Short sellers and the Lehman report

The 2,200-page examiner's report has sent a lot of messages, including one for those who take a dim view of short selling. Recall that as Bear Stearns (Bear Stearns news) and Lehman Brothers (Lehman Brothers news) were on the brink, bank executives were ranting about short sellers and how they were destroying their companies.

But in the case of Lehman Brothers, the examiner's report did not finger short sellers as the cause the of company's demise. The real problem was the use of Repo 105 deals that painted a misleading picture of the bank's health. Breakingviews suggests the report thus vindicates the likes of David Einhorn and others who were extremely skeptical of Lehman's assurances of financial stability.

In hindsight, this was an important view, one that was certainly vindicated, and the short sellers were an easy scapegoat. This may help mute the view that short selling ought to be banned in some stocks. 

For more:
- here's the Breaking Views article

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