In The Battle for the Soul of Capitalism Jack Bogle no longer sees Adam Smith’s “invisible hand” driving “capitalism in a healthy, positive direction.” Today, his “Happy Conspiracy” of Wall Street plus co-conspirators in Washington and Corporate America are spreading a contagious “pathological mutation of capitalism” driven by the new “invisible hands” of this new “mutant capitalism,” serving their selfish agenda in a war to totally control America’s democracy and capitalism.

The “Goldman Conspiracy” is the perfect B-School case study of Wall Street’s secret contagious pathology, with insiders like Blankfein, Paulson and others pocketing billions more of the firm’s profits than shareholders, evidence the new “mutant capitalism” has replaced Adam Smith’s 1776 version which historically endowed the soul of American democracy as well as our capitalistic system. But sadly for America, Goldman’s disease is rapidly becoming a pandemic spreading beyond Wall Street’s “too-greedy-to-fail” banks, infecting our economy, markets and government, as it metastasizes globally.

What are the symptoms of this growing “soul-sickness,” this “pathological mutation of capitalism” Bogle fears? Recently we reviewed the consequences of this “soul-sickness.” Several months ago we collected and paraphrase news reports about fifteen symptoms spreading “soul-sickness” further beyond the boundaries of this Goldman case study, and reform failures prove the disease is speading: These are the 15 signs of a moral pathology undermining not just banking, but American democracy and capitalism.

1. Gross denial of any moral damage caused by their rampant greed
Seeking Alpha: ‘Goldman is America’s most hated corporation. We cheer as Rolling Stone’s Matt Taibbi calls Goldman “a giant vampire squid wrapped around the face of humanity.” Banks triggered a global crisis. Main Street suffers. Greedy bank CEOs raid the Treasury then stuff $30 billion in their bonus pockets, up 60% from last year.’ They are our 21st century General Motors, convinced ‘What’s good for Goldman is good for America.’ We saw how that arrogance ended. Wall Street has similar suicidal symptoms.

2. Narcissistic egomaniacs with secret “God complexes”
London Times’ John Arlidge interviewed Goldman CEO Blankfein: ‘He paid himself $68m in 2007, now worth more than $500 million, yet insists he’s a blue-collar guy. He says banking has a ‘social purpose,’ just a banker ‘doing God’s work’.’ When I was at Morgan Stanley in the seventies the firm ran an ad: “If God Wanted To Do a Financing, He Would Call Morgan Stanley.” Today, all of Wall Street is dual diagnosed: They’re morally blind money addicts who believe they’re “God’s chosen.” AA would say: They haven’t “bottomed,” won’t recover from their disease till a disaster hits, with another market meltdown and the “Great Depression 2.” Then maybe they’ll “quit playing God.”

3. Paranoid obsessives about secrecy, guilt and non-disclosure
Bloomberg: “New York Fed’s Secret Deal: Taxpayers paid $13 billion more than necessary when government officials, acting in secret, made deals with banks on AIG, buying $62 billion of credit-default swaps from AIG. The government would eventually cover about $180 billion in AIG swaps backing toxic CDOs when Paulson and Bernanke double-teamed to bailout Goldman, saving them from bankruptcy. (More)

We know Wall Street is at war with Main Street America. In military terms it is a “Psy-Ops” or “psychological operations” war, by nature mysterious because it is fought in the shadows, by enemies who appear and disappear suddenly—like phantoms, stealth bombers, ninja assassins, like Iraqi insurgents and U.S. Special Forces inside Iran. Secrecy are essential to their successes. We are taking a totally different approach to this “war.” The popular press focuses on the weapons used in this psych-ops war by various names: behavioral finance, investment psychology, neuro-economics, the “new science of irrationality,” brain research, propaganda, and other esoteric names. In the past decade there have been many excellent books and ongoing press coverage of this new and rapidly evolving field.

The false and misleading promises of neuroeconomics
But so far, the works aimed at helping Main Street investors have approached the world of behavioral finance with one core assumption: If you, the investor,simply become more aware of your irrational behavior, apply some simple psychological rules, minimize that self-sabotaging behaviors, and act “less irrational,” then you will be able to beat The Street, beat the market, beat the averages … become a winning investor and get rich. The thrust of these earlier behavioral finance books is simple: A little education on behavioral psychology, a lot of self-discipline and that good old American “can-do” spirit! The implication is, of course, that if you, or any other of America’s 95 million Main Street investors study hard, understand and practice the basic tools these experts teach, you will be reborn “less irrational” and fully capable of “outwitting the markets.”

Unfortunately, you can’t fix an irrational mind using the brain’s own “flawed rationality”—certainly not against an enemy — Wall Street’s Happy Conspiracy — that’s doing everything it possibly can to keep Main Street investors ‘irrational and woefully uninformed,’ which is a clearly stated goal of behavioral finance psychologists and quant mathematicians now working for Wall Street. Seriously, ask yourself: Can Main Street investors ever “fix” their brains, make themselves more rational and beat Wall Street? The correct answer is “no,” but that’s not the real problem with behavioral finance.

Main Street will never win a head-on battle against Wall Street
The press, media and pundits all operate from the false assumption that Wall Street and Main Street are fighting this war on a level battlefield, equipped with equally powerful weaponry—and that if the Main Street investor just studied hard, understood and applied some apparently rational tools to his irrational thought processes, he will become a winning market investor. Sorry folks, but that is pure fiction. In a head-to-head battle, this psych-ops war is a total mismatch—what the military refers to as “asymmetric warfare”— a disaster for Main Street, like walking the streets of Baghdad alone.

Forced to fight ill-equipped and alone, the average investor doesn’t have a chance against Wall Street’s overwhelming firepower and organization. It’s not a fair fight. Wall Street has a 100:1 advantage in weapons, strategies and the ability to control the odds. Main Street, on the other hand, has no allies and no armies fighting on its behalf. We are fighting solo, armed with muskets against the Wall Street War Machine with its equivalent of stealth bombers, bunker busters, Apache GunShips, NightVision, satellite-guided cruise missiles and more. But … if Main Street doesn’t get suckered into fighting Wall Street on Wall Street’s terms, indeed, doesn’t fight Wall Street at all … the rules of engagement, and the chances of beating Wall Street increase.

You cannot “fix” an irrational mind with “rational tools”
Unfortunately, the media, press and behavioral finance experts continue reinforcing the old strategies, rules and tools that keep the Wall Street War Machine in business—by supporting the illusion that if all those 95 million “little guys” investing all over Main Street America just got a little “less irrational,” a little more disciplined, they could overcome the handicaps of their irrational and woefully uninformed minds and win. (More)