Short selling is the practice of borrowing shares that stockbrokers think will fall, selling them, and then buying them back at a lower price and pocketing the difference.
- September 15th 2008: HBOS shares lose 34% of their value in a short selling frenzy, forcing a merger with Lloyds TSB. A £39 billion bailout follows, and partial nationalisation.
- September 19: Financial Services Authority (FSA) bans short selling in 34 different markets until January.
- January 16th: The FSA ban on short selling is lifted. Barclays shares fall 25%.
- Barclays continues to collapse, RBS had lost 70% by tuesday, and Lloyds falls 47%. A second bail-out is announced, and further calls for nationalization.
Well done everybody.
Short selling is the epitome of City greed, putting short term profit over long term stability. It’s clearly in the interests of the City to have healthy banks, but they don’t seem to be able to resist the quick profit.
Our economic system is unsustainable. Ethical banking is more important now than it ever has been, and where you choose to put your money really does matter.
Read more about ethical banking here.