One fine spring evening 35 or so years ago, I rang the doorbell of the home of the young lady I intended to ask to a high school dance. After a short pause, the front door opened to frame her father, his bare feet and a can of refreshment in the doorway.
Momentarily stunned at the sight of his domestic bliss, I stood like stone. He didn’t. Turning in the direction of the kitchen he yelled, “Golly, Honey, it must be spring because the sap’s here!”
Shouting
The sap’s here? Recent events, however, have proven him more accurate today than cutting then. I mean, who but a sap would spend so much effort shouting into a hurricane of bad public policy when so little ever changes?
For example, within days of my writing last week that the Federal Reserve’s bailout of investment banks is terrible policy that carries unforeseen costs, J.P. Morgan, the white knight the Fed picked to buy sinking, stinking Bear Stearns, unmistakably pointed to one of those costs when it raised its $2 per share offer for Bear to $10 to ward off other would-be buyers.
The quintupling of price came 48 hours after investment banks like Morgan, according to the Wall Street Journal, tapped the Fed’s new line of credit — credit that nonbank banks like Morgan never had access to before the Fed moved to save Bear — for an average $13.4 billion of taxpayer money per day in the first three days of the new policy.
The tab
So, who is picking up the tab for Morgan’s increased offer? Only a sap would believe a Wall Street titan is bankrolling the deal out of its own back pocket when every shred of evidence clearly points to the taxpayers’ pocket.
That fact becomes even more rotten when compared to the farm bill impasse in Washington. By most accounts, the five-year legislation remains undone because of a $4 billion difference in proposed spending — or about one-tenth the money you and I promised Wall Street in three days last week — between Congress and the White House.
If that sticky, sappy feeling hasn’t spilled over you yet, here’s an item that may help you gain the glow: On March 17, the Chicago Mercantile Exchange Group, Inc., the now-combined Chicago Mercantile Exchange and Chicago Board of Trade, announced its purchase of NYMEX Holdings, Inc., formerly known as the New York Mercantile Exchange.
Price signals
That means today’s barely functioning cash grain and livestock markets will soon be getting their price signals from the world’s largest single, for-profit, around-the-clock money, grain, meat and metals futures trading operation.
Is this a good idea? Farmers and ranchers likely won’t get to say because the Merc, in announcing the all-but-done deal, noted that “We greatly appreciate the statements of support made this morning by our Congressional leaders … “
In short, the antitrust, regulatory fix is in so don’t be a sap and inquire if this massive marriage of market-makers is good for actual producers — hedgers — or if this is all about speculators’ hot pursuit of cold cash.
The Chicago Mercantile Exchange’s reassuring words, however, were not taken to heart by the biz writers at the New York Times who, March 20, wondered if these new, shareholder-owned mega-markets are becoming too big to be regulated by the Commodity Futures Trading Commission, the usually napping government watchdog.
Too late
Most futures market experts already believe they are, reported the Times, but “despite widespread agreement that these regulatory gaps are bad for investors and consumers, they have not yet been repaired.”
Why? I could tell you, but I think you already know. Besides, I’m hoarse from shouting into last week’s hurricane.
