The crowd that once argued that the market was omniscient, wise and wonderful is chasing rumors with a broom, muttering darkly about hedge funds and threatening to ban shorts. A Republican Treasury, which has avoided putting up a dime to save anyone, is potentially bailing out Fannie Mae and Freddie Mac, stirring up criticism from the GOP in Congress while Democrats look stonily on. Meanwhile, Lehman Brother Inc.'s Dick Fuld and the late Bear Stearns Cos.' former CEO Alan Schwartz are apparently making strange phone calls to Goldman, Sachs & Co.'s Lloyd Blankfein to demand he rein in his purportedly rumormongering, short-selling traders. Are they Vanity Fair readers? Or are they passing on rumors? And Goldman, of course, is one of those firms the Securities and Exchange Commission has on its can't-short list. Maybe Goldman guys are shorting Goldman.
Oh, and then there's naked shorting. After a controversy that simmered for years -- Patrick Byrne, this is your day! -- the SEC's Christopher Cox banned naked shorting, just before he lurched after its fully clothed variety. You can argue that shorting produces some market good, but can anyone say what economic good naked shorting produces? That's never been the issue. The controversy always was: Did naked shorting make any difference? Good to know the SEC has decided that it does, though why it couldn't have concluded that years ago is a mystery only the PR crowd can explain.
Beneath the chaos, we're seeing traditional lines being crossed, blurred, erased altogether. Example: hedge funds. The SEC is clearly targeting them, on the urging of what the papers call "Wall Street." There is no doubt that the hedge funds have targeted battered firms like Lehman, not to say Fannie and Freddie. But traditionally, the hedge funds and the Wall Street firms mutually benefited each other, through Wall Street's prime brokerages, which serve the funds (and provide them, among other services, the shares to short), not to say the fact that many of the firms actually own hedge funds or behave like them. Can you hedge without shorting? Can you build synthetic instruments without shorting? Has deleveraging proceeded so far that Wall Street firms don't feel the need to engage in shorting as part of complex leveraging strategies? Is Wall Street now prepared to declare that the grand experiment in shareholder democracy represented by hedge funds was a mistake?
At the end of the day, it always comes down to governance. What we've seen since the Bear run is shareholders getting creamed on several fronts. First, they've seen their equity destroyed, in some cases never to return. Second, shareholders have been accused of rumormongering, shorting, naked shorting, undermining the shining Oz of capitalism. Geeze, wasn't it just a short time ago that shareholders, including activists, were true corporate owners that had to be consulted on everything from strategy to a CEO dress code? Now they've turned on each other. How bad is it? Marty Lipton is supporting the stop-the-shorting program, probably with a degree of suppressed glee. Where does ISS come out on this burning issue? Who are the good guys? Who are the bad guys?
It's so confusing. Maybe everyone should just shut up and think mentally healthy thoughts, like Jerry Levin in California. Maybe everyone should go on vacation. Alas, this is no joke (no jokes are allowed). When the SEC starts talking about banning shorting, we're on a slippery slope toward a market holiday, which is really no fun at all. We're essentially saying that the market is so dangerous, so irrational, so nuts, that maybe we -- who, after all, make up the market -- need to take a little thorazine and spend some time, say 30 days, in rehab. It's either that, or Cox really feels the need to get on someone's good side. If only Hank Paulson had invited him to those meetings. - Robert Teitelman
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Enter the whirlwind. It's been building, but Tuesday was a day when any ties to past reality seemed to snap and get flung around like newspapers in a hurricane. The market is spinning faster and faster, and we've reached the point where the dynamism that propels it is fueled by, well, evil thoughts, which need to be stamped out. The pack has turned on itself. 
Short People got no reason
Short People got no reason
Short People got no reason
To live
They got little hands
And little eyes
And they walk around
Tellin' great big lies
They got little noses
And tiny little teeth
They wear platform shoes
On their nasty little feet
Well, I don't want no Short People
Don't want no Short People
Don't want no Short People
Round here