Recall that at the height of the financial crisis, executives of the doomed Lehman Brothers and Bear Stearns blamed short sellers for decimating their stock.

While some considered this an absurd contention, the stock gyrations were enough to spook the regulators, who passed a series of measures to curtail short selling in financial stocks. This ended up being a rather byzantine process that certainly tasked the IT folks at top broker dealers. After lots of discussion about the best course, the SEC ended up passing a modified tick rule, which is triggered when a stock falls more than 10 percent. When that happens, traders can only short stock on an uptick. Naked short selling was also banned.

As the Financial Times notes, the on-going European financial crisis has led to similar thinking at the EU. In the wake of failed efforts by EU regulators to co-ordinate a broad response to the market debacle, France, Spain, Belgium and Italy have laid out plans to ban all short selling of specific financial stocks for 15 days.

This certainly feels familiar. Short sellers are busying trying to make their voices heard above the confusion and knee-jerk mayhem. Among other things, they warn that an outright ban makes it really hard to hedge bank stocks, which may result in more outright selling. They also note that short sellers were often buyers of bank stocks on secondary issue, which made them valuable to bank capital raising efforts. That might dry up if the ban is made permanent.

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