Chris Cox Bans Short-Selling Again, Market Goes Lower Anyway

Undeterred by the recent spate of bankruptcies and government bailouts, Chris Cox once again pointed the finger at short-sellers.  "These several actions today make it crystal clear that the SEC has zero tolerance for abusive" short-selling.  One of the actions introduced today was to get rid of the market maker exemption for short-selling.  I suppose the SEC has a strong interest in reducing the efficiency that has resulted from years of competition in the options market that has tightened spreads to a penny.  Mr. Cox now wants to penalize options traders if they fail to locate stock when they short stock to hedge against customer trades.  Options market makers are just hedging their risk to execute trades for customers, not plotting against the demise of US financials.  It's sad that the head of the SEC doesn't understand how the market it is supposed to regulate actually works.  The only thing crystal clear about the SEC's actions today is that the agency has its head up its own ass.  Sorry, I always mean to keep this blog family friendly but this has really hit a nerve.  Does Chris Cox know that Lehman bond holders are not expected to recover more than around 40 cents on the dollar?  Somehow that is an indication that the short-sellers of Lehman's stock were right and that the SEC should perhaps be investigating Lehman for accounting fraud.  Ditto AIG.  Why did AIG need to borrow $85 billion in cash from the government?  Because its derivatives books was blowing up, yet the company continued to reassure investors that everything was ok because is was simply holding these derivatives to maturity and that the market was foolish for requiring them to mark to market.  Nice try, Mr. Cox, but the market is down 387 point so far today because of very serious fundamental problems that have nothing to do with naked short selling.