OpEd: "Jawboning"---- effective method or cruel hoax

Sometimes when policy makers do not want to take concrete steps to solve problems, they indulge in an exercise called "jawboning." This "jawboning" has risen to a high art in financial and political circles, whether you are the Federal Reserve Chairman or the President of the US or whomever.

Last weekend I went to Wisconsin Dells to join my editor brother in a doubles game of tennis with two younger...and faster tennis players. My bro and I only had age and .....whatever wisdom we called "experience" to work with. Speed, vision and deft of hand has been slipping for some time. O.K. You understand the situation we were in.

It was a furious paced game with lots of net play. Just the kind of game Denis and I have always loved. At a critical point, Denis hit from the baseline a direct ball toward the opposing net player, who hit it with his backhand, and popped a weak lob in the air, which I smashed for a winner.....one of the few of the day for me.

As I walked to the other side of the net, celebrating, I cheered my bro on and said, "Let's go big guy.....they may be losing their arm strength."

On the next play, the opponent smashed the ball at me and although I was ready for it, it came on the backhand and I blew the shot. The "Jawboning" had worked. I had the shot I wanted....just not the skill needed.

So------"Jawboning" as a rule of thumb is always the mark of weakness.

Think of President Bush "jawboning" the mortgage industry to "work with" the holders of the mortgages that are going to be set to new higher interest rates---over a million of them this coming year. He has the power to take effective administrative action to modify the rules of handling, but instead uses "jawboning." That indicates weakness and .....portends trouble.

"Jawboning" in the mortgage case is his way of distancing himself from the problem---a problem that he cannot distance himself from since the Treasury supervises or.....should have supervised....the industry.

In fact.....over the past 30 years whether it has been the savings and loan industry in the 80's, the bond fiasco, the stock market crash, the techno bubble, or the current situation---- money.....special interest campaign money has impaired the proper functioning of our government in the financial sector.

For years, the government has been trying to weaken the barrier between banks and the stock brokerage industry---the Glass Stiegel Act of 1933. To the extent that they have weakened this barrier, banks too have become vulnerable to the downdraft of bundled mortgage products they are financially tied to.

So---the problem: Right when we need effective decisive action from our government we get just "jawboning." Kinda like we got with Hurrican Katrina.

Today the stock market seems to be responding to the "jawboning."----and seeing right though it. That is how I see it.

Stay tuned.