It's about #@#@** time that somebody stands from the rooftops
and shouts that last week SEC Chairman Chris Cox saved the stock
markets. When he issued his emergency rule, applicable to 19
leading financial firms, against "naked short selling" (promising
to sell stocks at a low price that one not only doesn't yet own,
but doesn't even have an agreement yet to borrow), and promised to
ask the Commission to extend the rule throughout the market....
what happened? Well, despite all sorts of gnashing of teeth and
wrongheaded criticism (including
this absurd column by the WaPost's Sebastian Mallaby), the fact
of the matter is that the markets, badly tanking up until then,
staged an almost immediate rally -- big, bold, and deep -- which
continues as of this writing. The Dow rose more than 200 points the
very next day, and overall it is up something like 500 points since
Cox's action. A number of news stories have directly tied the rise
in the markets to Cox's action, but always buried deep within the
article, and always in passing.
But it deserves headline-making attention. What this economy has
needed for months has been part substantive corrections
and partly a change in psychology. The
latter, in circumstances of bank runs and panics, is often at least
as important as the former. Cox's emergency order, substantive as
it was (and it WAS substantive, and much needed, as will be the
broader rule when/if it is issued), also completely changed the
psychology at work, for the better. Combined with President Bush's
announcement that he is rescinding the executive order against
offshore drilling, which had the immediate effect of driving down
oil prices (again, psychology at work -- or, rather, a change in
outlook which is based on fundamentals but which acts through
psychology), the Cox move may well be seen in retrospect as the
turning point in this economic rough patch we've been having. Much
more needs to be done, of course, most of it by policymakers in
Congress or the administration who sometimes seem to want to do
exactly the wrong thing -- but for now, Cox
seems to have put a stop to the panic, reintroduced some
much-needed cautious optimism, and also of course done the right
thing substantively to ensure that buying and selling actually
involves securities that exist somewhere other than in somebody's
imagination.
Cox
explains it all very well in today's Wall Street Journal.
But there's more to be said, from a political standpoint. A few
months back, when Cox was enduring moronic criticism about supposed
complacency during the Bear Stearns mess, the Chamber of Commerce
took out a large ad in the Washington Examiner dedicated explicitly
to singing Cox's praises. Few people in Washington enjoy such
respect from such an important group. Cox also has the respect of
the tech community for his sponsorship of the Internet Tax Freedom
act and for all sorts of other tech-savvy actions during his years
in public life. And he did yeoman's work as first-ever chairman of
the then-brand-new Homeland Security Committee in Congress. It all
makes one think that if he were even half as aggressive at running
to the TV cameras as, say, Chuck Schumer is (any more than half as
aggressive would be obnoxious!), he would be a familiar face in
most news-watching American living rooms, with a well-deserved
reputation as a steady hand in tough times.
Just saying.....
topics:
Oil
