On Thursday, Citigroup officials began pushing SEC officials to reinstate the so called uptick rule, which made it more difficult for professional investors known as short seller—who make money betting that shares will decline—to short Citigroup stock.
(Citigroup's board meets today to discuss the bank's options. Watch the accompanying video for more...)
Citigroup's shares may be tumbling, but Ladenburg Thalmann's banking analyst Dick Bove said he does not see any reason for Citigroup to follow the path of Lehman and fail. Bove maintained his "buy" rating on the stock on Thursday.
The current decline in the stock price is reflecting a series of fears related to loans and security values that cannot be actualized without a severe setback in the economy and a very rapid increase in interest rates, Bove said.
Citigroup has access to U.S. Federal Reserve funds, is working at insuring some of its debt and is reducing its balance sheet faster than any other company in the banking industry, said Bove, who believes these steps backstops the bank's liabilities.
"It would take a Depression every bit as large and long as the 1930s debacle to shake this company's viability," Bove said.
Citi Presses to Bring Back Short-Selling Ban
As part of its efforts to curb the rumor-mongering it alleges is hurting its stock, Citi has told members of Congress to address short-selling, people familiar with the matter told Reuters.
The Financial Services Roundtable, an industry group, is also pressing for regulators to temporarily bring back the emergency ban that ended on Oct. 8.
The group, which represents most of the largest banks, brokerages, asset managers, and insurance companies in the United States, has been talking to securities regulators and others about reinstating the ban since it was lifted, said Scott Talbott, senior vice president in government affairs in Washington, DC.
Those efforts have increased in recent days as financial stocks have plummeted, Talbott said. "When conditions warrant, you want to prevent a downward spiral for shares. Investors are acting on panic now," he said.
If financial stocks were reaching irrationally high levels, the group would seek measures to rein them in, Talbott said. "We want markets to operate efficiently," he added.
Short-sellers borrow stock they expect will fall in price in the hope of repaying the loans for less and pocketing the difference. They have been blamed by some corporate executives for driving down the price of their companies' stock.
John Nester, a spokesman for the SEC, declined to comment. The agency separately announced on Thursday that it will hold a teleconference of international securities regulators next week to discuss short selling, among other topics.
—Reuters contributed to this report.