SEC Bans Short-Selling

[JK]

Wow

Link

WASHINGTON - The Securities and Exchange Commission took the dramatic step early Friday of temporarily banning the routine practice of betting against company stocks.

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The move, announced on the agency's Web site, may well be unprecedented and a reflection of regulators' concern about the widening scope of the financial crisis as entreaties come from all quarters to stem a swarm of short-selling.
In the announcement, the commission said it was acting in concert with the U.K. Financial Services Authority in taking emergency action to "prohibit short selling in financial companies" to protect the integrity of the securities market and boost investor confidence.

[marco]

Wow is right. The SEC is basically saying no more betting against these idiots. We know you had better foresight than they did but stop making them look bad for your own gain. Well that's the way I take it. Capitulation here we are.

[King]

Cox quote from the article: The move, he said, would not be necessary in a well-functioning market and is only a temporary step that is part of the actions being taken by the Federal Reserve, the Treasury and Congress.

So, a well-functioning market is one that artificially supports prices?

Wow.

[BlueBrained]

Good

[ppg shg]

Cox quote from the article: The move, he said, would not be necessary in a well-functioning market and is only a temporary step that is part of the actions being taken by the Federal Reserve, the Treasury and Congress.

So, a well-functioning market is one that artificially supports prices?

Wow.

A well functioning market is one which only goes up.

That's why there should be decreased tax on profits because of all the risk that the government will eliminate.

[BlueBrained]

Market up 400...

[Airshark]

A well functioning market is one which only goes up.

That's why there should be decreased tax on profits because of all the risk that the government will eliminate.

Another demonstration of your lack of understanding of how the market works, ppg. Short sellers are a tiny fraction of those who deal in the market. While of course they shouldn't be banned, this says nothing about buying puts or selling covered calls, which are the primary methods of hedging risk. Apparently you think that somehow the inability to short means the stock price can't go down, or is even really supported much.

[marco]

http://www.thestreet.com/story/10438366/2/stocks-zoom-out-of-the-opening-gate.html

The SEC, meanwhile, banned short-selling of 799 financial stocks, effective immediately. The temporary crackdown will remain in place until Oct. 2 but may be extended further. The U.K.'s financial regulator also banned short sales of 29 of its publicly traded companies. Short-selling, or making a bet that a given stock's price will fall, has been a source of heated controversy as some have speculated that short-sellers are responsible for the decline of Bear Stearns and Lehman Brothers.

Elsewhere in the financials space, AIG said Edward Liddy will succeed Robert Willumstad as chairman and CEO. Willumstad was ousted by Treasury Secretary Henry Paulson as part of a government bailout package for AIG.

Longer-dated U.S. Treasury securities were declining in price. The 10-year was down 2 points to yield 3.78%, and the 30-year was off 2-16/32, yielding 4.33%. The dollar was making substantial gains on its major foreign competitors.

[ppg shg]

Another demonstration of your lack of understanding of how the market works, ppg. Short sellers are a tiny fraction of those who deal in the market. While of course they shouldn't be banned, this says nothing about buying puts or selling covered calls, which are the primary methods of hedging risk. Apparently you think that somehow the inability to short means the stock price can't go down, or is even really supported much.

Someone is displaying a lack of understanding, and it ain't me.

I was not addressing the specifics of short selling, but rather I was answering King's question as to what is the definition of a "well functioning market".

Apparently, the definition is one in which the market only goes up, because if it goes down, the government will intervene. Thus, while individual stocks take a hit, overall the market remains stable or continues to rise.

[SluSignGuy]

Could someone explain how this helped the market go up 400 points so far today? Is it just because now there is less incentive for some to have stocks go down as they cannot profit by short selling (pretend I am a kindergardener)

[Blues Fan in TX]

Could someone explain how this helped the market go up 400 points so far today? Is it just because now there is less incentive for some to have stocks go down as they cannot profit by short selling (pretend I am a kindergardener)

That and Uncle Sam has come to the rescue of everyone to the tune of a trillion dollars or so.

[marco]

That and Uncle Sam has come to the rescue of everyone to the tune of a trillion dollars or so.

http://dealbook.blogs.nytimes.com/2008/09/19/putting-a-price-on-a-government-bailout/

The prospect of a government bailout of the financial system raised all kinds of questions Friday, but one of the biggest was this: How much would it cost the government — and, by extension, United States taxpayers?

