Wall Street Manna

An irreverent look at Wall Street

Thursday, September 18, 2008

Cox: All short selling banned

WASHINGTON -- The Securities and Exchange Commission took its most aggressive assault against bearish stock bets by stating its intention to issue a temporary ban on short-selling.

SEC Chairman Christopher Cox briefed Congress late Thursday of the agency's intention to take the extraordinary step of interfering with the market's regular functioning. Short-selling is a trading strategy of selling borrowed stock in hopes it falls and can be repurchased at a lower price.

It's unclear if the SEC's intention has been approved by the commissioners, which is required, and whether which stocks are covered or for how long it will be in effect. Earlier this summer, the SEC moved to restrict certain short-selling practices for 29 days, covering 19 financial stocks.

Thursday, the U.K.'s Financial Services Authority said it would ban short selling in financial stocks until January. The FSA said it would review the effect of the ban each month. The FSA also announced additional disclosure requirements from hedge funds of short-sales if a certain threshold is met.

The SEC's decision comes amid increasing concern that short-sellers are abusing legal trading strategies to drive financial stocks lower. Since the near-collapse of Bear Stearns & Cos. in March, regulators have been looking into a combination of short-sales and false rumors are part of the problem.

U.K. Treasury Chief Alistair Darling, who was involved in the FSA's decision, said in a statement Thursday, he welcomed the FSA's "decisive action." He said in current market conditions it was in the "interests of financial stability."
http://online.wsj.com/article/SB122178234612954617.html?mod=article-outset-box

Serves the shorts right; they overplayed their hand. I'm for free markets, but I like the Howie Long approach. When he was asked on CNBC last week if he was investing in real estate to take advantage of the distressed prices, he said, "I don't play that game. It's not for me."

The shorts agenda is different. They wanted to push firms out of business. Today the bulls pushed back, and tomorrow they get steamrolled.

It's payback time for the shorts!

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