Regulatory Credibility

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This Volkswagen thing is getting serious.
The Wall Street Journal is running a piece now challenging the credibility of German regulators in the incident, intimating that the huge spike in Volkswagen shares was the result of some regulatory failure. That's the other shoe dropping right there. Shares drop 50%, it's a regulatory failure. Shares spike 400%, its a regulatory failure. And, of course, the Wall Street Journal drops the nuclear bomb of regulatory justification. The incident might "enfeeble banks." To wit:

The repercussions may be more significant. Any major losses suffered by hedge funds which have scrambled to cover short positions in VW at ever more exorbitant prices could end up enfeebling counterparty banks, already hard hit by the credit crunch.

When are we going to let risk be risk? These are all big boys playing with Volkswagen. Had it gone right, they would have made big profits.
Germany's Crash-Test Dummy [The Wall Street Journal]

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