SEC's Short-selling Restriction Effort May Be Short-lived

The SEC's effort to reduce short selling hardly qualifies as a unique regulatory move -- by historical or modern standards. The lead article in the July 16 Wall Street Journal provides strong reporting on the effort and in-depth historical analysis of short selling.

Variations of short selling -- essentially borrowing shares today to buy at a lower price tomorrow (or next week or month) -- were banned by the New York State government in 1792, the British government following the South Sea Bubble in 1773 and the Karachi Stock Exchange last month.

What's so interesting about the short-selling controversy (the question is: "did short-seller rumor-mongering help sap the value of Bear Stearns, Lehman Brothers, Fannie Mae, and Freddie Mac?") is how it reflects sort of a mirror image of our last post-bubble fallout (the question was: "did analyst propaganda inflate the value of dot.com companies because the analysts spreading the gospel had skin in the game?").