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frowned upon by the courts, but even during the New Deal, when the government was redistributing wealth at a pace greater than any other period in U.S. history, the securities markets were considered the last bastion of unfettered capitalism. To be sure, there are vast differences in the markets of then and now. In 1933 individual investors were a tiny sliver of the market participants; these days even blue-collar workers are forced to save and invest for retirement given the erosion of guaranteed retirement plans that corporate America has replaced with 401(k) plans and other investments.
    The investor class for much of the sixty years after the 1929 stock market crash was pretty elite: Wall Street executives and wealthy individuals, lawyers, doctors, businessmen. Today average investors open online accounts at E*Trade when they want to buy stocks, and they aren’t bashful about looking for quick bucks through frequent trades. The game for the little guy back then was supposed to be long term: Buy stock in a company and watch it grow as the company grows. The overriding philosophy among regulators reflected this perspective—that markets become more perfect in the long run, when all the information, even those trades based on insider tips, get digested by participants and price discovery is created.
    And that would be how the SEC under Joe Kennedy and other chairmen would approach insider trading for the next three decades.
    In fact, it wasn’t until Joe Kennedy’s son became president in 1961 that the SEC and white-collar prosecutors began to view insider trading as something that must be eradicated.
    W hen are you gentlemen going to investigate the rigged markets in new issues of over-the-counter stocks?” read a letter addressed to the SEC’s New York branch office in May 1961. “There is a lot of funny baloney going on in these issues, with conspiracies up and down the street, one selling to another at higher and phony prices, thereby creating phony markets in new issues, thereby hooking the general public who will eventually hold the bag. Then when the whole thing crashes over the ears of the little guy holding the bag, then you will wonder what happened, when all the time it is going on under your noses.”
    Another letter delivered just one month later to the SEC headquarters in Washington, D.C., explained how current laws and the SEC’s enforcement of them were “wholly ineffective when it comes to preventing insiders, with special knowledge unknown to the public, before the issuance of corporate reports from taking unfair advantage of the public by their purchase or sale of these securities while the public is ignorant of the fact which may exist.”
    Both letters were part of an increasing pattern of complaints from average investors about the unlevel playing field of the stock market. The country’s postwar wealth created many benefits, including a burgeoning investor class of people who for the first time weren’t content to sock their money away in an FDIC-insured bank deposit, where it would earn interest at a rate lower than those offered on government bonds. They plowed money into stocks; shares of the Dow Jones Industrial Average were now well above their pre–Great Depression peak, while daily trading volume of shares on the New York Stock Exchange soared to 4 million shares, nearly triple the level immediately following World War II. The markets were booming, contributing to the postwar wealth effect. But many of those new investors who helped push stocks higher believed they were doing so in a vipers’ nest. Unscrupulous brokers were selling them stocks to help drive up the price so corporate “insiders” could sell their inflated shares at a profit. Those insiders—the men running America’s biggest companies—had access to information well before the public did, and they acted on it by selling and buying shares before major