Did Loss of the Uptick Rule Contribute to the Market Decline?
The Wall Street Journal's "Heard on the Street" column suggests today that abolition of the "uptick rule," established after the 1929 crash, may have contributed to the recent market declines.
The evidence of this is anecdotal, but I think this is a very real possibility. If so, then what we have here is yet another example of how the SEC's kowtowing to anti-naked-shorting nutcases has skewed its priorities and diverted the public's attention from real issues.
As I describe in Wall Street Versus America, elimination of the uptick rule was part of a package of regulations that included -- and was overshadowed by -- the ridiculous "Regulation SHO," which tackled the nonexistent "naked short-selling scandal."
Wall Street views Regulation SHO as a nuisance, not a threat to its livelihood. But the uptick rule was an obstacle to genuine (as opposed to phantom) short-selling.
So the Street was, I am sure, only too happy that Overstock CEO Patrick Byrne's lapdogs in the Utah congressional delegation railed away at Regulation SHO and the phantom menace of naked shorting -- while letting the uptick rule slip away.
And now the rest of us are paying the price.
Once again, the destructive force of the Baloney Brigade has been demonstrated.
© 2007 Gary Weiss. All rights reserved.
Wall Street Versus America was published by Penguin USA on April 6.
Click here for its Amazon.com listing and here for more information on the book, from my web site, gary-weiss.com.