I recently sat down with Nobel Prize-winning economist Joseph Stiglitz in his office at Columbia Business School.

Three years ago, Goldman Sachs (NYSE:GS) was sued for allegedly creating securities that were backed by investments hand-picked by a client who was betting against those securities. Any potential buyer who knew that would have kept their distance from the product. But most didn't know. So they lost -- big. 

In this clip, Stiglitz talks about how inside information and unfair advantages gives Wall Street a leg up on ordinary investors. Have a look (transcript follows):

Joseph Stiglitz: Until a couple of years ago, a couple of the Wall Street firms got a direct feed from the stock exchange, and so they knew what was happening in the stock market before anybody else did. So even though what was called "front and running," was illegal, we legally gave them information that allowed them to do what was in effect, front running. So that's one example. We stopped that, but that's an example.

CDSs that are anything that is based on LIBOR, I would be very wary of because it's manipulable. Now with the government looking over their shoulder, they're probably less prone to being manipulated, but it's a totally made-up number because there's very little interbank trading, interbank lending. So I would worry about that. They know more about what the gimmicks that they're up to than the rest of us do.

I think that one just has to recognize that the insiders do get access to a whole variety of information. As I say, things are better. Fair disclosure meant that the firms couldn't just disclose information to their friends in the market, but it is so interesting how IPOs often seem to be of such benefit to the friends of the Wall Street firms rather than to the outsider.