"Because one of the most astounding legacies of the George W. Bush presidency, which becomes more profound and historic with the passing of every single day, is how absurd and laughable has become the idea that unregulated markets are a sensible way to run an economy."

This comment is misphrased, and should read "Regulated" markets; are laughable, etc. How is the housing market "regulated"? Primarly through the asset bubble generated by the Federal Reserve bank, which is a subset of the Treasury Department. (Remember Bush and Paulson want more power for the Fed.)

There was no problem with interest only loans, etc, as long as the market, and asset prices kept heading higher, it was only when the Fed stopped pumping money into the economy, (because it was no longer a suitable strategy) that the socalled violations of fair lending practises became problematic.

The litany of Bush style regulation is best summed up by the EPA's handling of the air at Ground Zero, which Todd Whitman proclaimed safe, under pressure from the White House. If an independent agency had made those recommendations, they would have been hauled into court and bankrupted by litigation. Government interference, is government regulation.

When the Bush people issue no-bid contracts, thats' regulation, in that it limits free enterprise. The problem with the current situation is one of crony capitalism, and ham handed policy decisions, the outcome of which is a government which now supplies more than half of all GDP spending, and deficits which drive out private investment.

If Reagan was the Great Communicator, Bush is the Great Regulator. That America has become a place where the free market no longer functions is an understatement.

This is proverbial Achilles heel of Democrats and Liberals, who lost their blue collar constituents years ago. Now the only way their constituents can hold onto their mortgage is with Uncle Sam holding their hand.

Now a few mortgage lenders will get pilloried, and that completely missed the point. The solution is to abolish the Federal Reserve, and restore the role of Congress to control the money supply. Congress being that branch which represents the people.

One shouldn't quote the WSJ so freely. (It's like quoting the Bible). Sen. Bunning just took the Fed chief to task, concerning the proposed new, all powerful Fed. Bernanke demurred. However if one listens carefully to the Fed chief on occasion he will tell you what is happening. Quote "The Dollar is not my responsiblity."

A week later he was trying to jawbone the dollar higher at a commencement address.

Today Sen Bunning proposed fewer powers for the Fed Chief. Bernanke's answer:"I didnt' request any new powers."

Bingo. Then who wants the Fed to have all this new power, and to what end?

Keep your eye on the sparrow. SEC chairman Cox wants to regulate naked short selling, which is already prohibited. To begin, short sellers have no rights. Zero. The short seller borrows shares from an institution which offers these shares as collateral. If the instituion wants to rescind that offer, they may. The short seller has no guarantee that he can stay in his position.

Naked shorts are short sellers who take their position without borrowing the shares. There are a couple ways this happens, since the brokerage houses went to pooled assets, the rules concerning one investor, owning one share, no longer applies. Investors who own stock do not have the certificates registered in their names. (You own nothing, and additionally you only own a right to the distribution of those pooled assets should the broker have a liquidity problem. If you hold a T-Bill, you have the same rights as another client who owns options, or futures, ergo you have no risk cushion)

Andrew made the specious comment about the lack of regulation in the markets, in yesterday's post. The stock market is in fact heavily manipulated, including the Federal Reserve, through the Presidents Working Group, buying index futures to influence the markets.

The issue under consideration now is margin rules, which directly affects shorts sellers, because stocks purchased on margin are the main source of stocks offered on loan to short sellers. Short sales are considered bullish by analysts, because the short seller makes a promise to buy the stock to close the position. Should short sales be banned, there is no floor under the market. Additionally the margin rules apply to buyers of stock as well. Therefore any market rally has cold water thrown on it before it begins.

A short seller has no position in the market, he has a position, with a third party. In a real stock market crash, money disappears, it simply vanishes. This is the reverse effect of margin calls, cascading, in a self reinforcing vortex. Short sellers capture some of those losses, without short sellers the market is simply worse off than it was.

The SEC should have been regulating the markets the last six or so years, and now instead of regulating, the Bush people are going to try and manipulate the situation. Look out below.