Shame on short sellers for destroying the financials!

Posted Jul 14th 2008 5:21PM by Zac Bissonnette
Filed under: Rumors, Scandals, Bear Stearns Cos (BSC)

Yesterday I blogged, with a good degree of skepticism, about the SEC's announcement that it is cracking down on rumor-spreading fear mongers looking to profit from declines in stocks like Fannie Mae and Freddie Mac. In one of his daily email newsletters, hedge fund manager/all-around smart guy Whitney Tilson quotes one of his friends:

Thank God someone is doing something about this. Because, as we all know, our financial regulators have done such a good job in overseeing the institutions that are suffering from this evil conspiracy. What would be even better is if the SEC, NYSE, etc. could identify and "bring to justice" those hedge funds and short-sellers that, through a vast conspiracy with the ever-compliant press, forced bank/brokerage management teams to make the trillions in bad loans that now imperil our economic system.

Exactly. Regulators did nothing to protect investors and consumers from this mess, and have sat idly by while so many companies have failed to level with investors about their problems. The reason that the rumors have such impact on the market is that many investors have concluded, correctly, that they can't rely on these firms to provide timely updates about their prospects. If BEAR STERNS COS INC (NYSE: BSC) was a victim of rumor-spreading short sellers, it was also a victim of its diminished credibility that created an opportunity for manipulation in the first place. The SEC should focus on actual problems, not rumors which, last time I checked, have always been part of the market.

Tags: rumors, short sellers, ShortSellers