The Wall Street Journal today published an editorial written by the Senate minority leader, Mitch McConnell, claiming that this is truly a market driven by ailing supply. He goes on to put his, and his party’s support behind a bill proposing to cut down on both supply constraints and consumption, as well as tackle the issues in the futures market which have lead to such volatile price swings.

Ah, but if this is really an issue of supply and demand, then why attack the traders? It seems illogical to propose both of these mandates. First, go after the traders who are punishing the American public through the increase in gas prices (remember, he claims it is simple supply and demand economics). Second, legalize offshore drilling to alleviate supply constraints, accomplishing the same ends, but from a completely different viewpoint. In all fairness, shouldn’t the answer be just one or the other?

Don’t get me wrong, I believe this country has gotten away with purchasing cheap oil for decades, and some sort of price increase was due (and will continue to be), especially when considering the falling dollar value. Sure, higher prices may lead to inflation in OPEC member countries, but if oil profits were allocated properly in such countries, the general populous would have a higher quality of life across the board… maybe, say, near the excesses the American populous enjoys, generally speaking. While we cannot make capitalism cross borders efficiently, it doesn’t mean such countries not supporting it cannot reap the rewards of the free markets, especially if they control precious commodities.

But still, I am torn. It is no secret that our lame duck President is an oilman, or at least highly-connected in that world. As major oil suppliers “negotiate” closed-bid contracts with the Iraqi government to meet our supply, futures markets gambling on the commodities have been fiendishly bullish. How does this happen? The larger picture is quite clear – as the country struggles to stave off a Main Street recession, capital has drained out of the equity markets, and poured into more tangible assets such as commodities as a hedge against the declining dollar. Throw in some insider trading, controlled by a small, but cash-rich consortium of investors, and watch the rally.

Now, we get to hear our President propose the answer to all of our problems – offshore drilling, with the potential for more Middle Eastern conflict. Who says our politicians don’t do any work in Washington?

The stock is now trading at $3.6B market cap, or about 16% price-to-book.

Chances are, investors got it right. While the writedowns may be slow to come for WaMu, they will definitely have to mark assets down billions upon billions of dollars as delinquencies and foreclosures mount.

Shareholders were recently diluted when TPG acquired a preferred ownership stake at $8-$9.

Will the Fed, or possibly another bank, step in and take over the ailing firm’s balance sheet?

Fannie Mae and Freddie Mac are down nearly 50% overnight, valuing the equity in the firms near $5B on TRILLIONS of dollars of assets. The implicit guarantee from the American taxpayer may soon turn explicit, as capital injections will become necessary in the near future. There is no doubt about it; the American taxpayer and the Dollar’s strength are on the hook.

And the trading day is only beginning…