Over at the Harvard governance blog, Wachtell Lipton lawyers Edward D. Herlihy and Theodore A. Levine cut loose with a spirited call for regulation of short selling and offer proposals for doing so. Yet, as far as I'm concerned, the argument is loser from the start. They opine that:
The repeated abuse of short selling over the past eighteen months has led to the destruction of businesses, cost countless numbers of jobs and created systematic risk in the global economy. Though some have asserted that short selling aids liquidity and price discovery in the market, the possibility of such functions should not be used to justify the damaging and corrosive consequences of abusive short sales. Since the repeal of the uptick rule in 2007, the market has suffered a resurgence of manipulative short selling, including widespread “bear raids,” in which short sales of equity securities are employed, sometimes in combination with other trading strategies, in a concentrated effort to drive down their prices. These practices have badly damaged institutions, destroyed billions of dollars in shareholder value, and crippled investor confidence.
I'd like to see one iota of evidence for these over-the-top claims. Name one business that failed because of short selling. Explain how short selling cost anyone their job. How did short selling exacerbate systemic risk? It's all BS. There simply is no evidence. there's just a bunch of pissed off CEOs and investors who saw their stock driven down to its real economic value quicker than they would have liked. Want proof? Go here.
