Bold Prediction by JP Morgan

JP Morgan analysts suggest that US regulators may target short selling to prevent a banking crisis contagion. Some in the banking industry have argued that short sellers are alarming people and indirectly causing the belief that the crisis will spread to more banks. JP Morgan suggests that this argument may temporarily force regulators to halt short-selling activities. Recently, the American Banker Association expressed its concern that short sellers might manipulate the market. JP Morgan has never before seen a healthy bank end up in the hands of the FDIC within a short time, but the pressure has affected even banks in good financial positions as more Americans worry about their money in these institutions. Short sellers have been blamed for stoking fears and leading to significant price swings in shares of several regional banks.

Despite the crisis, most Americans still trust their banks, according to a survey by Ipsos. Additionally, approximately half of the survey respondents support government bailouts for struggling financial institutions. Short sellers are taking advantage of the situation, and data firm Ortex has reported that they have earned $1.2 billion by betting against struggling bank stocks.

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