Looking back to the future
Back in the “prehistoric 1970s,” says Irwin Kellner in MarketWatch, “bankers followed the 3-6-3 rule: they paid 3% for deposits, lent them out at 6%, and were on the golf course by 3 in the afternoon.” Banks were “boring, but they were safe.” Now, facing a massive taxpayer bailout and an abandonment of the investment banking model, the financial system will once again become less flashy, and more regulated, “regardless of who is elected president.” Expect fewer exotic securities and securitized mortgages, and more down-to-earth rewards. In our “brave new world” of finance, “the ‘Masters of the Universe’ will have to be content with two cars, one home, and no private jet.”
Don’t blame the short sellers
As in all times of “financial convulsions,” we’re looking for someone to blame, says James S. Chanos in The Wall Street Journal. This time “the guardians of our economy” have landed on short sellers, or “those investors who believe certain stocks are overvalued for fundamental reasons.” The SEC banned shorting 799 financial stocks, without soliciting comment and without any supporting data. Well, short selling has long been “misunderstood and maligned,” starting in the 1630s, but now more than ever we need these pessimists in the market. Short sellers keep things honest. They foresaw the troubles at Enron, Fannie, and Freddie, and this whole credit crisis—instead of blaming them, regulators should have listened to them.
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