Monday, October 06, 2008
Government policy summation, continued
The policies of this government, the flailing around of its agencies, and the wholesale effect of the United States congress in it zeal to be PERCEIVED as "doing something" and "taking action" has once again produced serious unintended consequences.
Intent: Curbing "speculation" that destroys value-adding financial firms.
Action: Banning short selling for a long list (who knows how one is added or deleted to the list) of financial firms.
Effect: Destroying support for share buy-backs as short-sellers close out positions. Destroying share-lending programs of financial institutions, limiting returns that would previously be inversely correlated with market declines.
Intent: Creating liquidity for MBS instruments and "toxic waste" financial assets
Effect: Concentrating power in the Sec. of Treasury, no effect on Aggregate demand, creating general havoc for accounting treatment of the asset swap.
The equities markets have seen the breadth of the government's response and said a collective "whatever"...and went back to storming the doors for ANY safe or guaranteed asset.