As the banking crisis lingers on, PBI Chair Ellen Brown examines the role inherently fraudulent short selling played in recent bank failures.
Many banks have major unrealized losses on their balance sheets, yet they have not been subjected to runs by depositors. The runs on First Republic and Silicon Valley Bank were evidently triggered by targeted short selling of their stocks. In the week leading up to its failure, First Republic was one of the most heavily shorted U.S. bank stocks, with one-third of its outstanding shares shorted. As of March 31, it held the second-largest short position of any U.S. bank, with Silvergate Bank claiming the largest.
After J.P. Morgan bought First Republic out of receivership, the share prices of other mid-sized banks dropped during most of the rest of the week. They were easy targets for short sellers. An article by Matt Levin titled “When Short Sellers Bet Against Banks” aptly described the situation: “basically, it was like shooting fish in a barrel.”
Photo U.S. Securities and Exchange Commission headquarters by AgnosticPreachersKid courtesy ScheerPost.