Too many loose ends, still

Too many loose ends

The Treasury bailout plan is a good start. There must be a vehicle to remove the bad assets from bank balance sheets and at this point only the Federal Government has the money and long-term staying power to do what needs to be done.

I still agree with the freeze on short-selling and think that should remain in effect. It should also be expanded to firms that are not financials. As far as the short-sellers are concerned, I find them to be a hypocritical lot. They cry about market manipulation by government and how that is bad, yet they are okay with policies such as capital gains tax cuts, reduced regulation, free trade, wage and income suppression and other policy, which is also designed to “manipulate” markets.

Credit default swaps (which are not really “swaps” at all, but insurance policies) must be traded on regulated exchanges or shut down completely, at least for now. It is too easy to manipulate these OTC products and they are being routinely manipulated. In many cases this is what is behind the nosedive in many financial companies.

The speculators are back! Congress failed to pass a bill to limit speculation last July (mainly because Republicans wanted to attach an offshore drilling provision to it) and that was a mistake. Expect to see a lot of speculative buying of oil again as the dollar weakens and you’ll hear the same old, tired arguments explaining the rise in crude, none of which are true. OPEC will add to this rally by cutting production. Don’t be surprised to see crude hit a new, all-time high soon.