Financial Wrongdoers Can't Confuse the Media

I hate it when so-called "trading experts" -- read: regulators -- try to feed me a line. It drives me crazy! That's my reaction to all of the scandals out there these days.

Take the New York Stock Exchange scandal: These fines, which are huge, and the crimes behind them -- and they are crimes -- involve alleged front-running. You hear other terms: "interpositioning," negative obligation. And for the longest time I was willing to smile and say those terms, attempting to distinguish these as acts of negligence vs. the outright stealing that front-running implied. But Thursday the Securities and Exchange Commission let it be known that front-running is indeed part of the investigation and the size of these fines says, Hold it, this isn't benign; this is potentially criminal behavior. No sooner did I say that on television than the NYSE reached out to try to tell me that the investigation was, alas, not front-running but negative obligation.

And I hit the roof when I got the note. I have traded for 24 years. I have accused traders of front-running orders on several occasions. I have cooperated with the SEC on these investigations. I am acutely aware of what front-running is. Does the NYSE think I am some sort of novice who doesn't know what's at stake here? The reason I went over to the bright side -- the journalism side -- was because I hated it when kind and good media folks got snowed by the pros. Heck, for me this stuff is like pornography: I know it when I see it, and I hate being told that, no, I am not sophisticated enough to see the differences between negative obligation, interpositioning and stealing, which, by the way, is what front-running is. Stop lying to me!

Or the mutual fund scandal. The funds say this is "rapid trading," they say it is "market-timing." Much of what this scandal is about is stealing, stealing from passive, poorer folks to generate better returns for hedge funds in exchange for higher fees in other lines of business. That this is so is obvious only if you have done net asset value work, if you have balanced the books at funds, if you understand money in and money out. Heck, I ran my books for 14 years myself. I handled money in and money out. I know exactly what these mutual funds did. They took advantage of the existing smaller shareholders to benefit larger hedge funds and figured, heck, no one would find out. Period, end of story. Market timing is like "interpositioning." These are euphemisms designed to deflect criminality.

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James J. Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for Action Alerts PLUS by clicking here. While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column to [e-mail]. Listen to Cramer's RealMoney Radio show on your computer; just click here. Click here to buy Cramer's latest book, "You Got Screwed!" Click here to order Cramer's autobiography, "Confessions of a Street Addict."