Treasury lifts ban on short-selling because ...??? FT dit

Are US Banks helping UK economy into the red?

  • Stupid question - nobody is to blame

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  • Yes

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  • No

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  • Stupid question - of COURSE they are

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  • Seen a shrink lately ?

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Saw this and thought of Forces Sweetheart:

Paulson reaps £270m ‘shorting’ RBS
By James Mackintosh

Published: January 26 2009 23:31 | Last updated: January 27 2009 08:45

Paulson & Co, one of the world’s biggest hedge funds, has made a profit of at least £270m betting on a fall in the share price of Royal Bank of Scotland over the past four months.

New York-based Paulson, run by billionaire John Paulson, covered its “short” position in RBS on Friday, according to a regulatory filing, dropping below the 0.25 per cent disclosure limit.

The scale of the profit is likely to reinvigorate the debate over short selling, which has seen archbishops and politicians criticise the practice and the Financial Services Authority ban additional shorting of banks for months. Short sellers borrow and sell shares in the hope of buying them back for less and making profits after the price has fallen.

MPs will on Tuesday raise the issue with hedge funds testifying at a meeting of the Treasury select committee, following a letter from the committee’s chairman to the FSA questioning its lifting of the ban.

As well as its short position in RBS, Paulson – which manages more than $35bn – has profited handsomely from shorting Barclays and Lloyds TSB, regulatory filings show, although it retains both these shorts.

But the fact it is reducing a short position may take some of the sting out of accusations that short sellers are to blame for the plunging prices of banks since the ban was lifted just over a week ago.

“We think it was the right thing to lift the ban,” said Richard Saunders, director-general of the Investment Management Association, which represents unit trust managers, mostly long-only investors.

However, other hedge funds have made quick profits from the falling prices by adding new shorts, including Lansdowne Partners. Its financial fund, run by former Morgan Stanley analyst William de Winton, made £17m last week by shorting Barclays for six days before covering its position.
According to analysis by Data Explorers, which measures short activity, short positions in British banks have risen in the past week, but remain much lower than last summer.

Paulson secured a profit from its RBS short of £275m from September, when it first revealed its position – although investors said it had held a short position for months before that, suggesting profits could be far higher.

The decision to cover the short on Friday maximised its profit. RBS shares jumped a further 13 per cent on Tuesday, having surged almost 20 per cent on Monday.

Paulson declined to comment.

So, tell me all you clever Financial wizards, allowing hedge funds to sell British banking stocks short is in this country's interest because........??

yrs ever,

Puzzled of Threadneedle Street

( obviously not the sharpest device in the array)

PS: ' Once is coincidence, twice is happenstance....the third time, its enemy action Mr Bond '

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