Short-selling ban lifted by watchdog

The Financial Services Authority (FSA) watchdog announced the end of the gambling ban, despite warnings that wealthy traders would once again try to bet against the value of banks, many of which are now publicly owned.

The short-selling of shares in banks helped to precipitate the financial crisis last September that forced the government to intervene, spending billions of pounds of taxpayers' cash to stop the banks collapsing.

Introducing the ban six months ago, FSA chief executive Hector Sants declared that short-selling shares was "giving rise to disorderly markets," but, on Friday, his stock markets director Sally Dewar claimed that exposing nationalised banks to such risky bets was "the right measure to maintain orderly markets."

City fat cats enthusiastically welcomed the news. Multimillionaire hedge fund executive Andrew Baker said: "We are delighted. Three cheers for the FSA."

But the regulator's action was roundly condemned in Parliament, with Labour MP and Treasury select committee chairman John McFall demanding an extension of the ban, while Liberal Democrat Treasury spokesman Vince Cable warned that the taxpayer would have to pick up the tab for any new gambling spree.

"This is an open invitation to short-sellers to gamble against the taxpayer," he said.

"When you have a fire raging, you don't start throwing paraffin around the place and making it worse, which is what is happening here."

Tax Justice Network director and TUC economic policy analyst Richard Murphy pointed out that "short-selling and other wrecking practices must be under the sort of control that will stop them being such a sure bet against the rest of us."

If the FSA was intent on allowing such gambling, "the taxes on profits from short-selling should at least be very high to try to prevent greed," he added.

Communist Party general secretary Robert Griffiths blasted the FSA decision for "encouraging private speculation that would drive down the value of publicly owned banks.

"The FSA record has made it a bad joke. It has completely failed to stop even the most extreme swindling and speculation in the City," he stated.

"What is needed instead is for the entire financial sector to be taken into public ownership and the spivs and gamblers retrained to be socially useful members of the community."