We have come to the grudging conclusion that the Banking industry, of which we have lately been rabid supporters, will do anything they can to evade the most basic of responsibilities for what has been five years of wholesale mismanagement. The news that the American Bankers Association is one of the major forces behind the recent push for short-sale curbs makes us wonder if the clamor to find scapegoats, any scapegoats, to cover misdeeds and dilute the shellacking stock and incentive options have taken over the last 18 months.
The proposals were largely welcomed by banks, which had been pleading with the SEC to rein in short selling. The American Bankers Association called Wednesday's move "balanced and reasoned" and predicted action will limit "downward stock spirals and restore investor confidence."
This, in combination with the totally unfounded and baseless rumors that certain members of the Treasury have been less than private with their personal (and one assumes professional) distaste for short sellers, and the various shenanigans designed to prop up bank share prices start to look like state sponsored short squeezes.
In this connection, we understand that it is popular at present to claim that trending away from mark-to-market accounting will have little real effect, but this attitude puzzles us. First, if it means so little, why make the change away from what is a solid bit of conservative accounting? Second, real effect or not, how wise can it be to sanction mythology pricing at the expense of even some real data extrapolation? Let's just face it. Anyone who tells you that basing pricing on current bid-ask data is wrong because the market is "illiquid" or "panicked" or "at fire sale levels" is merely substituting their own future view of the likelihood and size of future cash flows for the market's. We think this sort of conceit should be viewed with suspicion as it is based on the prospect that all asset prices must rise eternally, the same self-serving conceit that demonizes short sellers.
If the combination of these moves seems to suggest to you that the market is increasingly becoming a side-attraction ride at Imaginationland, you aren't alone. This gives the lie to the American Bankers Association's claim that short seller curbs will "restore investor confidence," unless they mean "investor confidence in the continuation of the present sham."
Wrangling Ahead on Short-Sale Plans [The Wall Street Journal]
Related: "Don't Short Me Bro!" Mug [Dealbreaker Swag]