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SEC’s Short-Selling Crack Down Is a Gross Double Standard

Jul 17th, 2008 | By Dave Gonigam | Category: Featured, Financial News

The Securities and Exchange Commission (SEC) moved against short sellers this week.

The list of 17 companies spans the SEC has decided to protect from short sellers includes Fannie Mae (FNM) and Freddie Mac (FRE) to Goldman Sachs (GS), Lehman Brothers (LEH), Morgan Stanley (MS) and Merrill Lynch (MER).

This is a gross double standard, says Dave Gonigam in Desidooru Saloon. Many of the companies the SEC is protecting from short sellers profit from shorting stocks…

For the SEC to crack down on naked short selling in only one sector of the market – the one that happens to benefit most from the actions of the Plunge Protection Team in which the SEC chairman is a key figure – is an outrage. The WSJ reports:

Critics of the SEC’s move Tuesday asked why certain financial firms were being protected – but not the broader market – especially when many of those firms are also active short sellers.

“For heaven’s sakes, they’re the very ones we believe have been doing this… to thousands of public companies,” said James “Wes” Christian, a lawyer with Texas law firm Christian, Smith & Jewell, who represents companies who have filed lawsuits relating to short selling.

So now we have one standard for the companies that grease the skids for naked short selling… and a different standard for everyone else (including junior gold miners – naked shorts is one of the reasons some experts cite for the fact juniors haven’t nearly kept pace with majors or bullion over the last year).

Source: Double Standard


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By Dave Gonigam

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Dave Gonigam is a contributor to Whiskey & Gunpowder, Daily Reckoning and Desidooru Saloon.

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The Daily Reckoning offers a "uniquely refreshing" perspective on the global economy, investing and the ability to live well in uncertain times. You will learn what you can expect from today's markets and how to prosper in the face of uncertainty.

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