I’ve always had a problem with public nudity. Ban naked shorts. Not that WS ever plays by the rules.
Exactly. Someone was about to get caught in a massive short position....MASSIVE (The size of which makes JP Morgan's current short position in silver of hundreds of billions of dollars look like a drop in the bucket). Rather than get caught with their pants around their ankles an unable to make good on the positions, they yanked all liquidity from the market quickly (Better to bring everyone down than to pay off the shorts). The problem is that they did it so quickly and the immediate reduction in liquidity drove the markets down to a point where they actually made billions on the same short positions they were about to lose their necks over.
Now, there are only three, maybe four, investment houses that control enough capital to have that type of effect. The only one that came out smelling like a rose and actually making money is Goldman Sachs. They are also the only house that would have their proverbial backsides covered if it all went amiss - look at the prior employment history of Treasury oficials and Federal Reserve officials. Goldman executives will NEVER be called upon to release any information about their positions and trades during this meltdown - hell, if you peddle it out to enough brokers, nothing even looks peculiar.
The meltdown was not the problem. The problem was the series of events that it created on the backside through credit default swaps, derivatives, and speculation postions. These three things are the real demise of true investment and a risk / reward system. AIG wrote so many 'insurance' policies on investments that were assumed to be a no-lose proposition. The problem was, when they did lose, they couldn't cover what they had written. To bad, so sad - they should have been allowed to fall, and everyone that bought worthless 'insurance' from them that failed to spend a bit of time on due diligence and realize that they couldn't cover all their bets should have payed the price for failing to do so. Lehman Brothers, Bears Stearns, CitiBank, and JP Morgan all would have followed them down the toilet, but that is exactly what was needed. By bailing out AIG and the investment houses, the FED removed the risk from the risk / reward nature of investing. Yes, it would have been a mess of prolific proportion, but it could have been sorted out by now for a hell of a lot less than the trillions that the FED is carrying on the books as a result.
So, who got caught with their pants down and rather than pay the piper decided to tank the market and make a few billions on the short positions?