Friday, September 19, 2008

SEC bans short-selling following like move by UK regulatory authorities

"The commission is committed to using every weapon in its arsenal to combat market manipulation that threatens investors and capital markets," SEC chairman Christopher Cox said in a statement. "The emergency order temporarily banning short-selling of financial stocks will restore equilibrium to markets."

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.

A recent wave of the market maneuvers -- where traders seek to profit by selling unowned shares of companies in the anticipation their prices will drop -- has been blamed in part for the demise of venerable investment firm Lehman Brothers and other big companies.

Digg here:


When the financial speculators are fat and happy, short selling is just considered part of the game. Financial speculation works both ways: you're betting on when a company goes bad (short selling) and betting on when you think companies might do well (the more "normal" type of investments: buying stocks, bonds, etc.). At least in the realm of financial speculation, this type of maneuvering makes some kind of sense.

The problem now is that our economists at the Federal Reserve want to keep pumping paper money into the system instead of lowering interest rates. Lower rates might mean more investment here at home (mortgages, etc.) in theory, but with consumer behavior leaning heavily toward savings these days (no matter how much they try to brainwash - er, advertise - us into buying that new plasma TV), they know that lowering the interest rate would accomplish nothing but allowing foreign investors to continue buying up pieces of America. And why wouldn't they? They're pissed enough as it is that they hitched their wagon to our economic star, and now that we've mismanaged ourselves into a recession, the rest of the world is seeing the side effects. So why not buy up that same driving force when/if a rebound occurs?

Our economists and government are more transparent than ever. They call this a "temporary" measure, as if we're about to bounce out of this recession all the better. In five years, we'll still be waiting.

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