UH OH - TROUBLE FOR THE FREE MARKET FAIRY

The rising gasoline prices are forcing even GOP ideologues to re-consider the wisdom of unrestrained markets. Bloomberg reports ("Congress Should Take on Oil Speculators, U.S. Senators Say") that Sen. Kay Bailey Hutchinson (R-TX) supports a limit to speculation on oil futures and Sen. Ted Stevens (R-Alaska) even co-sponsored a bill to do just that:

Legislation designed to limit speculation in oil markets was introduced last week by Senators Dianne Feinstein, a Democrat from California, and Ted Stevens, a Republican from Alaska. The bill would require the Commodity Futures Trading Commission to review trading practices of institutional investors and impose limits on how much those investors can hold in a given market.

Even more surprising, an AEI hack thinks some form of regulation is needed:

Lieberman Makes Risky Bet in Speculation-Ban Bid: Kevin Hassett

Commentary by Kevin Hassett

Thus, some congressional action to curb speculation may well be advisable, but only because it protects society from the possible financial catastrophe if futures markets make a sudden reversal. This should take the form of establishing reasonable position limits and tighter margin requirements, not an outright ban.

(Kevin Hassett, director of economic-policy studies at the American Enterprise Institute, is a Bloomberg News columnist. He is an adviser to Republican Senator John McCain of Arizona in his bid for the 2008 presidential nomination. The opinions expressed are his own.)