SEC Extends Short-Sale Ban, Giving Congress Time for Bailout
www.bloomberg.com
 The U.S. Securities and Exchange Commission will extend a ban on short-sales of financial stocks, leaving the prohibition in place until
Congress approves a $700 billion economic bailout.
(visit the link for the full news article)
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Please take note of the second paragraph of the story, as follows:
The ban will expire three days after lawmakers give Treasury Secretary Henry Paulson authority to buy illiquid assets that are burdening financial
institutions, the SEC said today in a statement. The prohibition on short-selling will cease no later than Oct. 17 if Congress fails to pass the
legislation.
The SEC is blackmailing legislators! Bald-faced, blatant blackmail! They're telling Congress to pass the bailout or else.
Short selling is the practice of "betting" that a company's stock value declines. On Sept 19th, the SEC banned short selling certain companies'
stocks, and they have increased the banned list since then. The ban was scheduled to end at 11:59pm on October 2nd.
www.bloomberg.com
(visit the link for the full news article)
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While it may seem like all these "bets" on the stock market, including short selling, are further pushing us into an economic black hole, short
selling is a valuable function in market values. It's a measure of investors' confidence in a company. If investors do not have confidence that
Financial Institution X (as an example) has enough liquid (available) assets to remain in business, they express that lack of confidence by short
selling Financial Institution X's stock. They are saying, in effect, "Hey, this company is really doing very badly and I believe they will suffer
losses."
While concentrated efforts to short sell a company just to drive their stock prices down is considered market manipulation and is illegal, outright
preventing short sales altogether is just as much of a market manipulation. A financial institution who is trading now at, say, $10 per share may
only be valued that high because of the short sale ban; in reality the financial institution could very well be nearly bankrupt. The short sell ban
allows for artificial inflation in a company's value in many cases, and that artificial value will only last as long as the ban is in effect.
This is blackmail and artificial market strength by the SEC!
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reply to post by anachryon
Without short sales, stocks are simply based on supply and demand. I don't really see how that can be considered manipulation. If someone thinks a
stock will go down, they can buy puts.
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