To Reverse Auction or Not To Reverse Auction? – That Is The Question


The latter school of thought cautions that potential fire sale prices which the government may pay under the reverse auction process proposed by Treasury could have a dire effect in pushing down the prices of related securities held by those companies and others, triggering a further downward spiral in capital shortages and tightening of credit.

Similarly, Jerry Bowyer, (whose blog we linked to last week), noted on Larry Kudlow’s show last night, “Let’s talk about all the regulations that put the hole in the boat, not just bailout the boat.”

Watch video here:

Behind the Market Drop

Discussing today’s nearly 400-point market drop, with Dennis Gartman, founder of The Gartman Letter; Jerry Bowyer, of Benchmark Media; and CNBC’s Larry Kudlow & Bob Pisani,0,4659993.story

The immediate question is how to help Wall Street while still penalizing firms for their mistakes, so as not to encourage the recklessness that fueled the current crisis. A good suggestion, floated months ago by Moody’s, is to have the government buy the troubled mortgages and other securities through a reverse auction that drives down prices. That limits the benefit to the sellers and gives taxpayers, who can afford to hold on to the securities until the market rebounds, the best chance of recovering their investment.

See also:

“Bowyer: Debunking Laissez Faire Lehman”

This morning on CNBC Governor John Corzine (D) of New Jersey blamed the current crises in the market on what he called the “laissez faire” mood of regulation which we have seen “over the past decade.” (Video below). Does he even believe this stuff? Lehman Brothers, like Bear Stearns and others was basically lobotomized by Corzine’s former colleague Eliot Spitzer, who severed communication between the research divisions of these firms from the trading operations. He did this in the name of “conflict of interest.” Who’s interest was served by severing the higher brain functions of these firms from the rest of the nervous systems? With one populist fell swoop, allegedly designed to make Wall Street safer for investors, Spitzer made it dumber.

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