Why Are Short Sales Bad? Why Are Heroes Good?

There is a temporary ban on short sales, and it gives the impression that they are some sort of rogue process that undermines equity markets. Treasury Secretary Paulson created a storm when the government took over Freddie Mac and Fannie Mae. The government could have made a point to China, Japan, Russia, and others that the bonds of these 2 institutions were equivalent to US Treasuries. ( China, Russia, etc. are the foreign owners of the bonds, and they were becoming jittery about just what the heck was going on with real estate mortgages.) The government could have taken a bit of the companies, say 25%, thus making the shareholders pain large enough, but not total.

Once the government took over the entire institutions, the shareholders lose everything. Once shareholders see shareholders loosing everything, they do not invest. So after that time, no one in their right minds would invest a penny in Lehman Brothers, nor any other financial stock which may possibly get into trouble and need the kind attention of the government. Since no one would invest, stocks went begging for buyers. Thus stocks declined quickly. The short sellers took advantage of this and facilitated it, but did not cause it. They offered to buy stock from panicky shareholders who would rather loose 50% by a short sale than 100% to the government. Who else would buy Lehman Brothers, other than a gambler? No one.

The ban on short sales actually will assist in the bail out, since we have forbidden the only potential buyer of distressed stocks to purchase anymore for a while. Thus, there is no exit until the bail out is made law. The bail out now proposed will put an end to this process. It does not look to assign blame, but that can wait. It should wait since (1) we already know who built the playground: Republicans and Phil Gramm, and (2) it will take a bit of time to scour all the spider-holes in the Hamptons for the miscreants.

However, no matter how it turns out, America has changed forever. I think for the better. Why? Because of the incredibly complex scenario of heroism we see before us. It was not enough to have idiotic Republicans going into an election against Hilary Clinton, who would then sweep to the White House. No. We have a contender who was a relative unknown until 2 years ago. No only is he new to the national focus, but he is a black man. So now America must deal with its racism. It wasn't enough to deal with war-mongering and lieing and torturing and those ethical issues and well as bread and butter ones; now we must deal with our own racism!  

We actually have to go into this election and confront ourselves. We actually have to choose whether we shall continue to give overt or covert support to the diseases which bedevil this country. That does not happen too often. We shall see what happens. Shall we be heroes and overcome our baser selves? Or shall we not. And what is the future for failed heroes? Philoctetes. He is the future of failed heroes. Philoctetes sits on his island in his nauseating misery.