Is the Market an Accurate Pricing Mechanism?
In recent weeks the Treasury has taken a series of actions which have shaken the foundation of our free market economy, and have brought into question the market’s ability to accurately price securities. Recently, Treasury Secretary Henry Paulson has temporarily banned short selling of over 800 stocks, and has announced plans to start a $700 bailout fund which would potentially value distressed assets above their market value. Through these actions, Paulson has brought about accusations that the market is seriously hindered in its ability to price assets. The most dramatic action by the Treasury Department thus far has been their temporary ban of 799 financial stocks (the list has now been expanded to include over 800 stocks). Short selling is a vital part of our financial markets and allows for accurate price discovery as markets price in risk. Secretary Paulson decided that in order to stabilize financial markets and to prevent additional large institutions from failing, all short se