The proposal is still being hashed out, so even the basic elements are a mystery for now. But the general idea seems to be the creation of a fund to buy the toxic sludge and illiquid assets that are clogging up banks’ balance sheets.

And there’s a lot of sludge out there.

Citigroup, JPMorgan Chase, Bank of America, Goldman Sachs, Merrill Lynch and Lehman Brothers alone had more than $500 billion of so-called Level 3 assets as of June 30, according to Credit Insights. There are billions more lurking in the balance sheets of Washington Mutual, Wachovia and hundreds of smaller banks throughout the country.

That’s admittedly a rough proxy: While many of the riskiest mortgage securities come under the category of Level 3, it also includes more-benign assets that probably wouldn’t be eligible for a rescue plan.
Republican Sen. Richard Shelby, speaking on ABC’s “Good Morning America” on Friday morning, suggested that the size of a bailout would begin at a half-trillion dollars and could go as high as a trillion, if the government’s other recent rescues — including the seizures of Fannie Mae and Freddie Mac — are taken into account.

“It’s probably $500 [billion] to a trillion dollars, and that’s going to visit the taxpayers sooner or later,” he said. “It’s either going to be a debt charged to all of us or to all our children.”

CNBC, citing an unnamed administration official, reported late Thursday that a government facility to buy mortgage-backed securities could require as much as a half-trillion dollars and would involve the purchase of both private-label and government-guaranteed mortgages.

Bloomberg News had higher numbers: It reported that the government is considering establishing an $800 billion fund to purchase so-called failed assets and a separate $400 billion pool at the Federal Deposit Insurance Corporation to insure investors in money-market funds.

Henry Paulson, the Treasury Secretary, isn’t offering up hard numbers yet: He told reporters Friday morning that a plan would need “hundreds of billions of dollars.”

But he also said that the final cost to taxpayers, whatever it is, will likely be “far less than the alternative.”

The U.S. government has already put a lot of money on the line in hopes of preventing an economic meltdown. In March, it pledged $29 billion to help JPMorgan acquire Bear Stearns. Earlier this month, it agreed to buy as much as $200 billion of stock in Freddie Mac and Fannie Mae to keep them solvent.

On Wednesday, the Federal Reserve offered a $85 billion bridge loan to American International Group to keep that insurance giant from going under. Yesterday, it joined with other nations to pump $180 billion into global money markets. And on Friday, the Treasury Department promised $50 billion to insure the holdings of money-market mutual funds for a year.

[Iowa_Card]

I would go out on a limb and say that the economy is the biggest National Security concern, rather than energy dependence.

[marco]

In another report, California's unemployment rate has hit 7.7%. Not good.

[ppg shg]

It's funny how the invisible hand works.

Republican Sen. Richard Shelby, speaking on ABC’s “Good Morning America” on Friday morning, suggested that the size of a bailout would begin at a half-trillion dollars and could go as high as a trillion, if the government’s other recent rescues — including the seizures of Fannie Mae and Freddie Mac — are taken into account.

“It’s probably $500 [billion] to a trillion dollars, and that’s going to visit the taxpayers sooner or later,” he said. “It’s either going to be a debt charged to all of us or to all our children.”

Bloomberg News had higher numbers: It reported that the government is considering establishing an $800 billion fund to purchase so-called failed assets and a separate $400 billion pool at the Federal Deposit Insurance Corporation to insure investors in money-market funds.

The U.S. government has already put a lot of money on the line in hopes of preventing an economic meltdown. In March, it pledged $29 billion to help JPMorgan acquire Bear Stearns.

Earlier this month, it agreed to buy as much as $200 billion of stock in Freddie Mac and Fannie Mae to keep them solvent.

On Wednesday, the Federal Reserve offered a $85 billion bridge loan to American International Group to keep that insurance giant from going under.

Yesterday, it joined with other nations to pump $180 billion into global money markets.

And on Friday, the Treasury Department promised $50 billion to insure the holdings of money-market mutual funds for a year.

The next time anyone says that Republicans are the fiscally conservative party or are for market solutions, they should just get punched right in the face.