading, I came away thinking that at long last, I have found the one person who can possibly replace Dimon running JPMorgan Chase.*

One quote, in particular, was reminiscent of Dimon (emphasis added):

I think what Kanye West is going to mean is something similar to what Steve Jobs means. I am undoubtedly, you know, Steve of Internet, downtown, fashion, culture. Period.

This echoed a quote by Dimon on Wednesday, firing back at claims by pesky congressional investigators that his bank had hidden, lied and otherwise tried to bullshit its way around its London Whale trading goof (emphasis added):

There was no hiding, there was no lying, there was no bullshitting. Period.

OK, sure, everybody uses the word "period" to emphasize that they are SERIOUS about what they are SAYING, PERIOD. But the parallels don't end there. Compare these two rambling, bragging quotes from them and tell me you can't see them swapping roles:

West:

I’ve been connected to the most culturally important albums of the past four years, the most influential artists of the past ten years. You have like, Steve Jobs, Walt Disney, Henry Ford, Howard Hughes, Nicolas Ghesquière, Anna Wintour, David Stern. I think that’s a responsibility that I have, to push possibilities, to show people: “This is the level that things could be at.” So when you get something that has the name Kanye West on it, it’s supposed to be pushing the furthest possibilities.

Dimon, talking to New York Magazine last August:

We bank Caterpillar in like 40 countries. We can do a $20 billion bridge loan overnight for a company that’s about to do a major acquisition. Size lets us build a $500 million data center that speeds up transactions and invest billions of dollars in products like ATMs and apps that allow your iPhone to deposit checks. We move $2 trillion a day, and you can see it by account, by company. These aren’t, like, little things. And they accrue to the customer. That’s what capitalism is.

West, on free speech:

I want to tell people, “I can create more for this world, and I’ve hit the glass ceiling.” If I don’t scream, if I don’t say something, then no one’s going to say anything, you know? So I come to them and say, “Dude, talk to me! Respect me!”

Dimon, again to New York magazine:

I’m an outspoken defender of the truth. Everyone is afraid of retaliation and retribution. Guess what. It’s a free. Fucking. Country.

West, (from earlier days) on President Bush's response to Hurricane Katrina:

George Bush doesn't care about black people.

Dimon, on President Obama's response to the financial crisis:

I don’t think the president of the US should paint everyone with the same brush.

And not even Kanye West would brag about his riches the way Jamie Dimon does. Here's West, back in the Times interview:

I would rather sit in a factory than sit in a Maybach.

And here's Dimon, addressing a well-paid bank analyst:

That's why I'm richer than you.

Dimon again, addressing poorly paid slobs in the news media:

You don’t even make any money! We pay 35 percent. We make a lot of money.

Plus, West is practically begging for the job:

I will be the leader of a company that ends up being worth billions of dollars, because I got the answers. I understand culture. I am the nucleus.

Come on, JPMorgan. You have already made Dimon your cult leader, your nucleus, without any possible successor in sight. Now is the time to let Kanye West be your next nucleus.

* -- This is of course satire, or something like it. Kanye West is way too smart to do anything dumb like run a bank.

Jamie Dimon and the Senate Permanent Subcommittee On Investigations apparently have somewhat different understandings of what "hiding, lying and bullshitting" mean.

The JPMorgan Chase CEO, speaking at a conference in New York on Tuesday, declared, “There was no hiding, there was no lying, there was no bullshitting, period," about the bank's "London Whale" trading losses last year, Bloomberg reports.

For good measure, Dimon also dared anybody thinking about suing the bank over its $6 billion in losses to just go ahead and try him, Bloomberg reports. “Anyone who sues, we’re going to fight that one till the end, too, by the way,” Dimon reportedly said. “So keep that in mind.”

Dimon's self-described bullshit-free handling of the London Whale debacle stands in contrast to the Senate Permanent Subcommittee on Investigations report on the losses, which came out back in March. That is essentially a laundry list of various forms of hiding, lying and bullshitting on the part of JPMorgan when it came to the London Whale.

Here are just some of the chapter headings from the Table of Contents of that report: "Hiding Losses... Misinforming Investors, Regulators, and the Public... Mischaracterized High Risk Trading as Hedging... Hid Massive Losses... Dodged OCC Oversight." According to the report, the bank tried to hide from regulators and investors the risks and losses piling up on the London trading desk of its chief investment office, which had made such a gargantuan bet on credit derivatives that one of its traders had earned the nickname of the "London Whale."

Dimon personally declared to investors in a conference call on April 13, 2013 -- after the London Whale had already started to lose money, but the news media had just started to catch on -- that the whole thing was a "tempest in a teapot." By that time, according to the Senate report, Dimon "was already in possession of information about the [London Whale's] complex and sizeable portfolio, its sustained losses for three straight months, the exponential increase in those losses during March, and the difficulty of exiting the [London Whale's] positions."

During that same conference call, former JPMorgan chief financial officer Douglas Braunstein declared that the London Whale's trades had been vetted by the bank's risk-management department. In fact, the Senate report says, the bank's risk managers "knew little about the [London Whale] and had no role in putting on its positions."

When asked by the Senate subcommittee about these allegations in March, Braunstein either had a faulty memory or said he was just going on the best information available to him. Dimon was not even asked to testify, having already appeared before the Senate Banking Committee for a gentle tongue-bath in June 2012.

The bank's standard response to these accusations has been that it gave everybody the best information it had as soon as it could. And certainly once the London Whale carcass was on the beach for all to see and smell, Dimon & Co. were profuse in their apologies and admissions that the bank had made a terrible mistake. Dimon had his pay cut in half this year, to a mere $11.5 million, and there was even a brief moment when it seemed he might lose one of his lucrative jobs.

But in the end Dimon kept all of his jobs. And Job One now appears to be trying to close the door, as forcefully as possible, on the London Whale debacle.