Short-selling financial shares is now illegal
The latest government intervention into the capitalist system is the move by the UK and U.S. governments to ban short-selling of all financial stocks outright.
In the wake of the severe market turbulence unleashed by the failure of Lehman Brothers, the government has decided to insert itself into the marketplace and prop up share prices by banning short-selling outright. This is a clear violation of free market principles.
This is quite ironic because the Federal Reserve and the U.S. Treasury allowed Lehman Brothers to fail in order to demonstrate the Governments commitment to the free market. Obviously, their experiment in free market economics has been a disaster, and they are doing a complete 180-turn. The next thing you know, they will ban private citizens from owning gold.
Below is the list of firms which cannot be shorted and links to a number of good commentaries on the issue.
U.S. financial companies whose shares can’t be shorted – Market Watch
The FSA’s endangered species list – FT Alphaville
Short Selling Ban: Why is the Bush SEC Scared of the Market? – Beat The Press
SEC tries to bankrupt Wall Street – Bronte Capital
UK Temporarily Ban Short-Selling 18 Sep 2008 – CNBC
FSA bans short-selling of banks – FT
Banking shares rise more than 30% – BBC News
The Next Target: Asset Managers – Market Beat
Fear and loathing in the financial markets – Willem Buiter
SEC: Ban All Short Selling – Barry Ritholtz