How bad are things on Wall Street? Well, far worse than I imagined, and I imagined a lot. Why do I say that, you ask (and rightly so)? I’m no economist. I’m not a registered broker/dealer. I don’t own a seat on the NY Stock Exchange nor am I a member of the Federal Reserve’s board. Well, all that is true, but even an ignoramus about financial matters like me can get the message when he’s hit in the face with a brick bat. And today, ladies and gentlemen, the Securities and Exchange Commission (the SEC for all you financial hipsters out there) hit the stock markets with one of the biggest bats in its arsenal:
SEC bans short-selling
WASHINGTON (AP) — The Securities and Exchange Commission took the dramatic step early Friday of temporarily banning the routine practice of betting against company stocks. […]
In the announcement, the commission said it was acting in concert with the U.K. Financial Services Authority in taking emergency action to “prohibit short selling in financial companies” to protect the integrity of the securities market and boost investor confidence. […]
“The commission is committed to using every weapon in its arsenal to combat market manipulation that threatens investors and capital markets,” SEC chairman Christopher Cox said in a statement. “The emergency order temporarily banning short-selling of financial stocks will restore equilibrium to markets.”
I’m fifty one and 9/10th years old and I can’t remember a time when the SEC banned short selling. Essentially, short selling a stock is placing a bet that the price of that stock will go down. If it does you win the bet. If it doesn’t you can lose your shirt or cocktail dress. On the other hand, in a market headed sharply downward, short selling can be a way to make a great deal of money in a very short (pardon the pun) time.
In a normal market short selling is a risky play, but what the SEC and its corresponding agency across the Pond, the U.K. Financial Services Authority are telling us by banning the practice is that these are not normal times. Obviously a wave a short sellers was anticipated, and that doesn’t exactly take a rocket scientist to calculate based on the losses in the markets this week. Hell, if I had any money I’d have been short selling financial stocks the minute Bear Stearns’ cow manure hit the fan back in March.
So the SEC, and I’m willing to bet the Treasury, the Federal Reserve and anyone else (i.e., central banks all over the world) with any interest in preventing financial markets from going into a death spiral, are clearly planning for the worst, even while they keep every finger crossed and pray each night for a miracle to deliver them from the evil of economic turmoil the likes we haven’t seen in a very long, long time. Indeed, the SEC’s action is clearly part of a coordinated effort to circle the wagons of our global economy:
Reflecting severe concern about the health of the global financial system, American, European and other major central banks drastically escalated their response Thursday, making almost a quarter of a trillion dollars available to banks after lending had stalled and threatened further harm to an already battered world economy.
In a statement released as markets opened in Europe, with trading well under way in Asia, the U.S. Federal Reserve said that it had authorized another $180 billion lending program to help banks in need of emergency cash. That took the total size of the Fed’s agreements with other central banks to $247 billion.
Something tells me $247 BILLION DOLLARS (damn, if that doesn’t start to begin to sound like real money), isn’t close to what it’s going to take. Not by a long shot. We are edging ever closer to the abyss of a global economic meltdown that will make Chernobyl far too inadequate a metaphor for what will happen to the markets, jobs, foreclosures, trade, the whole nine yards of globalization. People holding lots of gold will be happy, I suppose, but not many of the rest of us.
You know, if I were John McCain, I’m not so sure I’d want to be the next President of these United States. He signed up to run in order to play with all the US Military’s toys while chasing the bad guys in Iraqiranafghanapakistan and blowing stuff up. That is, he’s running for President so he can play the role of the all conquering military hero in the greatest melodrama ever fabricated by a speech writer. McCain and his tax cutting, deregulating lobbyist pals won’t have a clue what to do when the economy tumbles down around their ankles. After all, they and the rest of the Multinational Corporate wing of the Republican Party had a great deal to do with creating this mess in the first place.
Then again, I’m not so sure Obama is all that thrilled about the prospect of becoming the next “Leader of the Free World,” either. He was running to be the next JFK. Now, if he wins, he’s likely going to have to pull off morphing into the next FDR. We better hope he wins though, because McCain has “Hoover” redux (with a dash of Curtis LeMay) written all over his pancaked mug.
Ps. I wonder if McCain still plans to fire the Chairman of the SEC if he’s elected, even if he can’t, you know, legally do that?
