Game Stopped

I don't have much to say on the GameStop short squeeze, because there are so many moving parts to this story that I can't make a great deal of sense of it.  But here's the basic story: Small-time investors on a Reddit site pushed up the stocks of underperforming companies like the GameStop video-game store chain, BlackBerry, and the AMC theater chain to make a profit of the stocks' increased value and to stymie hedge-fund managers, but then the Robinhood company intervened and cooled things down by putting a stop to people using its platform to open new positions in the stock.  Lots of people are angry about this, because this means that the little guy can't game the system like the fat cats can.

And that is exactly why U.S. Senator Elizabeth Warren (D-MA) is mad at both sides, seeing no fine people on either. She wants to have Wall Street re-regulated to the point where the stock market once again becomes a platform for investing capital into companies that produce things, not a platform to bet on one stock or another.  I'll never forget what Nicholas Brady, Treasury Secretary under President George H.W. Bush, once called stockbrokers - "riverboat gamblers in three-piece suits."

Maybe this kerfuffle in the stock market, coming at a time when we're in a major recession caused by an ongoing pandemic, is the first sign that, at long last, the get-rich-quick mentality of Wall Street that has been going on for forty years finally peters out.  But who knows?

The GameStop short squeeze is too big an issue for me to delve into too deeply.  I recommend the Wikipedia article on the story if you want to understand it better.

Gone, Gone, The Damage Done

BP finally stopped the gushing of oil from its damaged well in the Gulf of Mexico yesterday, but it's only a temporary solution. The well is being capped for the time being while a relief well continues to be drilled for a more permanent solution. For many, it's a case of too little, too late. Numerous marshes and coastlines have been destroyed, wildlife has been adversely affected, and the tourist business at Gulf resort towns have dropped sharply. The oil that has already leaked out will take years, if not decades, to clean up. And Joe Barton and possibly David Vitter will continue to apologize to BP for inconveniencing them.

Meanwhile, the Senate finally passed a financial reform bill that President Obama will now sign into law. The legislation will create a consumer financial protection bureau to regulate the trading of derivatives but small businesses to keep using them to mitigate risks. It also establishes establishing a new authority to liquidate large Wall Street firms and force shareholders and creditors rather than taxpayers to assume any costs involved. What the bill will not do is get rid of any and all speculation by large banks, and companies will still be big enough to cause a lot of misery if they do fail. An amendment sponsored by Democratic senators Jeff Merkley of Oregon and Carl Levin of Michigan would have addressed those points, but it was never allowed to come up to a vote. The new regulations fall far short of what the British, for example, have done to regulate their financial sector in the wake of 9/15, and the law will take awhile to implement. I suppose it's better than nothing, and without the support of three Senate Republicans - Olympia Snowe and Susan Collins of Maine and Scott Brown of Massachusetts, who in this case are the "New England Patriots" - nothing is exactly what Obama would have gotten.

The law comes too late for those affected by the 9/15 Wall Street meltdown, as Senate bill sponsor Christopher Dodd (D-CT) woefully admitted. And for those for whom it's not too late, it may not help much.

Even after BP and 9/15, Americans will still be addicted to cheap oil and easy money.

And every junkie's like the setting sun.

All That Glitters Is Not Goldman

In a move that seemed more Orwellian than any scheme Orwell ever conceived in his novels, the Republican animal farm in Washington came out against financial reform designed to regulate the very Wall Street firms the tea party movement is mad at to protect them from government control that would have prevented the necessary bailouts the Republicans profess to be against. The entire Senate Republican caucus - including Scott Brown, who would not be a senator today if Emily's List hadn't forced Martha Coakley on Massachusetts voters (thanks, ladies!) - came out against the financial reform legislation proposed by congressional Democrats because of a fund designed to pay back creditors of failed firms, calling it a bailout - even thought the only beneficiaries of such a fund would be investors screwed by the financial firm, not the firm itself. It seemed the Republicans had found some convoluted way to get people opposed to Wall Street excesses to oppose a bill designed to prevent future excesses.

Then the latest Goldman Sachs scandal broke.

The Securities and Exchange Commission is suing Goldman Sachs, alleging that the securities firm misled investors involved in a group of mortgages by saying that an objective party the group of mortgages underlying a series of credit default obligations when in fact a hedge fund run by one John Paulson had put together the mortgage package and bet against it, knowing it would fail and thus reaping a benefit.

Paulson - who is not related to former Goldman Sachs chairman and former Treasury Secretary Henry Paulson - is not a defendant in this indictment, but his underhanded effort to profit off other people's losses is only the latest in a series of Wild West-style deals that have rocked the brokerage houses and investment banks of the nation's financial system. By announcing this suit filing at the same time that the Senate Republican caucus announced its opposition to the financial reform bills pending in Congress, the Obama administration has put Mitch McConnell and company on the defensive, leading them to explain their curious and dubious reasons for their opposition at the same time people like John Paulson are getting rich off unfair financial practices.

Let's see Republican wortmeister Frank Luntz come up with a catchy phrase to help Republicans answer to this revolting development.

Rock and Roll Over

I'm not reassured when the stock market invites the guys responsible for songs with titles like "Sweet Pain" to ring the closing bell.

All hail the gods of thunder. :-O

Don't Show Them The Money

The House of Representatives moved the country one millimeter closer to financial sanity today by passing the most sweeping regulatory bill on the banking and finance trades since the Great Depression. The bill would subject the moneyed interests to new rules that include regulations on derivatives for the first time and create a new agency to take over consumer protection powers currently held by banking regulators. The latter provision survived attempts to kill it, but not before (or after, whatever the time line was) allowing exceptions for some companies trading in derivatives. The biggest element in the bill is the ability to break up banks and financial companies deemed too big to fail. The bill would set up a special oversight panel comprised of several bureaucratic leaders to keep an eye on the market to look for firms that pose a threat to the nation's financial system.

House Republicans vigorously opposed the "overreach" of the new regulations on the financial sector (I don't call it the financial "industry," because that would suggest that financiers produce something of tangible or intrinsic value like manufacturers), and they all voted against it. Decrying the massive government intervention inherent in this bill, Republicans found themselves on the receiving end of criticism by the White House. "I didn't expect them to help after a meeting with one hundred lobbyists for the financial industry," White House Chief of Staff Rahm Emanuel said. "I'm not surprised they are opposed to it. The lobbyists are trying to gut this."

These provisions, if implemented, would mean a lot less money for financial firms to play with, and possibly lose. The government, to boil it all down, would be given the opportunity to prevent another 9/15. Representative Barney Frank (D-MA) is at the forefront of this effort.

Meanwhile, Kenneth Feinberg, who regulates executive compensation at firms bailed out by the government, has placed a salary cap on midlevel executives at four such companies General Motors, GMAC, American Insurance Group, and Citibank - to $500,000 a year until their loans are paid off. This may be the most popular element of the bailout - big shots at companies run into the ground having to take a government-ordered pay cut.

President Obama hopes to sign this bill as soon as it reaches his desk, but the Senate won't act on it until the first of the year. But seeing as how they financial system, as it is, was allowed to bring the economy to the brink, I don't see how it would be difficult for Senate Democrats to unite behind this bill, as sure as the Republicans in the upper house will unite against it.

More News

President Obama reversed nearly eight years of stem cell policy by allowing federal funding for embryonic stem cell research. George Walker Bush had banned this because of the moral questions involved. This from the guy who later started an unjust war Iraq. . . .

Meanwhile, the Dow Jones hit a fresh twelve-year low, and may soon hit a fresh thirteen-year low . . . .