Circle of Competence

Today is a momentous day, readers, for the state of the global financial system. In a shocking historic mandate, Congress, in concert with the SEC and the U.S. Treasury, has declared that all short sellers with open positions in financial companies must close their positions within three days, followed by a transfer of the newly liquid capital to the short sale of commodity futures.

With the outbreak of commodity speculation never before seen in history, and a short selling madness that continues to run unabated in the market for bank and financial equities, the regulators have found a solution that will solve both problems in short order.

“We can kill two birds with one stone, really. I don’t see a downside here,” said Christopher Cox in a public statement this morning. “It’s not that we don’t like short selling, we do, really. The problem is, we’d rather have them shorting oil then shorting Lehman. It’s much better for the average American.”

The rampant speculation by commodities investors has driven such products as oil and corn to new highs, inflicting pain on millions of consumers worldwide. It seems that, after extensive due diligence, the SEC has determined that there exists no supply and demand imbalance in the commodities markets, a thesis that has been widely speculated.

“While they claim that supply has been on the decline and demand on the rise, we’ve found no such thing in our investigations. It’s all speculation.” said Senator Joe Lieberman this morning, “Our new proposal will dampen this unregulated madness, bringing oil, wheat, cotton, and other commodities back to reasonable levels. My gas tank cost $120 to fill this morning! Is that fair? I don’t think so.”

When told that every commodity future purchase must simultaneously be sold by another speculator in an equal amount, Mr. Lieberman responded, “Wait, what?”

Likewise, the new mandate will enable financial firms, such as the august investment bank Lehman Brothers and the supernova mortgage giant Fannie Mae, to resume their upward trajectory. With the absence of short sellers, the stocks of these companies will be able to rise to more reasonable levels, in line with their unwavering profitability and discipline.

Treasury Secretary Paulson responded to the allegations of favoritism towards Wall Street; “These firms work very hard, 7 days a week, to make money for themselves, and they do so in a disciplined fashion. We just don’t think they should be punished for a couple of silly mistakes. Rumors about ‘extreme leverage’ and ‘insolvency’ are overblown. Fannie and Freddie are fine. The short sellers, though, might bring down the entire financial system if we don’t do something about it, and this mandate is a big step in that direction.”

While it is yet to be seen whether the move will stem unwanted speculation driving up commodities and  punishing financials, the regulators seem optimistic.