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Regulation and Compliance > Federal Regulation > SEC

Selling us all short

By John Sullivan

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Gotta love rule-making by enforcement. If ever there was a tool specifically to look for scapegoats, this is it. A particular action may not be illegal at the time an individual or firm engages in it, but regulators can get a law passed, and then retroactively go after the individual or firm to bring sanctions. Sort of like Tom Cruise in Minority Report; except rather than go after someone who is going to commit a crime in the future, regulators go after individuals for something perfectly lawful at the time of the supposed (past) infraction. It’s enough to make the head spin.

Short sellers are the latest scourge in regulators’ sites. But they don’t seem to realize that in order to trade, you actually have to have buyers and sellers. So, according to the SEC, an unfortunate market reality is that someone might still be making money? C’mon.

Look, I’m all for going after individuals who deliberately manipulate the markets with rumor and blatantly false innuendo. But the grand pronouncement by SEC head Chris Cox makes me think this is more flash than fury, and as a result, innocent people will suffer. The problems with Fannie and Freddie go far beyond mere short selling, and the fact they organized the posse so quickly tells me all I need to know about where the real blame lies. I guess it’s time once again to open the door to the glass house, pick up the stones and start throwing.