Dear Mr. Berko: My brother-in-law, who is a longtime human resources officer with a New York Stock Exchange brokerage, told me that the Financial Industry Regulatory Authority is establishing a new database to improve regulatory enforcement. This database will include information about all Americans’ brokerage accounts, their personal financial information and the details of every stock and bond transaction made by every brokerage firm. He says this is being done to prevent flash crashes like the one in 2010, when stocks fell 10 percent in a few minutes and then recovered just as fast. My retired tennis buddies and I, who often discuss your column in our clubhouse, would appreciate your usual brilliant response. And if you have time, please tell me why Standard & Poor’s downgraded U.S. Treasury bonds in August 2011 but Moody’s didn’t. — TS, Fort Lauderdale, Fla.

Dear TS: A member of Congress (I’ll call him George) I’ve known for years told me it’s more complicated than that. He’s one of just a few members of Congress who view this as an intimidating, bone-chilling and alarming vision of the future — a portent of what some members of Congress have in store for Americans, who can be defined by their demographics and psychographics.

In 2012, the Obama administration mandated that the Financial Industry Regulatory Authority establish a comprehensive investor database by November 2018. FINRA is a private, nongovernmental agency. It’s a bootless, useless organization employing thousands of gormless twits, supposedly to protect American investors. According to George, by November 2018, FINRA will have established a database similar to that of Equifax — and just as easy to hack — containing information about nearly 60 million investors, including their names, birthdates and Social Security numbers and information about their credit card accounts, bank accounts, brokerage accounts and retirement accounts. It’s said that FINRA’s twits want to develop a consolidated audit trail to identify transactions that improperly impact the market prices of specific stocks through insider trading, manipulation and other illegal practices.

Why must FINRA collect all this data on 60 million Americans, most of whom trade only a few times a year? Why does FINRA need your Social Security number or the name of your bank to investigate illegal trading or market manipulation? FINRA certainly knows the identities of every large trader behind most market events. Why expose 60 million Americans to cyberthieves and secret government agencies that, with a keystroke, can effortlessly make direct withdrawals from unwitting people’s stock and bank accounts? Scary? It’s enough to make Americans believe in a conspiracy theory! I urgently recommend that you write to your representative. Send him or her a copy of this column, and ask, “What in blazes is going on?” Things were so much less complicated when the world was flat.

The difference between a Standard & Poor’s rating and a Moody’s Investors Service rating is droll. Moody’s looks at the doughnut, whereas S&P just looks at the hole. The two rating companies don’t measure the same data. An S&P rating seeks to measure only the probability of default. Nothing else matters — not the time the issuer would remain in default or the manner in which the default would be resolved. S&P doesn’t care what the recovery value might be, nor does it care about how much money the investor might have after the default. Moody’s, on the other hand, is interested in not just the probability of default but also the expected principal losses. Moody’s considers default probability as part of the total expected loss and takes into account what would probably happen if a default were to occur. This difference is very clearly evidenced by the fact that S&P’s default rate on junk municipal bonds is three times as high as Moody’s default rate on the same category of junk municipal bonds.

Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at [email protected]

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