Connecticut Senator Chris Dodd has joined the baloney brigade -- the term Gary Weiss coined for the tinfoil hat crowd of conspiracy theorists who blame corporate problems on short-sellers.
Referring to the collapse of Bear Stearns, which some have blamed on shorts, Senator Dodd said that "This goes beyond rumors. This is about collusion."
Hold up. So Bear Stearns didn't collapse because of massive losses and a balance sheet like something out of a 1950s horror movie? No, apparently not. Bear Stearns collapsed because short sellers were betting it would collapse.
But isn't that like saying that the Patriots lost the Super Bowl because people bet against them in Las Vegas? The soaring short interest in Bear Stearns was an indicator of the company's problems, not a cause of them. The fact that JPMorgan needed guarantees from the Federal Reserve to acquire the company is proof of that.
Senator Dodd joins the baloney brigade
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Reader Comments (Page 1 of 1)
4-30-2008 @ 6:13PM
David Huston said...
My recollection of this is different: that there (allegedly) was a whisper campaign by short sellers impugning the financial wherewithal of Bear Sterns; not that there were many short sales. True enough, Bear apparently went through most of $12 billion in a day or so, trying to reassure the market that it could perform. JP Morgan got the best deal it could make from an all-too-willing FED pledging our tax dollars in the process. Also, since Morgan reportedly has more than $7 trillion in credit default swaps outstanding, many apparently with Bear, its interests may have been indellibly linked to Bear without the public's bailout.
5-01-2008 @ 11:55AM
Steve in Denver said...
Balony brigade. Not exactly the word I was thinking, but certinaly more polite. I actually must insist on credit for the original politically incorrect term as I coined it back in the days when Pat Schroeder was draining the common sense out of Colorado.