[Dialogue] The Suicide of Capitalism

[Harry Wainwright]

Published on Tuesday, July 18, 2006 by TruthDig <http://www.truthdig.com>  

The Suicide of Capitalism 

by Molly Ivins 

 

In case you haven't got anything else to worry about-like war in the Middle
East, nuclear showdowns, global warming or Apocalypse Now-how about the
suicide of capitalism? 

Late last month, the U.S. Court of Appeals struck down a new rule by the
Securities and Exchange Commission requiring mandatory registration with the
SEC for most hedge funds. This may not strike you as the end of the world,
but that's because you've either forgotten what a hedge fund is or how much
trouble they can get us into. 

These investment pools for rich folks are now a $1.2 trillion industry
(known to insiders, I am pleased to report, as "the hedge fund community").
Hedge funds are now beginning to be used by average investors and pension
investors. Back in 1998, there was this little-bitty old hedge fund called
Long Term Capital Management. Because hedge funds make high-risk bets, Long
Term Capital got itself in so much trouble its collapse actually threatened
to wreck world markets, and regulators had to step in to negotiate a $3.6
billion bailout. A similar fiasco at this point probably would break world
markets. 

The Securities and Exchange Commission under William Donaldson (appointed
after the Enron mess) had tried to regulate hedge funds. But Christopher
Cox, current SEC chairman and no friend of regulation, said he would consult
other members of the administration about whether to appeal the ruling,
which "came on the same day as disclosures," reports The Washington Post,
that the feds "are investigating Pequot Capital Management, Inc., a $7
billion hedge fund, for possible insider trading." Nice timing, judges. 

This is the third time in less than a year the appeals court has blocked the
SEC from acting beyond its authority. According to The Washington Post,
"Former SEC member Harvey J. Goldschmid, who voted to approve the plan,
yesterday urged regulators to appeal to the U.S. Supreme Court, members of
Congress or both. In the Pequot case, a former SEC lawyer who worked on the
Pequot investigation before being fired by the agency has written a letter
to key members of the Senate banking and finance committees alleging that
the SEC dropped the probe because of political pressure." The lawyer said he
was prevented by political pressure from interviewing a top Wall Street
executive: Sources said the executive was John J. Mack, once chairman of
Pequot and now chief executive of Morgan Stanley-and a major fundraiser for
President Bush's campaigns. I'd say the guy's wired. 

So what we have here is yet another case of ideological decision-making
("all government regulation is bad") being applied despite the most obvious
promptings of common sense. Come to think of it, that's exactly the same
pattern this administration has followed with war in the Middle East,
nuclear showdowns, global warming and Apocalypse Now. 

Well, if the administration won't do something, how about Congress? Reps.
Barney Frank, Michael Capuano and Paul Kanjorski are co-sponsoring a bill to
reverse the court decision-and to gather more information about how hedge
funds affect the economy. This would seem a peppy response, except Congress
seems quite determined to do nothing at all these days, having already
beaten the record of the "do-nothing Congress" of the Truman era. As near as
can be figured out, the Republican "game plan" is to do absolutely nothing
between now and November. This doesn't improve anyone's opinion of the
Republican Congress, but has the happy effect of dragging the Democrats down
with them. 

Molly Ivins's latest book is "Who Let the Dogs In?
<http://www.amazon.com/exec/obidos/ASIN/1400062853/commondreams-20/ref=nosim
> " 

C 2006 TruthDig.com, LLC

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