"The Government Is Contributing to the Panic"
This is a great WSJ piece from a few days ago. The author, Yale law professor Jonathan Macey, stresses a point that I haven’t seen elsewhere, namely that the SEC makes firms vulnerable to short-sellers:
For years the SEC has hampered companies’ ability to protect themselves from manipulation by short-sellers. The most effective way for a company to respond to an attempt to manipulate its share prices is simply to repurchase its own shares, simultaneously “squeezing” the short positions and sending a clear signal of financial health to the capital market.
However, companies have long felt vulnerable to being charged by the SEC with manipulation whenever they go into the market to make share repurchases. The SEC finally acknowledged this problem after the collapse of Bear Stearns and Lehman when it stated publicly that “historically, issuers generally have been reluctant to undertake repurchases” when faced with manipulative short-sellers because of the massive amount of uncertainty about whether the SEC would sue them for trying to manipulate the market.
