New York Attorney General Andrew Cuomo said Thursday he’s launching a "wide-ranging" investigation into short-selling on Wall Street, particularly in financial stocks.
On a conference call with reporters, Cuomo said he intends to use New York’s Martin Act to prosecute short sellers who spread false rumors and engage in other improper conduct.
Apparently there is no problem with longs who spread false rumors to artificially inflate the price of stock- just with the shorts. There is no mention of going after longs manipulating stock.
"The markets need to be stabilized," Cuomo said. "One way is to root out short sellers who spread false information."
Cuomo said he believes the federal government has been "ineffective" in regulating the financial markets and said much of the troubles in the markets today are tied to mortgage fraud.
"The federal regulatory structure has failed this country," Cuomo said.
Cuomo stressed that short selling is legal, but said he will pursue civil and possibly criminal charges against those who engage in improper behavior.
"You can’t spread false information," Cuomo said. "You can’t conspire to spread false information to manipulate the price of a stock."
I can’t help but think that the government’s attitude of "Pumping- OK, Dissing – bad," has contributed significantly to the problems in the markets. Cuomo’s comments are a classic example. We have been told that the troubles in the housing, credit and stock markets are crises of "confidence". Investor "confidence" is supposedly shattered by bears and their rumor-mongering. "Naysayers" and "negative media" supposedly brought down housing, and now shorts are being blamed for the stockmarket volatility. The SEC has even announced a temporary ban on short selling. [Details not released yet.]
Cuomo complains about a failed regulatory structure, but he seems to overlook an important factor that helped cause this situation in the first place- "pro-bubble" policies that allow them to inflate, and then additional policies that try to prop them up.
Greenspan says that central banks can do little to pre-emptively act to prevent bubbles in financial markets, but they seem to be working awfully hard to prevent their decline. The same can be said of the U.S. government. Benefiting from the taxes of inflated assets and anxious to please voters who liked their assets rising quickly, bubbles have been allowed to form, then kept on life-support as long as possible. Longs who manipulated stock or Realtors who claimed "It’s always a great time to buy" had little to fear from prosecution. I offer this video [from March 2007] as evidence:
So much for bearing a market "bear". Now it seems we’ve got "bulls" and "scapegoats". Sure there are short sellers who’s tactics ought to be prosecuted. Let’s just not forget though that they are no more guilty than the pumpers.
Thanks for pointing this out. I’ve been wondering why one-sided manipulation is o.k., but I guess I just don’t understand the “Secret” visualization principles at work here.
We might close up today, but I suspect that when more details come out, the market will realize that when the doctor pulls the paddles out to restart the patient’s heart- that’s a bad sign, not a good one.
My bet is that after we get more details of the “Grand Plan” on Monday and the market has time to digest it, that’s when the stomach upset occurs.
Even with his new Dodd-approved Katyushas blazing, and dictatorial powers over nearly the whole world’s financial services industry, Paulson cannot tolerate criticism or close inspection at this point. Heck, he can’t even afford to be laughed at.
I see by looking at the individual stocks in Google’s sketchy quotes that the typical trace (e.g. Goldman) consists of a huge 20 or so percent leap in the first couple of minutes on gigantic volume, then floating around on very light volume. Clearly this will not end well, even today.
I used this mornings bounce to sell all my positions at Scottrade. I will not participate in a market that is manipulated by the SEC, Fed, and the Treasury.
(Note I don’t believe in the efficent market theory Buffet is just right way too often for it to be correct But I do love to poke fun at it so without further ado)
The even Newer theory of Market efficiency!!
You are only allowed to be efficient when the market is going up.
Short selling is now verbotten so companies that are doing badly can only be punnished with the only other factor out there… time.
Expect a lot of sideways trading for umm say the next 5-8 years if Japans fiasco is a good example.
I realize of course that simply because you cannot sell short does not mean that you cannot sell at all but it does help us get a mark to market a lot faster.
Killing the shorts does nothing but create a scapegoat
Northern Virginia Housing Bubble Fallout
UK House Bubble
Bubble Meter
Mish's Global Economic Analysis
Ohio Fraudclosure
Breaking News
Thanks for pointing this out. I’ve been wondering why one-sided manipulation is o.k., but I guess I just don’t understand the “Secret” visualization principles at work here.
twist -
“We’re sorry, this video is no longer available.”
More likely they were sorry the evidence hadn’t been suppressed yet. I don’t suppose Admin took the precaution of downloading the thing
So how high do you think the Dead Paradigm Bounce will go today (no cats were harmed, but retail investors had better watch out!)
John-
We might close up today, but I suspect that when more details come out, the market will realize that when the doctor pulls the paddles out to restart the patient’s heart- that’s a bad sign, not a good one.
My bet is that after we get more details of the “Grand Plan” on Monday and the market has time to digest it, that’s when the stomach upset occurs.
Yes Igor, we know this will “fail”
twist -
We might close up today, alright.
Even with his new Dodd-approved Katyushas blazing, and dictatorial powers over nearly the whole world’s financial services industry, Paulson cannot tolerate criticism or close inspection at this point. Heck, he can’t even afford to be laughed at.
I see by looking at the individual stocks in Google’s sketchy quotes that the typical trace (e.g. Goldman) consists of a huge 20 or so percent leap in the first couple of minutes on gigantic volume, then floating around on very light volume. Clearly this will not end well, even today.
I used this mornings bounce to sell all my positions at Scottrade. I will not participate in a market that is manipulated by the SEC, Fed, and the Treasury.
(Note I don’t believe in the efficent market theory Buffet is just right way too often for it to be correct But I do love to poke fun at it so without further ado)
The even Newer theory of Market efficiency!!
You are only allowed to be efficient when the market is going up.
Short selling is now verbotten so companies that are doing badly can only be punnished with the only other factor out there… time.
Expect a lot of sideways trading for umm say the next 5-8 years if Japans fiasco is a good example.
I realize of course that simply because you cannot sell short does not mean that you cannot sell at all but it does help us get a mark to market a lot faster.
Killing the shorts does nothing but create a scapegoat
Igors word : BOOM
I could not agree more
So the Wall Street crime syndicate does not like shorts??
Surak-
Not when they can make them the fall guy.