Joe Lieberman’s Dangerous Blame Game

Floyd Norris sticks his knife today into Joe Lieberman, who thoroughly deserves it. Liberman’s blaming speculators for the fact that asset prices are rising, and by golly if he isn’t going to do something about it:

One proposal would require regulators to set strict limits on how many futures contracts could be owned by financial types…

Those limits would apply only to financial speculators who want to bet that prices will go up. The proposal would do nothing to halt bets that prices will fall.

Another suggestion from the senator would bar pension funds with more than $500 million in assets from going long in energy or agricultural commodities. (Evidently, it would still be O.K. for them to bet on copper or silver.) And no institutional investor would be allowed to be a passive investor in a commodity fund.

As Norris notes, this is the same Lieberman who opposed expensing stock options on the grounds that asset prices might fall. And the really scary thing is that Lieberman’s actually one of the more financially literate senators. (He does represent Greenwich, after all.) Beware politicians: when they start legislating in financial markets, they can generally be relied upon to do more harm than good.

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