September 28, 2009
The SEC needs to force broker dealers to allow their customers to choose whether or not the customer wants her/his stock to be available for stock-loan. The default choice on all New Customer Account Forms should be "no", and the customer should be forced to actively override that default if her/his stock is to be lent out to short sellers.
Short selling should not be made illegal. However, most people don't want their stock being lent out to institutions whose only motivation for borrowing the stock is to devalue it. Would you lend your house to someone so that they could sell it, trash the surrounding neighborhood, buy it back and then return it to you in its depreciated state?