Cox pressured to ban short selling
Christopher Cox complained that he was under intense pressure from Henry Paulson and Ben Bernanke to ban short selling in September 2008. Now, why would Paulson and Bernanke deemed it necessary and urgent to ban short selling? Both must have known the dangers of short selling and the damage it could have done. They were key players in short selling before, or at least Paulson must have been, being a fund manager. Many hedge funds blamed the banning of short selling for losing their pants. For it is in short selling that they have an edge against the normal small time investors. When the funds longed a position, it is very difficult to sell at a profit as the small investors will be reluctant to buy high or higher. They too will be waiting to sell. On the contrary, for shorting a stock, it will attract more investors to buy as the stock becomes cheaper. The trick by the hedge funds is to sell and push the price even lower to force out the long positions. And the funds don't sell in the thousands, they sold in millions to drive down a stock price. Short term investors will run for their lives as they cannot hold and will cut their positions. Long term investors too will liquidate for fear of something really wrong with the company. Those who pledged their shares will have their positions forced out by the banks. So will margin traders. It is a vicious cycle and the stock will keep going down with increasing momentum. That's when the hedge funds make their money by buying back at rock bottom prices. It is a very destructive method of trading stocks to make money. It destroy stocks, companies and stock exchanges and of course the investors. Trust me, Henry Paulson and Ben Bernanke knew what they were doing. Cox is just another cock that could not see the danger of his inaction. And there are many cocks like him around.