2008-07-20 23:16:00
Banks to the SEC - We'd Like Some Protection From Short-Sellers Too
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Did the SEC really expect anything different?
Recently (in case you have been living under a rock), the SEC announced that they would be implementing a short-term restriction on short-selling for certain companies, including Fannie Mae, Freddie Mac, Citigroup, Lehman Brothers and others. In total, 19 companies were included in the new rule (which says that you have to actually locate shares to short and they must be removed from the market in order to short these 19 companies).
As you can imagine, other companies are now asking the SEC to be included in the new rule. Why not? You get rid of a good number of "pesky" short-sellers, and you will likely watch as your stock soars over the short-term. Other brokers have asked to be included in the list of the 19 firms, and now some banks are asking to be included as well.
The American Bankers Association sent a letter to the Securities and Exchange Commission recently, saying that all "publicly traded" banks should be included in the restriction as well, or else it would "erode confidence in the banking industry" and that banks are suffering from the financial turmoil in the markets as well.
Are you really surprised? Can you really blame the banking industry for making this request? It doesn't seem unreasonable to me, and the SEC should have expected this when they implemented the new rules.
My question is - which industry or company will request to be included on the list next? Every publicly traded company in the world would love to be protected by short-sellers, and pretty much every company could probably make a pretty compelling case as to why they should be on the "list".
The SEC was sticking up for its buddies when it implemented these new rules, and are now finding that their little party is being crashed by all sorts of different companies.
I will be interested to hear how the SEC responds to the American Banking Association. I can pretty much guarantee that banks will NOT be included on the "list" - I just want to hear the SEC explain why they won't be included. This situation is quickly turning into a PR nightmare for the SEC. It was an ill-advised rule that wasn't very well thought-out in the first place. You can't solve all of the woes of the market with one stroke of your pen - it just doesn't work that way. As we before, the real problems lie in the balance sheets and businesses of the companies that are now begging for protection for the SEC. The real reform needs to take place there.
Source: U.S. Banks Ask SEC to Expand Stock Trade Protection
Filed under: The Economic Meltdown | General Market News
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