Did the FSA have to ban short selling in selected financials because they have never had an effective punitive regime against market manipulation and abuse? A Body Shop plc IT guy getting done for reading emails? A bond manager out of work for a year? PR stunts? Is this the monument to rigorous market 'fair-play' the FSA is proud to leave as its legacy of battle against the high priests of manipulation?

What is the consequence? Beside a well-earned reputation as ineffective prosecutors, when blow-back occurs as the political shit hits the fan the FSA, in many ways like the SEC, has no apt response. It can only listen to Alex Salmond and other populists play to their constituent galleries and bring forth a blanket ban on the shorting of selected financials. That is the price of never having had a useful process for regulating and monitoring market trades.

And what is the consequence of that? London is up an all time record amount on the back of financials of whom some are enjoying rises of 30%-40%. Is that really price discovery? Or legal market manipulation as the gamekeeper turns poacher?

Suppose a heretic says the creative destruction of the banks, or of those parts of the banks, that made a long series of bets on the back of cheap credit in real estate markets is in everyone's best interests? And that a freer market can achieve this - especially if regulators insist that the idea of heading off asset bubbles is a ridiculous one and, in any case, not covered by their mandates.

Heresy and unrealistic. But quite possibly that end will be served by other means (albeit within the limits allowed by political lobbying, influence and ramification). The public SuperBad bank along the lines being mooted is going to emerge a wolf in sheep's clothing. The wipe out of AIG equity is a precedent and the public purse is not without limit. Any bank offloading its toxic loans on the taxpayer expecting anything other than similar severe dilution, or its effects in kind, is a well-connected outfit indeed.

Yet the 'free market' equity holders of financials are currently voting for quasi nationalisation with full voice.

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