Blaming short-sellers for bank stock beatdown

Posted Sep 15th 2008 8:55AM by Zac Bissonnette
Filed under: Bank of America (BAC), Merrill Lynch (MER), Lehman Br Holdings (LEH)

The New York Times reports that, with David Einhorn target Lehman Bros. (NYSE: LEH) filing for bankruptcy, "some investors are afraid that fund managers like him will take advantage of the climate of fear stirred up by the troubles of Lehman to target other weak financial firms whose declining share price would bring them rich rewards."

Over the weekend, heads of major banks begged regulators to reinstate a rule making short sales in the financials more difficult, but regulators said no.

The New York Times also inexplicably states that "A rapid plunge in the shares to below $4 last week ultimately created the conditions that brought the 158-year old firm to its knees on Sunday."

Here's the problem with that logic: The Federal Reserve and all the major banks spent the weekend trying to find a way to avoid a Lehman bankruptcy filing. Anyone willing to assume all of Lehman's liabilities could have had the company for whatever price he wanted, less than a dollar even. But no one wanted it! Lehman's problems were not liquidity, they were solvency. The company had no equity. Bank of America (NYSE: BAC) could have had Lehman for a can of baked beans and a roll of toilet paper, but instead went and paid something like $35 billion for Merrill Lynch (NYSE: MER). There is no rational way to pin the mess that is Lehman on short-sellers.

Tags: 091508, bac, inthenews, leh, mer, short sellers, ShortSellers

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Reader Comments (Page 1 of 1)

9-15-2008 @ 10:02AM

kluji said...

begging regulators to not aloow short sales. good lord what next? its a free market isn't it? so they basicly want the market fixed to "only" go up? wusses!

9-15-2008 @ 10:07AM

beanspants said...

blame short sellers? no i don't think so. blame banks making stupid home mortgage and home equity loans to people that couldn't afford them, and then blame these fools for buying them.

so long and bye bye.

9-15-2008 @ 1:19PM

Mitch Eisensetin said...

You certainly cant blame the "quant" hedge funds for taking advantage, tick by tick of this situation. I am wondering if companies like Renaissance Technologies are short selling AIG just because they can. If they are, just because it is still legal to do so, how can you fault them for destroying the United States banking system in order to make profits for the ultra rich at the expense of the strategic security of the USA. They are only making money. Jim Kramer would be proud. The supreme court would be ecstatic because you should make laws to life by. interpretation and judgement are irrelevant. Whats right is not the issue. its whats legal. you cant blame the poor transnational corporations for supreme greed because that is what capitalism is based upon. Capitalism is a version of love your neighbor as you would yourself by hating everyone equally and believing it will all just even out. It is the law of the jungle. Jehovahs Law. Jewish Law, Pentacostal Christian Law. The law of punnishment and hatred. This is the law of business, which is war without bullets. I say kill the banking system. Sure. Its good for us. We have to validate the market economy by destroying the world in order to justify the old testament. Then when 3 billion people have died of war and starvation, the messiah will come and the book will be fulfilled. Its common sense. god is the ruler and we are nothing. We all must die to prove he lives. that makes sense doesent it? Of course it does. Ask Sandra Palin. Ask Karl Rove. Ask Sean Hannity. Ask Bill OReilly. Ask Brit Hume, Ask Monica Crowley, Ask Michael Savage, Ask Rush Lembaugh. And ask yourself. You know the world must end in order to prove God exists. So why try to save it. Kill it as fast as you can. God will be greatful to you. god bless you and god bless Amerika.

9-15-2008 @ 2:10PM

Susan Coffey said...

Leave it to my generation the baby boomers to screw up so badly. Taking down a company that has been around for 158 years. One word to describe us "Greedy." Hopefully, but it doesn't look like it so far the next 3 generations after us will have more sense.

9-15-2008 @ 2:35PM

Donna said...

Goes to show you that not all Einsteins are smart. What an idiotic philosophy you have. Move to Russia, you fool.

9-15-2008 @ 3:09PM

quentin said...

Susan the IRS gave illegals ITIN's which illegals used to get mortgages from idiot lenders that's what's behind a lot of this mess. Lenders should have left risky subprime mortgages to the mafia who knows how to collect...ha ha ha