Courtesy of Inquiring minds are reading S.E.C. May Reinstate Rules for Short-Selling Stocks.
They have been reviled as the bad hats of Wall Street, nefarious traders who cashed in on the market collapse and, some insist, helped precipitate it.
Now short-sellers, the market skeptics who correctly called last year’s downturn, are coming under even more unwanted scrutiny, this time from federal regulators. The Securities and Exchange Commission appears poised to reverse itself and reinstate rules that would make shorting stocks — that is, betting their prices will decline — somewhat more difficult.
Many banks, whose stocks came under attack last autumn, maintain that unfettered short-selling is dangerous. The shorts, their argument goes, helped bring down Bear Stearns and Lehman Brothers last year.
Mary L. Schapiro, chairwoman of the S.E.C., has said that considering new rules restricting short-selling is a priority.
For the moment, the most likely outcome may be for the S.E.C. to reinstate a rule that the commission itself abolished with a unanimous vote in 2007, under its previous chairman, Christopher S. Cox. Known as the uptick rule, it would bar investors from shorting a stock until its price ticks at least a penny above its previous trading price.
To some, the issue is clear-cut. The American Bankers Association, a trade group representing the vast majority of American banks — whose equity values have been especially battered in the last 18 months — recently submitted an opinion in favor of reinstating the short-sale restrictions.
Sally Miller, a spokesman for the A.B.A., said the member banks thought there was a clear link between the market turmoil and the rule change.
The American Bankers Association Group of Idiots
What brought down the banks was excessive leverage (40-1 or greater at Bear Stearns and Lehman), excessive dependence on real estate investments (both residential mortgages and commercial real estate), lax lending standards, off balance sheet investments ($1 Trillion at Citigroup alone), and a host of other piss poor discretions.
If the American Bankers Association wants to place the blame on who is responsible for this mess they ought to look straight in the mirror and blame themselves.
Moreover, Sally Miller is obviously a complete dunce as to how stock markets work. sally says there is a "clear link between the market turmoil and the rule change". Hello Sally, correlation does not imply causation.
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
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