Capitalism gets a bridle:
Given the importance of confidence in financial markets, the SEC’s action halts short selling in 799 financial institutions. The SEC’s emergency order, pursuant to its authority in Section 12(k)(2) of the Securities Exchange Act of 1934, will be immediately effective and will terminate at 11:59 p.m. ET on Oct. 2, 2008. The Commission may extend the order beyond 10 business days if it deems an extension necessary in the public interest and for the protection of investors, but will not extend the order for more than 30 calendar days in total duration.
The SEC could have said “In order to maintain the value of investment bankers’ bonuses, we are now cutting the investing public out of the game.” And if you are a short-biased fund, you just got “bricked.” The real joke of this is that it’s being done under the guise of “restoring liquidity” to issues. All it’s really doing is giving insiders some breathing room for bailing out.
The “No Loss Sale Rule” is next.