JPMorgan (NYSE:JPM) CEO Jamie Dimon is urging the SEC to ban shorting bank stocks.
Days after White House press secretary Karine Jean-Pierre said President Biden’s administration was looking into short seller activity around bank shares in the United States, triggering predictions of a possible ban, JPMorgan CEO has expressed his view that short-selling of bank stocks should, indeed, be prohibited.
Specifically, Jamie Dimon believes that regulators “vigorously” go after unscrupulous short-sellers, or anyone doing anything wrong in terms of stock options, derivatives, and short-sales, as he told Bloomberg TV anchor Francine Lacqua in an interview published on May 11.
Asked by the host whether the regulators need to look at the activities of bank stock short-sellers – or traders that profit on betting that certain shares will fall – Dimon said:
“My folks would tell me that’s not the problem, the short-selling ban.
If you actually analyze stocks and short sales, it doesn’t seem that big of a deal.
I think they may be partially wrong because, as you know, some people are unscrupulous and use other means to go short.”
Finbold says JPMorgan CEO believes that the US Securities and Exchange Commission “has the enforcement capability to look at what people are doing by name, and if someone’s doing anything wrong, people in collusion, or people going short and they’re making a tweet about a bank,” he hopes the SEC is looking into it.
JPMorgan Holds Bigger Short Positions Than Its Total Assets
Dr. Stephen Leeb, one of the world’s top money managers, says that JPMorgan’s gold derivate short positions are so numerous and large that they likely exceed the entirety of the bank’s assets on hand – “which is a very dangerous position in which to be.”
“Should the price of gold ever shoot up from its current price by, say, another $1,000 in the coming weeks or months due to an unexpected “black swan” event, banking giant JPMorgan Chase would more than likely find itself underwater due to the massive gold derivative short positions it currently holds,” says Planet Today.
“What I lose sleep over is how much exposure does a bank like JPMorgan have to the [gold] derivative market,” Leeb is quoted as saying, adding that it is an “open secret” in the gold market that JPMorgan is heavy in gold derivative short positions.
“This is not fraudulent, but it’s an open secret. In fact, it’s no longer a secret because they’ve been penalized so much for it.
They’re trying to control the price of gold.”
When a stock or commodity is short sold, the short seller is on the hook for delivering that stock or commodity at a later date.
The goal is to make a profit between the current price and a future lower price.
In this case, JPMorgan appears to be selling the precious metal short using derivatives, which is effectively keeping the price of gold artificially low, says Planet Today.
Will the SEC Ban Short Selling in Bank Stocks?
An SEC official who spoke on condition of anonymity told FOX Business a short sale ban is “not something the commission is currently contemplating.”
However, bankers continue to push for a short sale ban on banking stocks despite the claims.
In September 2008, big banks were on the verge of collapse.
The SEC enacted a 21-day ban on shorting the shares of the remaining big banks.
However, investors continued to sell stocks due to the predicament the entire banking sector was in.
Big law firms at the time urged the SEC to ban short selling to protect against “coordinated short attacks.”
But FOX Business says SEC staffers are advising against implementing a short sell ban today.
They say the last time a ban was implemented following the 2008 financial crisis, it actually added more uncertainty to the financial markets, causing bank stocks to fall further.
“Upon evaluating the impact of the ban (in 2008), there was compelling evidence it was counterproductive and resulted in costs to big segments of the market,” said James Overdahl, Former Chief Economist of the SEC.
Lindsey Johnson, CEO of the Consumer Banking Association, which represents mid-sized banks, said policymakers need to “take a serious look at the role short sellers are playing in the market and their impact on Americans’ confidence in our financial system.”
People close to the SEC say Gensler will have to propose the ban himself and push it through the full five-member commission on a party-line vote.
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