Download
HTML Embed
HTML EMBED
Click to Copy
Marketplace

What makes the dollar strong?

Aug 23, 2019

Latest Episodes

Download
HTML Embed
HTML EMBED
Click to Copy
Marketplace Morning Report
Download
HTML Embed
HTML EMBED
Click to Copy
Marketplace Morning Report
Download
HTML Embed
HTML EMBED
Click to Copy
Marketplace Morning Report
Download
HTML Embed
HTML EMBED
Click to Copy
Download
HTML Embed
HTML EMBED
Click to Copy
Download
HTML Embed
HTML EMBED
Click to Copy
This Is Uncomfortable
Download
HTML Embed
HTML EMBED
Click to Copy
Marketplace Morning Report
Download
HTML Embed
HTML EMBED
Click to Copy
Marketplace Morning Report
Download
HTML Embed
HTML EMBED
Click to Copy
Marketplace Morning Report
Download
HTML Embed
HTML EMBED
Click to Copy

Short selling ban exposes gap between American, European market attitudes

Marketplace Staff Aug 12, 2011
Share Now on:
HTML EMBED:
COPY

STEVE CHIOTAKIS: Earlier today in Europe, France, Belgium, Spain and Italy prohibited traders from the practice of short selling. That’s where people are allowed to make money betting on falling stocks. What does that decision mean,and how will it play around the world? Randall Kroszner is a former governor of the Federal Reserve System. He was there in D.C. from 2006 to 20009. He’s now on faculty at the University of Chicago Booth School of Business. Professor, good morning.

RANDALL KROSZNER: Good morning.

CHIOTAKIS: Let’s talk about the short selling ban that was implemented today in Europe. What does it say about the European debt crisis — and how it’s affecting banks there?

KROSZNER: Well, I think there are fundamental concerns about — and legitimate concerns about the stability of the banks because they have so much exposure to the sovereign debt. But short selling bans don’t address those fundamental concerns.

CHIOTAKIS: Do you think it’s going to help — I mean, obviously, you say no.

KROSZNER: The studies that have been done on short selling bans in the past have shown really no improvement in firm share prices, and generally, an increase in volatility. It’s really more of an attempt to blame someone rather than the fundamental factors.

CHIOTAKIS: So more pointing fingers there, right?

KROSZNER: It’s pointing fingers rather than admitting blame that is a legitimate problem here — the risk of sovereign debt.

CHIOTAKIS: What about here in the U.S.? It’s said it’s not going to implement a similar short selling ban. So, does it reveal anything about differing attitudes?

KROSZNER: I think it is a difference in attitude. I think there’s more understanding that short-term market movements, or short-term practices don’t address the fundamental issues. But you do have to remember both the U.S. and U.K. did put in some short term selling bans in October 2008

CHIOTAKIS: We do remember that quite well. Former governor of the Federal Reserve System, Randall Kroszner. Thank you so much for your time, sir.

KROSZNER: Thank you very much.

If you’re a member of your local public radio station, we thank you — because your support helps those stations keep programs like Marketplace on the air.  But for Marketplace to continue to grow, we need additional investment from those who care most about what we do: superfans like you.

Your donation — as little as $5 — helps us create more content that matters to you and your community, and to reach more people where they are – whether that’s radio, podcasts or online.

When you contribute directly to Marketplace, you become a partner in that mission: someone who understands that when we all get smarter, everybody wins.