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The Useless Ban On Short Selling

by | 20th, September 2008

MEGAN MCARDLE on the self-serving ban on short selling:

“Every time there’s a financial crisis, demagogues start criticising the short-sellers. . . . Successful shorts, like George Soros’ spectacular attack on the British pound, usually work because there is a real underlying issue (in that case, the British pound’s unsustainable peg to other EU currencies). If there’s no problem there, the shorts take a big bath. . . . Perhaps most importantly, while short selling is a problem for Morgan Stanley, and his shareholders, it is not the primary problem in this crisis. The problem is in the debt markets, not the equity markets: financial firms are finding it very, very difficult to roll over their paper. (More on this later). The ban on short-selling does nothing to combat this problem, and indeed, by shaking public confidence in the stock price, might push investors into being more conservative on the debt than they otherwise would be.”

It’s a market. Money is bought and sold. Selling short is legit…



Posted: 20th, September 2008 | In: Money, Twitterings Comments (9) | Follow the Comments on our RSS feed: RSS 2.0 | TrackBack | Permalink