I have to admit I’m very suspicious of WS these days. I wonder if they could stand close scrutiny by law enforcement?
There's this erroneous notion going around that the recent stock price collapse in financial stocks came out of the blue. It did not. Short sellers have been selling these stocks since way before the recent news broke. Banks and brokerages have been hiding* bad assets for over a year now. In the past few months, the information dam finally broke - to the point that other banks and brokerages began shunning the banks and brokerages in the worst financial shape in fear of not having their money paid back. This got out to shareholders, who began selling them, and short sellers, who increased their short positions.
The fact is that once major firms like Bear Stearns and Lehman started announcing billions of dollars in write-offs, the writing was on the wall. Management throughout the financial sector had lied and obfuscated for too long with off-balance sheet vehicles and hard-to-value items that were nonetheless valued at fantastical levels. This was Enron on steroids.
* Why do they hide them? Because disclosure would mean serious stock price declines, hurting senior managers, who might be fired en masse, and taking an axe to the value of their stock options. This procrastination, combined with even more risk-taking by banks and brokerages, is what has led many of these companies to the brink of a liquidation where stockholders will get nothing, and some creditors might get pennies on the dollar.