The Nanny Market

by Steven M. Cohen  •  Jan 24, 2008 at 7:03 am

http://www.buyselljump.com/2008/01/nanny-market

It was only a matter of time.

During this period of intense market volatility, as fear runs rampant and we are perched on the precipice of a full-scale panic, a major politician just had to chime in with a call for significant additional market regulation. It's a great way to pander to overwrought investors, those at risk of massive layoffs, and anyone who doesn't believe in the virtues of free enterprise, capitalism, and markets that function according to economic realities.

In other words, to Democrats and others who mistrust Wall Street.

Predictably, Hillary Clinton has issued a clarion call for the federal government to get on the case and pass new rules to wring out the "excesses" of the market. Other objective and measurable market sins include "offensive" and "wrong" executive pay packages. It should be amusing to watch Congress wrestle with such exactitude in trying to forge a law on the subject.

According to the New York Times, which gave Hillary above-the-fold front page coverage on her market views, she wants to "get back to the appropriate balance of power between government and the market." Of course, appropriate is in the eyes of the beholder.

What this really means is that she wants the feds to hold investors' hands and guide them through the minefield that is the market. She wants the government to dictate to private companies what they can and ought to pay executives instead of allowing a system out of balance to self-correct.

Never mind that government intervention usually means stifling risk-taking, innovation, and capital formation. But, hey, maybe those are not "appropriate" market functions, anyway.

Incidentally, where was the junior senator from New York when she could have called for legitimate governmental intervention into abusive tactics by lenders that resulted in many thousands of mortgages predestined to foreclosure as the borrower walked out the door?

Such an intervention by regulators might have prevented the slicing and dicing of these faulty loans into the CDOs that are bringing down hedge funds, their institutional investors, and perhaps eventually some banks. In other words, the government might have had a constructive role in preventing the root cause of the present crisis.

But it's so much easier, and politically appealing , to blame the market for its "excesses," and to call for the government to step in and make things right.

Hillary's soul mate George Soros weighed in from the rarified air of Davos, Switzerland, where the intellectual elite congregate once a year to solve the world's problems. Soros called for a "new sheriff"--you can't make this stuff up--for global finance, presumably to prevent the kind of worldwide market crisis we are now experiencing. This from a former maverick trader who exploited the wild and woolly (and largely unregulated) currency market to make his first billion by shorting the Brish pound, bringing the Bank of England to its knees. Rest assured the irony is lost on him.

It is amazing how a major segment of the investment community continues to throw its support behind candidates like Hillary, who essentially espouse anti-market views and propose new rules to stifle the markets that made these Wall Streeters rich in the first place. It seems hardly a week goes by when some Goldman Sachs plutocrat isn't throwing a major fundraiser for Democratic candidates who share Hillary's view of the world.

In other words, raising money for politicians who don't believe in or trust free markets. Truly unbelievable when you think about it.

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