The recent turmoil within the U.S. regional banking sector has lured short sellers to the sector and one financial expert believes these smaller banks are in trouble.
"The reason that these companies are in trouble is because their lines of business are poor,” Brad Lamensdorf, co-portfolio manager of the Ranger Equity Bear ETF, told BNN Bloomberg in an interview on Monday.
Lamensdorf explained that U.S. regional banks have shown poor lending practices, such as borrowing short and lending long. These decisions, he said, point to a broken business model and he questions the ability of these smaller banks to make money moving forward.
It’s for these reasons that he says short sellers can see the precarious situation that some of these banks are in.
"The short sellers are on these stocks, there's no question about it," he said.
In this environment, there have been calls to ban short-selling for some of these financial stocks in an attempt to avoid further instability within the U.S. banking system, though the White House ultimately dismissed these fears.
Lamensdorf explained that despite the concerns over a short-selling ban, people need to remember that U.S. regional banks are nowhere near as large as the likes of JPMorgan Chase & Co. or other U.S. banking institutions.
“I think that if those were to start getting in trouble (large U.S. banks), which they may, then you would have some trouble,” he said.
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