Never thought the word “naked” would be so loaded. Had quite a bit of reaction to last week’s post on short selling. Call it lost in transcription, but due to a transcription problem caused by spotty cell phone service from rural Massachusetts, the subject line mistakenly read FCC instead of SEC (incredibly cringe-inducing, as if the FCC didn’t have enough problems, wardrobe malfunctions and all). Once corrected, it didn’t slow reader commentary. A sample:
“I have no problem with people making money … but not when they make this profit by selling out the stability of our country and making life miserable for millions of people. This is greed pure and simple.”
“I agree this is a knee jerk reaction, but I also agree that individuals or entities that are trying to manipulate the market should be HARSHLY punished. So the question is how do we … or should I say the SEC do this? I think the theory is bring down the hammer and then we may be able to ease it off later.”
“What people don’t seem to be understanding is that they are outlawing NAKED short selling. [A] large hedge fund could theoretically short a stock into the ground if they had enough money and never have to actually take delivery of the shares.”
“I believe that the only entities that should be able to short stocks are market makers, in the effort to create an orderly market. I do not believe that naked short selling should be allowed at all.”
“Yep, just watch the Senate hearings if you want to see some totally ignorant grandstanding.”
“This isn’t about short sellers. It is naked short selling, fails to deliver. That’s what’s not legal. I’m curious how you twisted this into a them against us. It has always been illegal to not deliver.”
Call me oversensitive, but after the skewering the G-8 summit gave commodities speculators I saw another political potboiler on the way. I agree I should have specified naked short selling. For more on the controversy, see Holman Jenkins’s excellent piece “Washington loves bank investors” at www.wsj.com.