If one thing’s certain, we know what not to do when it comes to saving the banks. We shouldn’t let short sellers continue their bear raids unregulated or demonize the sector’s executives or persist with ill-timed accounting rules. The sad thing, though, is that we’re doing those very things right now. They’re White House policy.
Look, without the uptick rule, which requires a stock’s price to tick up in price before a trader can sell it short, those bear raids will continue. And the UltraShort Financial ProShares fund, which turns a $1 investment into $2, would only add to the damage done. So the reinstatement of this regulation is necessary to restore stability in the markets, especially among the financials.
The cartoonish characterization of villainous bank CEOs only serves the short seller’s ends as well. Such notions sow fear and doubt in the markets, which sends investors into a sell-off panic, and the bears cash in on that.
Plus, mark-to-market accounting rules play their part as well. Banks are forced to value assets at the market’s presently low prices even though those assets are in fact worth much more. Cramer thinks we should follow the suggestions of JPMorgan Chase CEO Jamie Dimon and Federal Reserve Chairman Ben Bernanke, who are calling for key changes in these rules.
Of course, there’s no guarantee that Cramer’s recommendations should save all the banks. But he thinks that some would be spared while the best among them would prosper. In fact, the only guarantee is that this sector will collapse if we do nothing.
Cramer's charitable trust owns JPMorgan Chase.
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