Crucify the short sellers!

The cat's out of the bag with the SEC's new rules on short sales. You can tell the government is worried whenever they put restrictions on short-selling. They're getting desperate because their year-long track record of market manipulation attempts has failed.

Another such attempt went sour yesterday. The government takeover of AIG, after the Feds said they weren't going to intervene in the markets anymore, has sent stocks down rather than up. Perhaps traders are getting the clue—this collapse isn't going to end any time soon.

The AIG takeover makes it pretty clear that the Merrill purchase by BoA was not only an "arranged marriage" but also that there was some kind of dowry offered.

Short sellers are not the problem. SELLERS are the problem. No one who owns these bank/brokerage/insurance stocks wants to own them anymore, and one by one, they're selling.

Still, the government has no one but itself to blame if short sales are truly causing problems. From Wikipedia:

The uptick rule is a securities trading rule used to regulate short selling in financial markets. The rule mandates that, subject to certain exceptions, a listed security may be sold short at a price above the price at which the immediately preceding sale was effected, or at the last sale price if it is higher than the last different price. In 1938, the SEC adopted the uptick rule, more formally known as rule 10a-1, after conducting an inquiry into the effects of concentrated short selling during the market break of 1937.

The SEC eliminated the uptick rule on July 6, 2007.