Anti-Regulation Chickens Come Home to Roost, Stocks Down 5%

The New York Times reports:

"The financial crisis entered a potentially dangerous new phase on Wednesday when many credit markets stopped working normally as investors around the world frantically moved their money into the safest investments, like Treasury bills.

"As a result, the cost of borrowing soared for many companies, while the stocks of Wall Street firms like Goldman Sachs and Morgan Stanley that only a couple of weeks ago were considered relatively strong came under assault by waves of selling. Investors were so worried that they snapped up three-month Treasury bills with virtually no yield and they pushed gold to its biggest one-day gain in nearly 10 years. Stocks fell by nearly 5 percent in New York."

"The stunning flight to safety, away from other kinds of debt as well as stocks, could cause serious damage to an already weakened economy by making it more expensive for businesses to finance their daily operations.

"Some economists worry that a psychology of fear has gripped investors, not only in the United States but also in Europe and Asia. While investors’ decision to protect themselves may be perfectly rational, the crowd behavior could cause a downward spiral with broader ramifications." (NY Times)

Well, that's what happens when masses of people lose confidence in the stock market and economy -- especially when they have cause to lose confidence.

After 7+ years of the Bush Administration's anti-accountability policies (which some people glorifyingly mis-label as "free market" principles), what could one reasonably expect?

The Bush Administration and many corporate powers-that-be devoted years to publicly spinning reality to create the false appearance of market- and economic-stability -- even after the wake up calls of the early 2000s, like the Enron, WorldCom, Tyco, and Adelphia scandals.

Bottom line: market stability requires more than mere public-relations talking points.

Our nation needs is sensible regulations and a system that promotes accountability: i.e., a system that strongly deters corporate decision makers from driving up their stock prices based on questionable (or false) accounting. 

Until we have that, potential investors should shy away from the stock market.  Why should we engage in Vegas-style gambling with our retirement funds?

Apparently, the Bush Adminsitration and current regulators disagree about the importance of sensible regulations:

"With little notice, regulators at four agencies that oversee the nation’s banks and savings associations on Monday and Tuesday proposed a significant change in accounting rules to bolster banks and encourage widespread industry consolidation by making them more attractive to prospective purchasers.

"The regulators and the Bush administration have decided to resort to further loosening of the accounting rules to try to get the industry through problems that some experts have attributed in large part to years of deregulation." (NY Times)

Great.  Let's do more of the same and hope that the problems choose -- of their own volition -- to just go away. 

And what's this about consolidation?  It seems to me (though I'm NO expert) that one reason we taxpayers had to bail out AIG is that allowing it to collapse into bankruptcy would have had horrible ripple effects on our nation's economy -- precisely because AIG is so huge.

Rather than consolidate, wouldn't it be better in the long run if federal officials encouraged the break-up of such huge companies (i.e., reducing each company's effect on our economy)? 

If a smaller company fails, the effects on our economy would be smaller, and we taxpayers wouldn't be forced to bail it out after executives drove the company into the ground.

Memeorandum has commentary.

Other Buck Naked Politics Posts:

* The Age of Corporate Welfare: Heads they Win, Tails You Lose

* AIG's $85 Billion Bailout: See What Anti-Regulation Ideology Can Do?

* Lehman Brothers Bankruptcy: What it Might Not Mean

* FDIC Says More Bank Troubles Ahead

* Waxman Looks into AIG, Lehman, Interior Dept. Scandal

* Obama Pummels McCain on Economic Policy

* John McCain says Economic Fundamentals Still Strong?

* Bailouts & Stimuli: Will Congress Encourage Bad Behavior?

 

Comments

[JOshua Moore]

heyyyyyyyy smexy!
how you doin sweet thang?
i got my eyes set on you whoooa!
haha

love always,
joshua and mal

[JOshua Moore]

heyyyyyyyy smexy!
how you doin sweet thang?
i got my eyes set on you whoooa!
haha

love always,
joshua and mal

[Gold IRA]

Presentation of ideas is awesome..
Watch a free video on Gold IRA.
http://www.youtube.com/watch?v=3P5oEnKMysQ

[family travel resorts]

I appreciate it very much, at least I know from it someone is reading the contents I have here.

[Web Design Services UK]

Seriously the Financial crisis is at the peak and is a serious problem. Thanks for a good post.

[French Maid]

Hey it’s so nice I really want to appreciate to this site. It’s so much interesting matter I like your work. Please carry on with your work and post me such a wonderful article.

[Natural Cures for Sleep Apnea]

Knowledge giving Article! I appreciate you. I completely agree with you. If we talk about current scenario then it is must be update. I enjoyed reading. I would like to visit more for more queries.

[security cameras]

In shares, up's and down are there every time... Thanks for giving such important information...

[physical chemistry]

I just want to say that It was very good post, it helped me in finding a good affiliate,