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September 26, 2001 - Congressional wisdom of "inhibiting short selling" seriously questioned. |
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Asensio & Company, Inc. a New York investment bank engaged in short selling has issued the following statement: On September 24th Congressman John J. LaFalce, ranking member of the House Financial Services Committee, published a letter to U. S. Securities and Exchange Commission ('SEC") Chairman Harvey Pitt requesting the consideration of imposing new rules to inhibit short selling. Short selling is already inhibited by rules enacted in the 1930s. Promoting and buying stock is not inhibited and largely unregulated. We believe it is unwise to promote the idea that short selling is harmful to the markets. On the contrary, we believe America would be far better served by eliminating all existing short selling rules. Existing rules limit short sales to down ticks and require short sellers to borrow stock before they sell. These rules restrict the amount of capital and the ability of short sellers to execute orders effectively. Also, short sellers are not considered "investors" under federal securities laws and as a result have no enforceable standing to protect themselves against companies engaged in fraudulent activities that cause short sellers and the investment public general harm. These rules and judicial prejudices already exist in the markets. They are the reason that Wall Street's short selling community is under-capitalized and under staffed. As a result, Wall Street's "Bulls" are unopposed both in promoting stocks to America and in lobbying Congress and the SEC. Congressman LaFalce's letter serves to show both the extent of the "Bulls" influence and their disregard for the health of America's markets and economy. Wall Street’s "Bulls" earn their living by helping to persuade Americans to take enterprising risks with their savings. This is a complicated duty requiring balance between conservatism and speculation; between personal and societal interests. Despite being unwisely hampered by out-dated restrictionsshort-sellers are the element of our free markets that keep the system balanced. Certain contained amounts of fair speculation are symbols of confidence and robust economic activity. However, society is not well served when unbridled speculation is allowed to funnel savings towards areas with questionable value and at unwise moments. It benefits too few, too greatly and too wrongly. This is what short-sellers challenge. Not the system but those who abuse the system. There is great value and great potential in America's economy. Today America needs Wall Street to be strong and to be fair. |
