The SEC's emergency rule against short selling is being roundly derided if not outwardly laughed at. As pointed out, it has all the markings of a regulatory panic.
We figured that, feeling ineffectual if not incompetent in pursuing his charge of preserving investor confidence, SEC boss Chris Cox announced a proposal to crack down on naked short-selling --something which many market watchers believe may not even be occurring on any significant scale-- because he couldn't think of anything else to do. (And also, the head of JP Morgan and a bigshot New York Times business reporter told him to.)
But others think we're being too charitable. The SEC chief may--like many in Washington, DC--have simply lost faith in market processes that weren't producing convenient outcomeswe.
"The most charitable view of this is that the move is political, designed to make it seem like the SEC is Doing Something in the face of all the chaos," Felix Salmon writes. "But it doesn't look like that: it looks like the SEC is happy signing on to the belief that stocks wouldn't be falling if it weren't for short-sellers. In other words, the Powers That Be don't trust the market, and the SEC has gone from facilitating price discovery to making it harder."
David Gaffen at Market Watch mocks the SEC's program as "Operation Stocks Go Up Always."
The move may, ultimately, satisfy the bigwigs among major financial executives who recently discovered that the bilge being held on their balance sheets is not the cause of their problems but the terror of short-sellers. But it's detrimental in the long-term, as it gives people yet one more reason to excuse the market's condition as the figment of someone else's nefarious plan. "At the end of the day if there's smoke, there's fire," says Dan Alpert, managing director at Westwood Capital.
Nice touch, Dan Alpert. Jamie Dimon, you'll recall, used that very phrase when claiming that a conspiracy of short sellers was causing financial stocks to decline.
Four at Four: Operation Stocks Go Up Always [Wall Street Journal]
The SEC Panics [Market Movers]
Posted by guest , Jul 15, 2008 5:53PM
It is just hysterical.
Posted by guest , Jul 15, 2008 6:19PM
Has helicopter Ben been grounded from high gas prices? And where are all of these tools telling us how the market is going to be going up and up! Dow to 5000! bahahaha
Richard Roma
Posted by guest , Jul 15, 2008 6:46PM
Cox is the most free market regulator around and he gets pissed on all the time to be "doing something".Like if anyone knows about unintended consequences, it's him, so Carney, stop sucking dog balls over Cox.Your whining is getting old.
Posted by Tex Appeal , Jul 15, 2008 6:50PM
I think Cox is on the right track, he just isn't taking things far enough. I think what we need is up-tick only trading - thats right, you can only buy or sell on an up-tick! Cause stocks are only supposed to go up right?
Posted by guest , Jul 15, 2008 6:51PM
Like i said before lets focus on the short sellers because they are easier to deal with than the actual mess we are in. If anything all this does is make me less confident about what is going on and i have almost no confidence of the current adminstration being able to guide anyone out of this mess. It is like squandering are resources in Iraq while al qaeda continues to strengthen in Afghanistan. What a joke.
Posted by guest , Jul 15, 2008 7:11PM
If people are selling short without borrowing stock, that's wrong. The fact that the SEC is saying that's wrong NOW is incredible. Having worked at the SEC when I was a little 'un, I have always believed that the SEC didn't need more rules - it needs more people to better enforce the existing ones.
The fact that many people in Congress sold their testicles to Wall Street already for campaign donations makes sure that doesn't happen.
Posted by guest , Jul 15, 2008 7:14PM
don't get confused between short selling and NAKED short selling. vanilla short selling is fine and should be allowed. due to naked short selling, in some companies, fraudulent counterfeit stock is now floating around the market place, in some cases exceeding the total market cap of the company. at least one CEO has tested this by buying up the entire stock of his company and yet a high volume of shares are still trading in the marketplace today. the answer - counterfeit shares of course. the SEC thinks this is enough of a problem that they have grandfathered existing naked short positions, and said that if they were unwound they could lead to systemic market failure.
Posted by guest , Jul 15, 2008 10:44PM
I think it's appalling that Chris Cox would testify before Congress and the nation and not be capable of making himself understood.
I think fair, aggressive enforcement of existing SEC regulations is the key and obviously this hasn't been done lately.
The Administration thinks nothing of committing billions of dollars for bail-outs with a weekend's worth of consideration and yet penny pinches and soft pedals enforcement until conditions are near riotous on Wall Street. The SEC can issue a big growl now but the truth is that they don't have the budget and the qualified personnel to ramp up meaningful enforcement.
Posted by guest , Jul 15, 2008 10:47PM
bess--http://tinyurl.com/67h2uk
Posted by guest , Jul 15, 2008 11:09PM
This is hyporcisy at its very worst!
American investors, the insto investors at least, have been preaching about the good of the free market to everyone from Hong Kong to Sao Paulo.
But when shit hits the fan in the US of A. What does the SEC and the US government do? Curb short selling and call these short-sellers rumour-mongers and market-manipulators! What about their roles in enhancing market efficiency and liquidity??
Those at the SEC. Hang your heads in shame you market-meddling two-face hypocrites! Don't you dare ever lecturing other countries about free markets and government non-intervention.
Posted by guest , Jul 16, 2008 9:27AM
Agree w/ 7:11.
SEC has been asleep at the wheel.