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WASHINGTON - US REGULATORS will consider reviving the 'uptick' restriction on short-sellers of stocks and a top monetary official lent his support on Tuesday to modifying an accounting rule that has forced banks to take billions of dollars in writedowns.
Federal Reserve Chairman Ben Bernanke said he was opposed to suspending mark-to-market accounting but said the rule tended to reinforce economic trends and improvements could be made. The prospect of the changes helped US stocks to their best day in four months, cheered by Citigroup saying it was profitable in the first two months of 2009.
Barney Frank, who chairs the US House of Representatives Financial Services Committee, told reporters he had spoken to the head of the Securities and Exchange Commission and hoped the uptick rule would soon be reinstated.
The SEC later confirmed it may meet next month on the uptick issue but any proposal would likely be subject to a public comment period with a final rule possibly months away.
"The Commission may conduct a public meeting as early as next month to consider whether to formally propose reinstatement of the uptick rule, or consider other measures related to short sales," said SEC spokesman John Nester.
The uptick rule, adopted after the 1929 stock market crash, allowed short sales only when the last sale price was higher than the previous price. The SEC abolished the rule in 2007, after concluding that advances in trading strategies rendered it ineffective.
Short-selling is often blamed for precipitous declines in stocks but short-sellers defend their role, saying they prevent shares from becoming overvalued.
The SEC adopted short-term restrictions on short-selling last year but the measures were judged by some market watchers to have been largely ineffective. Short-sellers borrow stocks they expect will fall in price in the hope of repaying the loans for less and pocketing the difference.
Mr Bernanke stressed that he supported mark-to-market's goal of making financial balance sheets as transparent as possible, but also talked about its shortcomings."It's one of the things that tends at times to increase the severity of ups and downs in the financial system and the economy," he said in response to an audience question following a speech to the Council on Foreign Relations.
Mr Bernanke's remarks come two days before a US House Financial Services subcommittee is scheduled to meet to consider possible changes to the mark-to-market rule. The banking industry says the rule is undermining the government efforts to stabilize the financial industry. -- REUTERS
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