Ravengate
Partners - Stock market, economic and political commentary by Patricia Chadwick

The uptick rule made sense when it was instituted back in 1938 and 70 years later it still makes sense. Simply stated, the rule required that a short sale be executed only if the latest transaction in the stock was at a price higher than the previous trade, i.e. had been an uptick. The various arguments made for its elimination do not hold water relative to the rationale for its existence – as a check and balance against ‘bear raids’ on stocks. Its elimination was a mistake and the recent rampant and destructive bear raids on more than a handful of financial stocks is evidence of that mistake.

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In the beginning – there were bad lending practices. And they are at the core of this extraordinary mess.

What was at the heart of the bad lending practices? The Federal Government!! Under both the Clinton and Bush administrations, it was government policy to encourage the private sector to ease underwriting standards in order to expand housing ownership in the U.S. The Federal Reserve under Alan Greenspan was an enabler in that development, by employing a monetary policy that kept interest rates exceedingly low, to the benefit of mortgage seekers. So lay blame on the US Government for bad policy.

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Enough is enough. If the stock market is ever to turn all the way around, there must be an end to what is clearly becoming a witch-hunt on the part of the Congress. Congress, which cannot seem to keep its own books straight, is hell bent on straightening out corporate America – and it is obviously acting, with elections around the corner, for political gain.

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The new year has witnessed the political rhetoric become pointedly directed at the economy. Not surprisingly, the Democrats, aggressively led by Senate Majority leader, Tom Daschle, are now blaming Republicans for creating a budget deficit with the tax package that was passed in the spring. That tax package was not only appropriate but it was good (not bad) economics. Even more astonishing has been the performance of President Clinton’s one-time national economic adviser, Laura D’Andrea Tyson. On television a few days ago, she actually blamed the current recession on the tax cuts put into effect last spring. Where was she when President Clinton was cutting the capital-gains tax?

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