Will a short sale ban reduce pressure on bank stocks?

JEREMY HOBSON: Now let’s get some analysis to all this with Gus Faucher. He’s an economist who focuses on the big picture — macroeconomics — with Moody’s Analytics. He’s with us live. Good morning.

GUS FAUCHER: Good morning.

HOBSON: Well, Gus, when I hear ban on short selling I think trouble — what do you think of all this?

FAUCHER: Well, I think it’s probably a cosmetic measure. I don’t think banning short selling is going to reduce any of the pressures on bank stocks. I think it’s an effort by the governments involved to show they’re doing something. But, it doesn’t take care of the underlying problem.

HOBSON: And is the underlying problem Europe? Look at this entire crisis — the reason the market is going up and down, up and down — is it all about Europe, or is it something else?

FAUCHER: I think Europe is a part of it, but there’s real weakness in the U.S. economy as well. And I think investors are concerned about whether the U.S. economy is falling into a double-dip recession. I think over the next few weeks as the data become clearer — hopefully some of that volatility will fade. I think we’re still in for a rough few weeks as data comes in that’s good, data comes in that’s bad, and we’re going to see big swings in stock markets. So the problems in Europe are adding to the problems in the U.S., but they’re not the root of the problems here.

HOBSON: Well, is there anything that can be done, do you think at this point, to ease concerns?

FAUCHER: I think that there’s little that the French government or the Federal Reserve can do right now. The Federal Reserve took some aggressive steps on monetary policy earlier this week, and markets did like that. But the Obama administration, they have their hands tied, so a stimulus would be helpful, but that isn’t going to happen in the current Congress. You see President Obama making these bus trips to the Midwest, where he really doesn’t announce anything new.

HOBSON: For someone like you who really focuses on the economy all the time, is this a scary week for you or sort of business as usual.

FAUCHER: No, I am concerned. I don’t think the U.S. economy will fall into recession again, but the odds that that may happen over the next six months is one in three, which is still pretty high. I’m concerned about confidence. Will businesses continue to spend, will consumers continue to spend?

HOBSON: Gus Faucher, economist with Moody’s Analytics, thanks so much for joining us.

FAUCHER: Thank you.