Afternoon:
9°c
Finally, the cavalry has arrived. As they haul themselves out of their upturned wagons and pick themselves gingerly over the carcasses of fallen comrades, those bankers still left standing are entitled to ask of the Financial Services Authority, where have you been?
Blatant short-selling of banks has been going on for months now - the watchdog said as much when it targeted those trying to make a killing out of their rights issues. The consensus is that this will work: no hedge fund is going to risk public vilification by not closing out their positions ahead of Tuesday's deadline.
But to assume the short-sellers are the only villains of the piece is to miss what has really occurred. The shortsellers feed on weakness and it's the banks that got themselves into this unholy mess.
They were forced to turn to their shareholders for more cash. It's their own greedy behaviour and over-stretched finances that are to blame, more than someone scenting blood.
The ban is meant to be temporary - to make it anything more than that would go against the belief, expressed by none other than Hector Sants, the FSA chief himself, that the tactic is "a legitimate investment technique".
However, if it is only to be short-lived, then the banks must get on and strengthen their defences.
To imagine that this spells the end of the credit crunch, is naive. Unless liquidity is restored and cash starts flowing between the banks again, not much will change.
After all, it wasn't short-sellers that stopped banks trusting each other and holding on to their money. In that regard, the move by the US to remove investment banks' bad mortgage debts and park them in some kind of giant financial warehouse, is of enormous significance.
Again though, what it starkly highlights is the banks' inability to clean themselves up.
The authorities have taken charge and the bankers' claim to be the brightest and the best has been found to be as hollow as their balance sheets.
Reader views (3)
Despite the comments, HBOS would have survived OK without the targeted shorting by a rich few.
The targeting, and probable collusion is immoral.
When a few have enough money to influence the market, and stay in the shadows, they're simply robbing the man in the street.
- Cap, london, uk, 20/09/2008 17:36
Report abuse
Of course the banks created the uncertainty which allowed shorters an advantage.
But panic is not a good guide to share valuation and can drive firms passing through a bad patch into liquidation when they would have survived after adjusting their business model. Banking is intrinsically a good business since it's not optional to the functioning of the economy.
Is the above good service by markets? It depends on how you look at the world. But few among the public are going to be advantaged by it.
- Mike Newland, London, 19/09/2008 12:43
Report abuse
It aint over until the fat lady of threadneedle street sings in her death throes and all that the new support for "toxic" mortgages etc has done is expose the central banks to collapse. Can't happen? Who says it can't? Think the unthinkable. They either let those toxic mortgages feed on those who benefited from them and who are still sitting on a tidy pile of stolen capital "thank you very much" or they will bring the whole Western world collapsing down not just the financial system. Are they really willing to bet it all on one throw of the dice to support a bunch of thieves who bet in a game they couldn't lose in? We have seen there is no such thing as a city whizz kid there are only insider traders making a fortune at our expense and either they have every last stolen penny taken back from them quietly and efficiently by governments as of right or the system will "self-correct" to make sure it happens anyway but far more messily.
- John, Dundee, UK, 19/09/2008 10:54
Report abuse
