Biting the silver bullet

Wall Street stockbrokers were still breathing sighs of relief over the weekend after last week's panic in the silver markets sent distress signals throughout the financial community. By Sunday the shock waves had subsided enough for Securities and Exchange Commission chairman Harold M. Williams to say "the problem is either gone or manageable." Now congressional and federal regulatory agency probes will attempt to sort out what specific circumstances were responsible for the scare and sudden collapse of the silver market, which sent the stock market plunging and, for a while, threatened to bring down a couple of the country's major brokerage houses.

One of several questions that will need to be explored is whether the commodities regulators need to do more to keep large investors from cornering and thereby manipulating an entire market. It was the forced selling of large amounts of silver accumulated by Texas billionaires Nelson Bunker, W. Herbert, and Lamar Hunt that triggered last Thursday's panic selling. The Hunt brothers reportedly had built up silver holdings of more than 200 million ounces and were a large factor in boosting the price up from $6 nearly last year to a January hgh of $50.05 an ounce. When rumors began to circulate that the Hunts had overextended their credit and were being forced to sell large quantities of their silver, panic selling set in, and silver prices dropped dramatically, closing the day at $10.80 an ounce.

Although the commodities market proved capable of handling the crisis with relatively little interference from the SEC or the Commodity Futures Trading Commission, a whole range of questions dealing with federal regulation -- whether it is strict enough, whether regulators were aware soon enough of last week's problems, and whether they moved in quickly enough or took strong enough action to protect investors -- also need to be pursued.

It was large, wealthy investors who suffered the biggest losses last week, and, in the case of wheeler-dealers who gamble millions on speculative schemes, many people may not be inclined to show much sympathy. But undoubtedly many smaller investors got caught by the decline in the price of silver. The silver panic may hold a warning for those entranced by the something-for-nothing psychology of investment. They may have staked too much of their financial future in gold, platinum, and other precious metals.

In any case, the silver bubble has burst -- for the time being. Wall street rode out the panic with relative ease, and so did the national economy. The only noticeable gap for many Americans may be at the dinner table -- where the silverware they sold used to be.