SEC looks to crack down on rumors

In a press release issued on Sunday -- presumably meant to be a warning to traders before the opening bell on Monday -- the SEC announced that "the SEC and other securities regulators will immediately conduct examinations aimed at the prevention of the intentional spread of false information intended to manipulate securities prices."

Cash-bleeding train wrecks like Bear Stearns and Lehman Brothers (NYSE: LEH) have complained that rumor-mongering has damaged investors by causing a precipitous slide in their stock prices. Bear Stearns executives have essentially blamed short-sellers for the company collapse which is, interestingly, the same argument made by Enron's former head honchos. Just saying.

I don't doubt that there's a fair amount of hanky panky on the part of short-sellers looking to profit from declines in share price, but I think that massive writedowns and a lack of transparency at these companies have been larger factors. As DealBreaker recently noted, "if a company can be brought down by the corporate equivalent of 7th grade girls passing notes in class, perhaps it doesn't deserve to exist anyway."

The Wall Street Journal notes (subscription required) that "The need for such a move by the SEC took on new urgency after a brutal week in the U.S. stock market, where major financial firms such as Lehman Brothers Holdings Inc., Fannie Mae and Freddie Mac were battered as rumors about everything from government bailouts to possible mergers flew across Wall Street."

This just in: Fed to rescue Fannie Mae, Freddie Mac. Apparently those mean short-selling trash-talkers were onto something.