NPR logo In Defense of Short Selling

In Defense of Short Selling

The Securities and Exchange Commission temporarily banned short-selling of financial stocks yesterday.

Short selling is a way of betting the price of a stock will go down, and the concern is that it is becoming a self fulfilling prophesy - pushing stock prices down artificially.

But let's remember that all this trouble began with a housing bubble. And short-sellers are one way of keeping bubbles from happening.

Our colleage Alex Blumberg, has a beautiful explanation of something called "naked short selling" on our podcast. The SEC previously banned naked short selling though no one seems to think the practice was widespread.

Alex is working with us from his regular gig at This American Life (Thanks Ira!) which just won two Emmy's for its brilliant TV series on Showtime. (Read Ira's reaction to winning on the TAL website.)