Even if you didn't like the fiction of the SEC's ban on short selling, you still imagined it was trying to protect "financial stocks." Although a fantastic tale has been woven about the impact of short sellers, the definition of what exactly is a financial company seems to have grown in the telling.
Sure, you can understand the inclusion of Citigroup (NYSE: C ) or Credit Suisse. But when did you last get financial advice from diamond seller Zale? And while you were picking up your meds at your local CVS Caremark (NYSE: CVS ) drug store, did you happen to find the aisle selling investment information? Both of those companies have been included, along with Ford and General Motors (NYSE: GM ) .
In fact, Credit Suisse wasn't even originally included on the list; it had to request that its name be put on. In a bit of irony, Greenlight Capital (Nasdaq: GLRE ) -- the hedge fund home of vocal short seller David Einhorn -- was included.
Now the SEC has shipped out responsibility for who should be on the protected list to the exchanges themselves. So rather than the original rationale of trying to stabilize our financial system by protecting banks and credit unions from the big, bad short sellers, we're basically saying to any company that if it wants to change its sector designation to "financial," all it needs to do is ask. Apparently anyone with even the most tangential relationship to finance can get included.
That's why we see not only Bank of New York Mellon (NYSE: BK ) on the list, but also Medco Health Solutions, Coventry Health, and Sears Holdings (Nasdaq: SHLD ) . We've got REITs, insurance companies, car dealers, and tax prep specialist H&R Block, too.
Yet not everyone thinks protection is necessary. Greenlight Capital recognized the absurdity of its inclusion and asked to be taken off, while Diamond Hill Investment Group begged off as well. American Physicians Capital also opted out, noting, "We believe in free and fair markets." That's a sentiment in short supply in Washington these days.
It wasn't the short sellers who brought the markets to their calamitous precipice, though their actions often did try to warn us. In the end, the SEC should simply follow Australia's lead and ban short selling altogether.
No, it won't help prevent the implosion of banks that took on far more risk than they should have, but then neither will the fairy tale that's currently being spun that these companies are somehow being protected. After all, Washington Mutual (NYSE: WM ) was on the protected list, and that sad story is now coming to an end.
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