The European banks are in much worse shape than their US competition.  Deutsche Bank seems to be in the worst shape and has been in the news a lot lately. The reason being argued in Europe is that the US government imposed a ban on speculation after the financial crisis. That is true, how much affect could it have had since it was imposed on September 19, 2008, and it ended on October 9, 2008?  Not to be deterred by small, but significant facts, some Europeans still claim this is why US banks survived.  These same experts now want to outlaw short selling on banks stocks in Europe. I am not sure about you, but that sounds like a Freudian slip to me.

The problem with this proposal is that a new rule outlawing short selling would lead, not to short selling, but wholesale liquidation. They would have to suspend all trading. Period. Furthermore, The suspension would not last for a little less than one month, as was the case in the United States.  On the contrary it might last for a very long time.  Bottom line, new rule like this would only destroy confidence in Europe altogether.

A few questions to consider:

1) Would this rule affect you at all?

2)  How would your local bank be affected by outlawing short selling on European bank stock?

3)  What does the consideration of this new rule tell you?

4)  How could you profit from bank troubles in Europe?

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