Short-selling ban cheers markets

The Securities and Exchange Commission, following the lead of its British counterpart, temporarily banned short selling in the shares of 799 financial firms. The emergency ban is immediate and will last through at least Oct. 2. (MarketWatch) Short selling, in which investors bet that a borrowed stock will fall in value, has been blamed for the sharp fall in the shares of Lehman Brothers and other financial companies. (AP in Yahoo! Finance) The British and U.S. bans on short selling, and the U.S. plan to mop up mortgage assets, helped push stocks sharply higher early today, including record jumps in Britain’s and China’s benchmark indexes. London’s FTSE 100 was up 8.3 percent. (Bloomberg)

U.S. mega-bailout in the works

Treasury Secretary Henry Paulson, Fed Chairman Ben Bernanke, and leaders of Congress started work on an ambitious plan for the government to buy up toxic mortgage-linked assets from U.S. financial firms. The plan, which Congress hopes to have finalized by the end of next week, could easily be the largest bailout in U.S. history. (The New York Times) The idea of the unspecified plan is to buy up the distressed assets so that banks will resume borrowing and lending. (Los Angeles Times) Possibilities include creating an $800 billion fund to buy the toxic assets and having Fannie Mae and Freddie Mac buy them. “It sounds like there’s going to be a giant dumpster for illiquid assets,” said Mirko Mikelic at Fifth Third Asset Management. (Bloomberg)

HSBC drops Korean bank offer

Britain’s HSBC dropped its $6.3 billion offer for 51 percent of Korea Exchange Bank, South Korea’s sixth-largest bank. HSBC blamed the market turmoil in scuttling the long-running deal, but some speculate that HSBC is looking to buy closer to home. “Maybe it’s better for HSBC to look at other markets,” said analyst Y.K. Lee at Core Pacific-Yamaichi in Hong Kong. “U.S. bank valuations are very depressed.” (Reuters) Citigroup, also looking to take advantage of the down market, is considering a bid for Washington Mutual. (The Wall Street Journal) And Berkshire Hathaway’s MidAmerican Energy unit agreed to buy Constellation Energy for $4.7 billion in cash. Constellation shares are down almost 60 percent this week. (MarketWatch)

Folgers goes for the budget gourmands

Folgers is the top-selling packaged coffee in the U.S., even though it’s seen its market share eroded by higher-end brands like Starbucks and Caribou. Now, with what it calls “the biggest innovation since the launch of decaf,” Folgers is making a play for coffee lovers who have fallen on harder times. Folgers, in its most expensive ad campaign to date, is touting a new roasting method—completely drying the beans before roasting, to keep down the bitterness. If it works, the high-end market has room for poaching: a record 17 percent of Americans had a daily gourmet coffee drink last year. “People may be willing to forgo the high end but don’t want to have a bad cup of coffee either,” said coffee industry consultant Judy Ganes. (The New York Times)