Hedge Funds and Mercantilism - Updated


Untangling the knot a bit more
This one misses the point a bit. More on that after the links.


The really telling point is in Part 2, and I quote (adding some emphasis):

"Naked short selling is a name often applied to in an illegal, steroid enhanced perversion of short selling and is the most common mechanism by which stock manipulators generate supply swollen IOUs to sell instead of real shares. Neither you nor I can do this, but until relatively recently a few powerful folks on Wall Street could and actively did engage in naked short selling in order to manipulate the price of a company's stock down, making their regular short positions and put options much more lucrative."

While I will agree that certain hedge funds should top the suspect list on the private side of the equation, this otherwise excellent piece doesn't ask the really important question.

How did those "few powerful folks on Wall Street" get the power to use naked short selling, and why can't anyone else do it?

There was more than one set of rules. There was no uniform rule of law. Someone had paid a pretty penny for the power to control one part of the market.

It's mercantilism. Crony capitalism. Corporate welfare. A perpetual sixty-nine between business and government that screws everyone else.
NeoWayland, Fiscal Porn

There's no doubt in my mind that neither Congress nor the various regulators understood what they were handing to certain individuals.

But the root of the problem is still the absence of the uniform rule of law. Law should apply to everyone or to no one. It's obvious that the only way hedge funds could have taken advantage is if there is more than one set of rules.

And from the looks of it, Congress is not going to repair it. At least as long as elected officials and politicos get their cut.

The fix is in, the deck is stacked against you.

UPDATE - At the request of Judd Bagley who made the videos I linked to, I changed my transcript (see comments). Blame my hearing, not his video. I double checked this morning, and he was right.

— NeoWayland

Posted: Sun - March 22, 2009 at 02:14 PM  Tag


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