is wall street as bad everyone says it is? no. it’s far, far worse.

It’s been five full years since the financial meltdown of 2008 and it’s still fashionable to bash Wall Street. People who know nothing about finance or investing routinely blame everything from the real estate bust to the financial crisis to our crappy economy and high unemployment on Goldman Sachs and other dominant investment banks. A lot of folks in my business reflexively defend Big Finance against these attacks. But the truth of the matter is, Wall Street hasn’t gotten enough blame for the way it operates, and even though a couple of firms paid fines for their behavior during the housing mania, The Street is still reaping massive profits by screwing its own clients.

Including guys like me.

One of the main ways I make money is by shorting the stocks of companies I believe are destined for failure, or at least short-term trouble. I’m in the process of finishing up a book about how I’ve learned to spot these “dead companies walking.” Despite its bad reputation, short-selling is a relatively straightforward investment strategy. But the mechanics behind it are a bit tricky. I can’t just go out myself and engineer my trades. I have to rely on my prime broker to facilitate them. Put simply, my prime broker “borrows” the number of shares in the company I hope to short and sells them on my behalf at the current market price. The money from that sale then goes into my brokerage account. If the stock goes down, as I’m betting it will, I can then “cover” my short at a later date by purchasing the stock at that lower price and returning the shares to the person or institution that leant them to me in the first place.

Now, this process inevitably depresses a stock’s price, at least temporarily. The mere act of selling the borrowed shares pushes the bid price for it lower. And the more people out there shorting a given stock, the more downward pressure there is on it. So you might wonder why in the world anybody would allow Wall Street firms to lend their stock to short sellers like me when doing so is only going to make that stock less valuable.

The answer is that nobody allows those firms to do it. They don’t ask for permission. They simply take shares without telling their owners–even if those owners happen to be their clients–and “give” them away. I put “give” in quotes because, of course, Wall Street doesn’t give anything away. They use these essentially pilfered securities to reap big time profits for themselves.

In the last five years, I’ve paid out $8 million in so-called “negative rebates” to my prime broker on shorted stocks. These fees used to be relatively rare. In fact, my prime often used to pay me a decent rate of interest on the money I made from selling borrowed shares. I recently asked a sales representative there why this practice stopped. He explained that the company used to invest the proceeds of borrowed share sales into lucrative mortgage bonds and collateralized debt obligations.

At first, I was stunned when I heard this. I couldn’t believe that the millions in fees myself and other short sellers have to pay now are making up for the profits Wall Street once made on the very subprime bonds that tanked the global economy.  Then I remembered who I was dealing with–some of the smartest and most amoral people in the world. That’s a very dangerous combination of character traits–for their clients at least.

Does Wall Street share any of the largesse it makes on negative rebates with the people who have unwittingly leant out the shares? Of course not. As I said, prime brokers don’t even tell the owners of a given stock that they are using it to help short sellers depress its value. In 2011, two tech entrepreneurs discovered that their brokerage company had leant out their own personal shares in a company they had founded to short sellers. How twisted is that? The very brokerage you’ve entrusted with your business’s stock turns around and gives it to people who are betting that it will crash and burn.

And Wall Street wonders why it has an image problem.

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