John Lewis' Letter on the Bailout

I apologize for not posting much lately, I've been busy trying to write a few editorials on the current crisis, but it's taking longer than I'd hoped. In the meantime Noodlefood has a great post here which could probably be forwarded to your senators and representatives.

Update: Noodlefood has ongoing discussion and ARI/ARC has now put up a page devoted to the issue.

Financial News

A few items of interest tonight:

John Allison of BB&T criticizes Paulson's $700B bailout.

China, recognizing the value of liquid and efficient markets, allows short-selling. (Quite sad when the Chinese markets are freer than ours.)

Regulators Responsible for Current Credit Crisis?

I don't know enough about the subject to opine on the overall veracity of this article, but I think at a minimum it provides a good entree for anyone wishing to research the subject. A taste:

Specifically, Basel I's aims were to ensure that banks kept high capital ratios, to guarantee a competitive “level playing field” between banks from different countries, and to penalize risky behaviour by means of a target risk weighted capital requirement, such that the higher the risk of assets held by the bank the higher the required capital.

However, Basel I created a strong incentive for banks to increase their exposure to certain types of assets, deemed less risky by Basel I planners, such as interest rate derivatives, agency securities, and mortgages. For example, under the Basel framework, the risk of holding Fannie Mae (FNM) and Freddie Mac (FRE) debt was 20% of the risk of holding an industrial loan of identical amount. Little wonder then that Fannie and Freddie were able to grow so much.

The Resurgence of Big Government

I'm looking forward to this talk on Thursday the 18th. It's particularly topical given the Fannie Mae / Freddie Mac nationalizations ("conservatorships").

Global Warming Madness in Britain

Ominous news out of Britain. Their courts have found that destroying the property of others in the name of preventing "global warming" is legal and defensible, likening it to kicking down the doors of a burning building to save those inside. On that reasoning, I don't see how any factory, motor vehicle or even farmyard animal in Britain is safe.

Hedge Fund Fees

The typical 2&20 hedge fund fees have always seemed to me to be on the high side, but of course the price has been set by mutual and voluntary agreement, so my opinion was irrelevant. But many commentators, despite understanding that the fees were set in a free market, have called for regulation because they felt that the amounts were "exorbitant" and that the market simply didn't, and can't, "work". Now it turns out that the market is beginning to re-price, without the need for any regulation. I wonder if the pundits will recognize this and start calling for deregulation of other markets they claim "don't work"?