Despite putting taxpayers on the hook for hundreds of billions of dollars, the bailout passed by Congress last week has done little to restore confidence in the country's financial sector. Ditto for the rate cuts orchestrated by the Fed and other countries.
So taxpayers face massive losses, runaway inflation, dismantling of the capitalist system, and dwindling ammunition to stem further market crashes -- and we're still no closer to restoring confidence in being able to bail out of this thing. Thanks for nothing.
To the blanks fired by the government, we can also add the SEC's ban on short-selling. This was a misguided effort from the get-go that sought to give the financial sector a breather from the big, bad short-sellers who were driving stock prices down. Now that the ban has expired, it instead is generally viewed as having added to the mayhem while doing little (if anything) to prop up stocks.
In the weeks since the ban was first instituted, financial stocks like Sovereign Bank
But we need to look at the nearly 200 other stocks that were added to the list, stocks that investors don't normally associate with finance: along with General Electric
The turmoil in the markets was heightened precisely because short-sellers were not there to even out the excesses. When markets tumble, short-sellers are usually buyers to cover their positions. It serves as a bit of equilibrium, but in their absence, there were no checks in place, and the S&P 500 is now more than 200 points lower, or 18% below where it was beforehand. The Dow is down more than 1,750 points.
With hedge funds being a big component of the short-selling milieu, their inability to short certain stocks -- a key component of their investing strategies -- may have pushed stocks down even further. With their funds showing steep losses, investors have been liquidating the holdings, causing the hedge funds to have to sell off shares at depressing prices.
The government has made bad choices about the markets from the very beginning, when it forced the sale of Bear Stearns. It multiplied the fear when it bailed out Fannie Mae and Freddie Mac, nationalized free-spending American International Group
These are the people we trust to get us out of this mess? Don't worry, folks. The government's here and it wants to help.
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