1) The federal government got rid of the uptick rule making it easier to short stocks*
2) The SEC is not enforcing their rules on preventing naked shorting
3) The FASB has a mark-to-market rule that causes distressed financial institutions to write down the value of some of their assets to ridiculuos “fire sale” levels
4) As we learned in the government seizure of Fannie and Freddie, when the government takes over a financial institution it wipes out the common and even the preferred stock.

Taken together, these constitute a “perfect storm” for the destruction of financial institutions. George Soros or Vlad Putin can pick a bank, short forty billion shares of it, create a panic and rest assured that the government will wipe out the existing shareholders to make sure he never has to cover.

*The argument against reinstating the uptick rule is “It probably won’t have any effect.

The argument for reinstating the uptick rule is “it costs nothing and may have a huge effect”

Given these two views why wouldn’t you reinstate the rule, except for the colossal ego and possible coruption of a few government flunkies?
Christopher Cox needs to be waterboarded!

This is a good example of “unknown unknowns”. If they reinstate the uptick rule and it stabilizes the market this will be proof positive that they were incompetent to get rid of it. For this reason alone they refuse to reinstate it.

Scary thought: Russia owns a ton of US debt and desperately needs to raise money to bail out their own banks.