If you thought Wall Street has acted with brazen stupidity over the past few years, you apparently ain’t seen nothing yet. CNBC is reporting that certain Wall Street firms are pitching a new derivatives-based product that would effectively let hedge funds skirt the ban on short-selling of financial stocks. Among the culprits is Citi:
An official there who spoke on condition on anonymity said the technique is still in the discussion stages, adding that if it is rolled out, it will be used purely for hedging purposes. Hedge funds will not be able to use the technique to create a “net short” position. Rather, the technique will be used to hedge against potential losses from going long on a financial stock on the banned list.
Are you kidding me? Wall Street pushes for this ban in order to protect itself, and now is working on a scheme that could easily circumvent those very protections. And for what end? To help out the short-selling hedgies that many bank executives think caused their problems in the first place?
Most Americans don’t understand how Wall Street got itself into this mess in the first place, because it seems inconceivable that firms like Bear and Lehman could believe they’re solvent on Wednesday and insolvent on Sunday (most anyone who’s filed for personal bankruptcy knows it’s coming a mile away). But there seems to have been some general sympathy — or at least acceptance — that larger events conspired against the universe’s former masters.
But then something like this Citi scheme gets hatched, and any goodwill gets deservedly dissipated. I’m not sure what a stronger word for “shameless” is, but that would describe the folks behind this.