on the brink of madness

As we’re on the brink of the biggest nationalisation in world history with the US preparing is $700Bn bailout of many of its major financial institutions in return for equity and tighter regulation it’s probably a good time to consider whether it needed to be this bad.
Here are a few suggestions that could have capped the “irrational exuberance”

  • Maintain a full record of stock and commodity market short positions as is maintained for longs
  • Either ban the practice of naked shorting or impose reasonable and proportionate fines on the fauilure to execute the “puts” in the event the stock rises. Without fines in reasonable proportion to the “naked” position then the risk to hedge funds is simply not great enough and mayhem will reign
  • The ECB should raise and enforce requirements for bad debt provisions by banks based on their balance sheet.
  • No unsecured bailouts for banks. When a bank is bailed out due to what is impolitely described as reckless lending the government providing the rescue package should take a reasonable stake. It seems highly unfair to the rest of the economy that some financial services companies should be immune to the consequences of their actions.
  • Require banks to purchase government bonds to support the deposit guarantees (now 100k in Ireland)