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JPMorgan CEO says short-selling of bank stocks should be banned

JPMorgan CEO says short-selling of bank stocks should be banned
Ana Zirojevic

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 (NYSE: JPM) 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.

On the possibility of a ban

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.”

In this context, the JPMorgan CEO believes that the US Securities and Exchange Commission (SEC) “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.

“They should go after them, and vigorously. They should be punished to the full extent the law allows it. So I guess it’s possible it’s taking place, we’ve no evidence of it, but my experience in life has been ‘don’t assume too much.’”

Profiting from the banking crisis

Indeed, short-selling is a particular trading strategy in which traders arrange to borrow the specific stocks they do not hold in their portfolio but presume will decrease in value in the near future, and then they sell them, hoping to repurchase them again at a lower price and return to the lender, pocketing the difference.

As Reuters reported on May 3, the recent banking crisis has allowed short sellers to pocket $1.2 billion in paper profits during the first two days of May. More recently, the news outlet quoted a source saying that federal prosecutors in Washington were looking into short-seller activity around the latest volatility in US bank shares.

Featured image via NBC News YouTube.

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