Janet Yellen's Dismissal of Short Selling: Unearthing a Deeper Systemic Problem in Financial Markets

Jeremy Frommer
June 12, 2023
min read
Janet Yellen's Dismissal of Short Selling: Unearthing a Deeper Systemic Problem in Financial Markets

As the CEO and Chairman of Creatd (OTCQB: VOCL) and a financial markets veteran of three decades, I was horrified as I watched Janet Yellen dismiss short-selling in an interview with CNBC’s Sara Eisen on ‘Closing Bell Overtime’.

My shareholders and a great deal of hard working Americans are beginning to lose confidence in a market system rigged to the advantage of a few at the expense of the many. It is sowing the seeds of social unrest and extreme class structures in society.

It is time to say goodbye to the Clinton-era apparatchiks who continue to trot the outdated theorems of their tired and irrelevant perspectives on the 21st-century financial world. Yellen is the most recent offender of my senses.

Yellen is — essentially — a career academic who never experienced the financial markets from within. Lacking practical experience, this type of person cannot and should not be in a position of power anywhere in this country. In 2023 the complexity of the financial system can only be understood by an individual who combines technological understanding with real-time execution skill sets. It’s only someone like that who can dedicate their time to consistently stay at the tip of the spear in the information age. Present-day officials — from Gary Gensler at the SEC to Janet Yellen at the Fed — are simply protecting legacy and collecting a paycheck as they aspire to their next position of power.

But let me give Janet Yellen a break for a moment, as she is not fully to blame. She is a symptom of a broader disease. As we have seen time and time again, the Fed is not proactive, it’s not intuitive, instead it is reactive and almost always the cause of its own problems. Even more importantly, the Fed doesn't innovate. It has followed the same playbook for decades. As such, we now face not only a crisis of confidence but also a crisis of structure. This threatens the confidence and trust the American people have placed in the financial system, and those charged with protecting it.

It's important to note — though this is not the place to discuss it at length — that this criss of structure threatens not just our financial system, but democracy itself and our Constitutional Republic.

Runs on banks and short selling are directly correlated and even worse, orchestrated by hedge funds and other organized groups of investors. Their intent is not to maintain a stable and fair market, but rather to exploit fear and behavioral psychology. This gives them the ability to bully weaker investors who will unwittingly enable their manipulative trading. That’s who Janet Yellen is up against. In that interview on CNBC she was asked whether regulations around short selling should be readdressed. Her response? To simply imply that “the bar is too high” to justify any movement on this front.

Who is Janet Yellen to make such a proclamation, when I can assure you that she could not coherently explain nuances related to borrowing stocks, tracking fail-to-delivers, checking market maker exemptions and the numerous other essential data points that I spent most of my career studying. She, however, just refused to engage with the issue. When further pressed by Sara Eislan she did what most politicians do — passed the buck. “This is a matter that’s up to the SEC,” she said.

The first step is to accept that the system is broken. And then, we must begin to cultivate a culture of education in the broader financial system. Short selling — which, let’s remember, essentially means betting against the success of a company — no longer provides the value it was intended to foster. Decades of advancement in technology and corporate transparency have rendered the mechanisms of short selling obsolete. Yellen and other talking heads who have found themselves in positions of power must stop perpetuating the myth that short selling as it currently exists is of benefit to the market. Clearly, it is not.

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Jeremy Frommer

Chairman and CEO of Creatd, Inc. (OTCQB: CRTD)

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