Zachary Goldfarb, a Washington Post staff writer, discusses (p. A10, “SEC Moves to Limit Short Sales of Stocks”) this SEC proposal - sympathetically.  The article is naïve - buying the complaint of “High-profile Wall Street executives” that short sellers “played an outsized role in crashing the stock values of several major financial services companies.”  Now, it is certainly true that when an asset value is falling, some will anticipate further declines and sell short - just as many will anticipate…

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With the British financial markets in meltdown, most of the blame has attached to speculators. In a desperate attempt to be seen to be doing something, the Financial Services Authority has reportedly banned short selling of stocks in “disorderly markets.” In other words, shorting a stock in a normal market is fine but when prices start falling rapidly, the practice will be banned.

This is a foolish, knee-jerk reaction that attempts to have it both ways. For clear explanations of why short…

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