But not just any old regulation.....

[nancylebov]

Figuring who to blame

Happily, you can still blame Cox for something. He went as far out of his way as he could to enable the brokerage firms by harassing the small group of informed financial people who have been trying to tell the truth to the markets: the short sellers. They bet against the stock price of a company and so have always had a bad reputation with the public. But in this case, they are the closest thing we have to heroes.

A man named David Einhorn is a case study. He runs a hedge fund called Greenlight Capital, which sells short some stocks and buys others. That is, he doesn't just bet against companies but for them, too.

Still, for some time now, he's been standing up in front of large audiences, announcing that he was short Lehman Brothers stock, and then explaining in great detail its dubious accounting practices. The SEC responded by demanding to see his firm's e- mail, hinting darkly that he was part of some conspiracy to drive Lehman Brothers out of business, and generally making him feel that he'd pay a price for telling the truth.

I have a notion that we need some way of regulating the regulators, but I have no idea what it would be.

Link thanks to Robin Hanson.

Comments

[cucumberseed.livejournal.com]

I adore how the first comment to the article translates out to "we're screwed because the government told these companies to loan money to black people (who everyone knows don't work and can't pay it back)." I look forward this meme sprouting up like little racist mushrooms everywhere in the next few months.

[nancylebov.livejournal.com]

Probably. It's a damned shame that racism does such a good job of recruiting malevolent ingenuity.

Two Things

[osewalrus.livejournal.com]

The unfortunate trend in the courts for the last 20 years, and at the SEC for the last 8 years, has been to protect company Board Members and Officers from the shareholders who actually own the company.

Why? Well, because people figured out that if they bought a few shares, they could use the rights of shareholders for other purposes, such as alerting other shareholders to bad practices within the company or even press social causes such as investing only in socially conscious investments or limiting carbon footprint or some such.

Mind you, this is what free market advocates always say when people want the government to regulate social goods. "Nonsense, go out and use the market and convince other people in the marketplace to go along with you." But when people try to do this, suddenly they are "taking advantage" of the rules designed to make those who control the company (officers) accountable to those who actually own it (the shareholders).

The result is that shareholders can't ask about things or propose resolutions about things that have significant impact on the value of their investment. For example, cable companies just blew a boatload investing in deep packet inspection technology, which they will now have to junk because spying on your customers proved to be enormously unpopular. You would think you could, as a shareholder, ask the company to assess the risk of this huge investment so shareholders could evaluate whether it was a good idea. But they aren't allowed to ask. You can't even ask if the company is investing in DPI so that you can make your own evaluation of the risk.

Ah Republicans -- all the free market bumper stickers and none of the actual free market principles.