http://www.reuters.com/…

The U.S. Securities and Exchange Commission issued an emergency order on Friday temporarily halting the short selling of 799 financial stocks in an effort to protect investors and markets.

The measure underscores growing concerns that short-selling has led to sharp declines in U.S. and European financial stocks since the onset of the credit crunch.

“The emergency order temporarily banning short selling of financial stocks will restore equilibrium to markets,” SEC Chairman Christopher Cox said in a statement. “This action, which would not be necessary in a well-functioning market, is temporary in nature and part of the comprehensive set of steps being taken by the Federal Reserve, the Treasury, and the Congress.”

As Bill Anderson over at the Lew Rockwell blog has said:

The last line is a howler worthy of Paul Krugman’s twice-weekly missives in his New York Times column. The SEC is not “restoring” equilibrium; it is preventing equilibrium.

It seems that policy makers are making the same terrible errors committed by the Hoover and Roosevelt administrations during the 1930s. (The Daily Kos, a popular Democratic blog, is calling for a “New New Deal.” Frankly speaking, we are not rid of the old New Deal.) The government wants us to believe that the real problem is falling prices, so if the government can prop up prices of assets by any means, then it is doing us a favor.

Remember that Carl Menger wrote in his wonderful Grundsatze that “all things are subject to the law of cause and effect.” Indeed, Menger’s words live here; falling prices are an effect, not a cause. Short sellers and others who are helping to drive down asset prices are restoring the markets to their natural equilibrium, not preventing it. Unfortunately, the SEC is channeling Hoover and FDR, and they are preventing the economy from recovering.

The more they tinker… the more pain we will end up in.

http://www.reuters.com/…

A meeting between top government officials and the heads of some of Wall Street’s biggest financial firms over the fate of Lehman Brothers broke up on Saturday but was set to resume on Sunday, a spokesman for the New York Federal Reserve Bank said.

“Senior representatives of major financial institutions reconvened on Saturday with U.S. officials at the New York Fed. Discussions are expected to continue tomorrow,” the spokesman said. Small groups were continuing to work into the night on unspecified issues that were raised at the meeting.

Efforts are under way among Lehman executives, potential buyers and government officials to craft a buyout plan for beleaguered Lehman, possibly before the weekend is over.

Lehman has become the latest victim of the global credit crunch but Treasury and the Fed have made clear they do not want to see taxpayer funds committed to any deal involving Lehman.

Among government officials at the meetings were New York Fed President Timothy Geithner, U.S. Treasury Secretary Henry Paulson and Securities and Exchange Commission Chairman Christopher Cox.

I wasn’t able to pay attention to the market the 11th and 12th as a result of attending the Service Nation Summit so I missed the Lehman Brothers and Merrill Lynch stock plunge. (Morgan Stanley didn’t do well, Fannie and Freddie dropped quite a bit too.) The Fed claims that they won’t step in with credit because Lehman has been doing poorly for some time and have access to the discount window. Seems last reported was that Lehman was perhaps to be broken up in three ways with “Bank of America would acquire the bulk of Lehman Brothers, including its mortgage assets. Barclays, Britain’s third-biggest bank, would take a smaller parcel including Lehman’s asset management and fixed income businesses, while Goldman would take the rest.” However other sources are claiming Barclays has backed out citing it “couldn’t get guarantees from the government or agree on a private-sector deal to mitigate what it called Lehman’s “open-ended” trading obligations.”

It’s going to be interesting to see what comes out. They really want to figure out something before Asia markets open. Tomorrow could be a really nasty day.

In other news JP Morgan is in talks to buy Washington Mutual. With all these buyups and mergers the results remind me more and more of the 1907 panic where its believed that JP Morgan spread rumors of bank insolvency in order to buy their assets up cheap after the bank run which would inevitably occur. The neo-merchentialist/corporatist system we have continues to increase the power and wealth of the bankers and power elite at the expense of all the rest and the public continues to dig their own grave by playing into the hands of the banks and politicians by requesting more regulation and nationalization which only further expands their power.

For those interested in knowing more about the history of banking in the United States, The Great Depression and why the Federal Reserve System is bad:

America’s Great Depression

• Free: http://mises.org/rothbard/agd.pdf
• Print: http://www.mises.org/store/Americas-Great-Depression-P63.aspx

History of Money & Banking in the United States

• Free: http://mises.org/books/historyofmoney.pdf
• Print: http://www.mises.org/store/History-of-Money-and-Banking-in-the-United-States–P191.aspx

The Case Against The FED

• Free: http://mises.org/books/fed.pdf
• Print: http://www.mises.org/store/Case-Against-the-Fed-The-P69.aspx

I just checked the news and it looks like Bank of America has pulled out too. The Fed is claiming it won’t provide any funds to prevent the collapse. Tomorrow is not going to be pretty. I also noticed that Mr. Greenspan is saying the obvious: “the U.S. credit squeeze has brought on a “once-in-a-century” financial crisis that is likely to claim more big firms before it eases.”