Will no-one stop these speculators gambling with people's livelihoods?

Published on Thursday 18 September 2008 21:01

It's a black day all right for Scotland and Edinburgh (your report, 18 September). Our first bank, founded more than 300 years ago to fund the first Jacobite revolution, has been swallowed up in less than 12 hours of rampant speculation and short-selling in the wake of the American bank collapse.

Short-selling, as I understand it, involves selling lots of shares, hoping to be able to buy them back again at a lower price. Do this with enough shares and you force the price down, so you get your wish. You wipe billions of pounds off the value of the target company, but what does that matter if you make a nice commission?

Halifax Bank of Scotland was a prime target. The backwash from the US financial crisis and the fact that it's the biggest mortgage lender in the UK were apparently enough to create a favourable frisson for the stockbrokers to dust off the Maserati brochures. In one day, a perfectly healthy, well-funded and venerable company with a history of prudence, which had been a steadying influence on the UK for hundreds of years, was taken over by Lloyds TSB, with the approval of the UK government, to avert another Northern Rock.

Edinburgh has lost a great part of her credibility as a financial centre and Scotland has lost part of her identity.

What has made my blood boil is that those who did the short-selling didn't even own the shares. They borrowed them. It seems that is perfectly acceptable in our free-market, deregulated economy.

As I understand it, you borrow, say, 10,000 shares at 10 each, sell them for that price, wait until the price drops to, say, 5 a share and buy them back. You give the lender their shares back and pocket the other 50,000, while speed-dialling your local sports car dealership. This is bad enough, but the chairman of a national securities lending body, talking on BBC Two's Newsnight about what the government can do to stop this happening, said they were looking into forcing the speculators to actually borrow the shares first.

So, tell me, what are they on, when they can allow people to buy and sell short massive quantities of stock they haven't even borrowed yet and bring down national institutions, with all the concomitant misery and anxiety which will affect our already-teetering housing market, not to mention the small savers, investors and small companies where people are actually doing some useful work, not just sitting on a phone, gambling with other people's livelihoods?

Can anyone explain?

F CARMICHAEL

Whitecraig Avenue

Mussleburgh, East Lothian