No more naked (sigh)

By John Sullivan

Commentary July 28, 2008 at 08:00 PM

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I've gone on about this for far too long now, so barring something spectacular, it will be my last post on naked short selling. But I absolutely have to point to L. Gordon Crotivz's piece at www.wsj.com. He validates my earlier viewpoint (at least in my own mind) that the dustup over naked short selling was more political than practical. Writes Crovitz:

"Asked for an example of false market rumors bringing down a firm, Harvard financial historian Niall Ferguson thought for a moment. 'You might look at France in the 18th century,' he suggested."

Seems it happens much less than politicians would have you think (or not at all). And how's this for irony:

"For one thing, rumors about Bear Stearns' losses appear to have been true, confirmed by the federal regulators who oversaw the forced sale of the firm. For another, the list of the largest financial firms being protected from naked short selling by hedge funds (among their most important customers) includes several being investigated for potential manipulation of Bear Stearns and Lehman shares. Still another, Fannie Mae and Freddie Mac are among those being protected, even though forensic-accounting short sellers (naked or not) were right over the years to warn that the federal housing insurers were putting taxpayers at real risk. A final irony: In the credit crisis, the one class of financial-services firm that has not collapsed or begged for a bailout is the hedge-fund industry."

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