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The 5 Dumbest Things on Wall Street: July 15

3. Berlusconi's Bull

Sorry Silvio, but blaming speculators for the implosion of Italian banks is a whole lot of bunga bunga.

Italy's two largest banks, UniCredit (UNCFF.PK) and Intesa Sanpaolo SpA (IITSF.PK), this week fell to lows not seen since the period following the collapse of Lehman Brothers in 2008. The lenders saw heavy selling over concerns that Italy would be the next victim of the European debt crisis.

To stem the pressure, Italy's market regulator Consob moved to curb short selling on Monday by forcing short sellers to reveal their positions when they reach .2% or more of a company's capital and then make new filings for each additional .1%.

Paolo Bonaiuti, an aide to Prime Minister Silvio Berlusconi, said the new regulations would unite Italy "in blocking the effort of speculators."

Bonaiuti, of course, was simply following Berlusconi's lead in blaming the entire crisis on the sliver of investors betting against Italy's faltering banks. Back in late June, Berlusconi lashed out at "the locusts of international speculation" for attacking Italian bank stocks, as well as the rating agencies for speaking ill of the country's debt, which, as luck would have it, is heavily owned by those sinking banks. UniCredit and Intesa held a total of $325 billion of government debt as of the end of April.

Come on folks. Let's be fair to locusts! If there are any slimy insects eroding the stability of the Italian -- and potentially European -- financial system, its Berlusconi and his ragazzi.

Clearly Rome is burning. Italy's public debt load amounts to about 120% of gross domestic product. Italy's economy grew a mere .1% in the first quarter. And more than 28% of Italian 15-to-24 year-olds are unemployed.

And even more clearly, the Italian government is fiddling. Instead of spending his time battling the problems afflicting his country's economy, Berlusconi is currently fighting legal charges over wild "bunga bunga" sex parties, as well as tax fraud allegations.

He's also locking horns with his own finance minister, Giulio Tremonti, who he trashed in an Italian newspaper, saying, "he's the only one who is not a team player."

As for Tremonti, he is involved in a scandal in his own right for living rent free in an apartment owned by parliament member Marco Milanese, who was arrested on accusations of accepting bribes. Speculation over Tremonti's future is not helping Italian bonds, now trading at their widest spreads to German bunds since the launch of the euro.

Perhaps the only member of Berlusconi's cronies that's hard at work trying to keep the country afloat is Mara Carfagna, the former topless model who Berlusconi tapped to be Italy's equal opportunities minister.

Carfagna obviously believes in transparency, at least when it comes to her clothing. And that's more than you can say for Berlusconi, who is trying to hide his own ineptitude by redirecting the spotlight on shortsellers, a group that evidently sees the prime minister for what he is: An Italian version of Lehman CEO Dick Fuld right before the investment bank went arrivederci.

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