What is it about Democrat Senators and their public statements that so often result in market disruption? Just yesterday we saw the results of Senate Banking Committee Chairman Chris Dodd's statement that nationalization of some banks may be necessary "at least for a short time." The Washington Post reported that shares of Bank of America, Citigroup and Wells Fargo were down more than 25 percent in the wake of Dodd's loose lips.
It would be interesting to know if any of his hedge fund buddies in Connecticut benefitted from the fall in bank shares and the overall market.
There is a very disturbing pattern here. I reported earlier:
Senator Schumer was accused last year of triggering the collapse of IndyMac, a major bank in California, by publicizing a letter he sent to federal regulators questioning the soundness of the bank. A classic bank run followed, leading to the bank's collapse. The head of the Office of Thrift Supervision pointed a finger at Schumer: On Friday, regulators specifically fingered Schumer for IndyMac's failure. The Office of Thrift Supervision said in its statement announcing the seizure that "the immediate cause of the closing was a deposit run that began and continued" after Schumer went public with his concerns
Senator Reid, almost as well-known for loose lips as Vice President Joe Biden, single-handedly was responsible for a massive sell-off of insurance stocks one day last year, when he said that the financial system bailout plan was crucial because a large insurer was at risk of failing (this was after American International Group was bailed out). Reid specifically cited "a major insurance company -- one with a name that everyone knows -- that's on the verge of going bankrupt," according to Dow Jones Newswires.
Guess what? The stock prices of insurance companies collapsed that day. The next day, Reid backtracked. His office released a statement that Reid was not personally aware of any particular company being on the verge of bankruptcy" and that "he has no special knowledge about nor has he talked to any insurance company official" . This the Senator Majority Leader. Incidentally, no insurance company has collapsed since then, either.