It's a tough time to be a short seller.

The view out on Main Street, fueled by the SEC's temporary ban on shorting roughly 800 stocks, is that the shorts are responsible for much of the carnage. Hedge funds, of course, are an easy target. But it's unclear where all the shorting was coming from, to hear some established shorts opine. One professional told TheStreet.com that much of the shorting seemed to be coming over electronic networks by possibly really untoward sources. He raised the notion of financial terrorism, which may be a bit out there.  

Truth be told, legitimate shorting provides benefits to the market. It certainly plays a role in price discovery. The market price, in our mythic free market, should reflect buying and selling pressure, so one can understand why hedge funds are miffed. The idea of a lawsuit has even been raised. Some are speculating about some sort of action from Phil Goldstein of Bulldog Investors, who took on the SEC several years ago on hedge fund registration requirements--and won. My sense is that the ban will pass on schedule and with a minimal amount of controversy. It's not an ideal solution, but it has to be balanced against the current crisis and the hair-trigger atmosphere that still has people on edge.   

There is some irony to all this: The fact is that the big bailout by the government is designed, in part, to prop up banks. But the big banks, notably Morgan Stanley and Goldman Sachs, run huge prime brokerage operations that have been a rare bright spot as of late. Stock lending really plays into that. The ban will cut into their revenues. - Jim