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The Editors | 09.18.08


Ironic Speculation: Investment banks seek protection against short-selling

Liz Moyer, Forbes [Read the Article]

In an effort to slow panic selling, the SEC will try to force hedge funds to disclose their short selling positions. What's ironic is who's cheering the agency on: "Morgan Stanley and Goldman are the only two of the formerly five major Wall Street brokerages standing alone, and that is believed to have made them targets of speculators... Last week Lehman was the subject of a massive sell-off that eroded confidence in its business and sparked a funding crisis that ultimately led to its demise. 'It's very clear to me we're in the midst of a market controlled by fear and rumors, and short sellers are driving our stock down,' Morgan Stanley CEO John Mack said in a memorandum to employees Wednesday. 'You should know that the management committee and I are taking every step possible to stop this irresponsible action in the market.'"

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By jmedaille AT 10.11.08 02:08AM


Short selling allows involves either a theft or a fraud. In naked shorting, one sells what one doesn’t own, which is fraud; in covered shorting, one sells shares that one “borrowed” without the owner’s permission, with the intent of returning them at a lower value. This is theft.

If someone wants to short his own shares, then let him do so, without restraint. But of course, no one does this. It can only be profitable if you steal someone else’s shares.


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