The Best of Today’s Business: July 28, 2009
SEC Requires Traders to “‘Cover Up”
Expanding on the temporary rule put in place during the height of the fall of 2008’s financial crisis, last night the SEC made a rule banning “naked” short selling permanent. Short sellers bet that stocks will fall in value. Short selling occurs when traders borrow stock, sell the borrowed stock, buy real stock when the stock loses value, return the borrowed shares, and pocket the difference (and that’s the simple version). While the SEC does not view short selling as a evil, it does believe that “naked” short selling, or selling shares when there are no shares even borrowed, to be highly manipulative. The SEC finally realized that there was something inherently wrong with selling things you down own, don’t have a right to, and don’t even have access to. Nice work.
Summary of the ruling:
http://www.cnbc.com/id/32174786
Full Release:
http://www.sec.gov/news/press/2009/2009-172.htm
Bank of America Goes on a Diet
Dan Fitzpatrick reports that BofA chief, Ken Lewis, announced plans to scale back it’s American branch network by 10%. Mr. Lewis cites consumer demand shifting away from traditional branch banking to more convenient online and mobile outlets. BofA’s chief rivals, Wells Fargo and J.PMorgan Chase, have no plans to follow suit saying that they will continue to continue to branch as aggressively as they have done in recent years. Bof A’s trimming down comes as it attempts to appease Uncle Sam while swallowing Merrill Lynch and Countrywide and seeing continued pressure on earnings from souring loans.
Full Article: http://moneywatch.bnet.com/economic-news/video/bofa-to-shed-10-of-branches/325535/
CFTC Reverses Itself on Oil Speculators
Jeanne Dugan and Alistair MacDonald report in today’s Wall Street Journal that the U.S. Commodity Futures Trading Commision plans to issue a report stating that oil speculators played a large role in the extreme surge in oil prices in 2008. In a clear departure from Bush-era free market idealism, the agency states that previous studies and conclusions were based on incomplete and possibly erroneous information. The reversal stands in clear opposition to the U.K’s Financial Services Authority who says it has found no evidence that speculators caused the bubble.
Full Story: http://www.cnbc.com/id/32183731
Silverman Strikes Out (On His Own)
Sam Schechner and Shira Ovide report that Ben Silverman, co-chairman of NBC Entertainiment and Universal Media Studios, will leave the company to begin a new media venture withIAC/InterActiveCorp. NBC’s chief executive, Jeff Zucker, stated that the departure and NBC’s reorgainzation come as part of a “confluence of events.” Silverman leaves with a mixed track record. The network lost 155 of its prime-time viewership under his watch while producing hit shows such as “The Office” and “Ugly Betty.”
Full Article:
http://online.wsj.com/article/SB124870053062783671.html
Noted: Home prices fell 17.1% in May 2009 over May 2008. This is a slight improvement from April 2009’s yearly decline and further indication of the bottoming of the housing bust.
