Sure, it's only (sort of) financial now, but given how brilliantly it has worked in curing fundamentals (someone forgot to tell FedEx though) and boosting the market thus far, can a wider short-selling ban be far behind? (Probably not, but we love to speculate anyhow).
Who does a short-selling ban screw with other than evil conspirators that spend their afternoons conspiring to conspire to destroy otherwise noble and financially sound firms with their names listed next to "integrity" in the thesaurus? Lots of important players that don't have the political clout or aren't sympathetic enough to be spared. Including:
Any number of strategies, including:
Covered Puts (No great loss here).
Long Call Synthetic Straddles
Short Put Synthetic Straddles (No great loss here either).
...are out the window.
Not to mention that you are just asking to pump up implied volatility on a number of instruments (both puts and calls) and generally disrupt options markets when you pour the short sentiment spill-over into puts.
But these inflated "Wall Street Types" look like bloated beneficiaries of the massive equality gap in this country. Let 'em all suffer.
List continues after the jump.
Funds that use the net cash from short positions to boost their long exposure have become quite popular. Depending on your view of the 130/30 structure (and it's 140/40 150/50 cousins) you may or may not be shedding tears for these managers. Plus, there's probably only around $50-$60 billion in 1X0/X0 funds right now anyhow- not nearly enough to afford expensive lobbyists. We can step on these ants easily without their pitiful cries being heard by anyone who matters.
Merger Arbitrage Funds
That's ok, we didn't really care about efficient pricing of stocks involved in mergers anyhow. Shareholders thereof are big boys and girls. They will be just fine.
Any Arbitrage Fund Involved in Equities
I mean, really, we don't want people able to hedge against financial crashes. We shouldn't need hedging anyhow since the government is going to assure that stock prices only ever go up.
Bond Fund Managers
Want to keep your investment focused on a particular segment of the balance sheet without enduring overly burdensome spill-over equity risk? Too bad. You can't go long bonds and short equity anymore. (Perhaps this helps explain why bonds issued by financial firms didn't enjoy Thursday and Friday's rally quite as thoroughly as financial firm equities?)
No sweat here. We've been bailing out the bond guys since Bear Stearns. It is easy enough to remind them of that if they even think about whining.
Any Sophisticated Player That Buys Bonds
You can't hedge your convertible bond purchases by shorting the stocks. But none of this is about the "sophisticated" players, so no one will care. Crush 'em.
Convertible Bond Issuers
See above. No one understands them anyhow, so no loss.
Credit Default Swap Stability
For a country trying to get a handle on the financial system, I would think you would prefer to avoid increasing the number of OTC instruments like credit default swaps.
Sure, he is right more often than wrong, sure he stands for truth, financial justice and the American way, but he reminds everyone of that guy in high school who was always blowing the curve by acing all the tests. No sympathy from the frat-boy connected finance folk here either. (We are huge fans though, David).