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House Price Crash Forum

Could This Work?

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The Government needs to make two immediate announcements:

1. That the ban on Short Selling of Financial Stocks is reimposed with immediate effect, and

2. That with immediate effect the Government will purchase in the open market Banking shares of a list of banks, which would need to include LloydsTSB, RBS, Barclays, and perhaps others. The announcement would state that they would continue to do so until the price of each had increased to a defined level that would be stated in the announcement. This level for LloydsTSB and RBS should be the price at which the Government purchased the recent offer shares (173.3p and 65.5p), and for Barclays would be an agreed price, perhaps �2 or �2.20.

The effect would be immediate and probably dramatic:

(i) Stability would return as investors would know that while the price remained lower than the stated price then they would be foolish to sell,

(ii) The immediate price for each of these shares would probably be much higher than now, and possibly close to the target,

(iii) Any Short Sellers would be severely burned,

(iv) It is likely that the Government would not have to purchase a large volume of shares as the announcement itself would be likely to cause the share prices to rise close to, if not beyond, the target prices,

(v) An upward momentum of stability and confidence would be re-established that hopefully might be self perpetuating and take the price continuing upwards with general easing of financial tensions.

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(iv) It is likely that the Government would not have to purchase a large volume of shares as the announcement itself would be likely to cause the share prices to rise close to, if not beyond, the target prices,

Why would the price not rise to a point just below the target, with the taxpayer as the only buyer?

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All what would happen is that everyone would bail out leaving the govt as the only shareholder and thus holding the toxic crap.

Stability wouldn't return as the global economy is completely fooked.

Given that The City always seems to behave like lemmings, not "The brightest and the best, we need these huge incentives in order to attract them, blah blah blah", don't you think that if Tarquin saw Crispin not selling his bank shares he might just follow suit. I have a relly who is an investment banker and she is quite frankly thick as a plank.

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A couple of BIG issues:

I understand that Short Selling wasn't banned

Naked Short Selling was restricted

Naked short selling is selling a stock short without borrowing it first. I.e. selling stock that doesn't exist or you don't own, or haven't borrowed off someone else.


Naked short selling is a case of short selling without first arranging a borrow. If the stock is in short supply, finding the borrow can be difficult to arrange. The seller may also decide not to borrow the shares, in some cases because lenders are not available, or due to the costs of lending. In the case where a borrow is not arranged within the clearing time period and the shares are not given to the buyer, the trade is considered to have "failed to deliver."[10] Nevertheless, the trade will continue to sit open and may eventually be filled.
In July 2008, the SEC announced emergency actions to limit the naked short selling of government sponsored enterprises (GSEs), such as Fannie Mae and Freddie Mac in an effort to limit market volatility of financial stocks.[33] But even with respect to those stocks the SEC soon thereafter announced there would be an exception with regard to market makers.[34] SEC Chairman Cox noted that the emergency order was "not a response to unbridled naked short selling in financial issues", saying that "that has not occurred".[35] Analysts warned of the potential for the creation of price bubbles.[36][37]

In my mind naked short selling makes a healthier market, because more trades are taking place EVEN through the money doesnt exist/isn't being borrowed so people believe there is liquidity. Banning naked short selling is like emptying half the swimming pool and it makes the crunch worse.

Restricting Naked short selling has probably made the crunch worse, and it is a great scape goat for leaders to blames the problems on

Edited by moosetea
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Hi, I just registered after seeing your post as I saw this exact comment on the blog a few minutues ago and instantly thought what a perefect recipee for disaster this would be! The implications of nationalising half the banks of the world's largest financial centre would be huge and disastrous in every possible way, unless of course they start going to the wall if left alone.

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