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The Week of Living Dangerously

September 21, 2008 Comments off

We seem to have entered a new phase of the credit crisis. We spent a number of months learning just how much house prices would fall and which institutions had exposure to mortgage loans. Now, as credit problems cascade and liquidity remains scarce, events seem to have moved beyond mortgages. Now we are concerned, for example, about which firms are exposed to other firms via credit default swaps.

In this entry I will make some observations about a few of the extraordinary events of the last week, specifically about money market funds, short sales, and the need for centralized clearing of financial products. Read more…

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Naked Shorting: Do Clothes Make the Trade?

August 5, 2008 2 comments

“In an abusive naked short transaction, the seller doesn’t actually borrow the stock, and fails to deliver it to the buyer. For this reason, naked shorting can allow manipulators to force prices down far lower than would be possible in legitimate short-selling conditions.”

–  “What the SEC Really Did on Short Selling”, by Christopher Cox (SEC Chairman), Wall Street Journal, July 24 2008, P. A15. Read more…

Categories: SEC, short sales