Freddie Mac-No Politics (FMCC)

[El Mago]

New York City's mayor on Monday said U.S. regulators must stop short-sellers from "preying on the weakest firms"

Mon Sep 15, 2008 6:59pm EDT NEW YORK

http://www.reuters.com/article/etfNews/idUSN1530821320080915

(Reuters) - New York City's mayor on Monday said U.S. regulators must stop short-sellers from "preying on the weakest firms" and the state comptroller said that without "rational" reforms, the demise of Lehman Brothers Holdings could cripple financial marts and the economy.

The two politicians were responding to the extraordinary trifecta of Lehman's bankruptcy, Merrill Lynch's hasty acquisition by Bank of America and a capital crunch at American International Group, once the world's largest insurer ranked by market value.

Some of Bloomberg's latest comments were a shift from last year, when a commission he formed urged regulators to relax costly and burdensome rules that help other global capitals, most notably London, attract financial companies.

Wall Street is the tap root for both the city and state economies. The total compensation paid to financial workers accounts for 35 percent of the city's wage base and pays one of every five state tax dollars.

Democratic Gov. David Paterson, who on Monday helped state-regulated AIG buy time by clearing the way for it to legally give itself a $20 billion bridge loan from its subsidiaries, also spoke out about financial regulation.

Paterson pinned the current financial crisis on the lack of transparency, saying: "Nobody really understood what was going on ... Innovation has really come back to bite us.

"What I would encourage is that as much information be shared with the public as possible so that we can really get our arms around how large this crisis actually is," he added.

State Comptroller Thomas DiNapoli called on the Federal Reserve to follow the governor's lead in aiding AIG, saying: "The first goal of both New York and the federal regulators is to restore confidence and stabilize the markets." Continued...