One of the country's most famous traders, who spurned incredible wealth to heed a call to public service, has advocated--in a laudably measured manner, whether one agrees or not--reexamination of the uptick rule.
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Seriously:
Assume for the sake of argument that the market is locked into a downward spiral and a catastrophic crash can only be avoided by external intervention.
Ad hoc, kneejerk regulatory responses are even more transparent attempts at manipulation than what short sellers are allegedly doing. At worst, such responses, coming on the heels of political/bureaucratic incompetence and phony reassurances from Fannie, Freddie, Lehman, et al, will only aggravate the panic. At best, kneejerk regulation is likely to lock in distortions that will impair the competitiveness of US markets going forward.
If the threat is not catastrophic, let the market do its work of creative destruction[1]. If the threat is catastrophic, close the market for a week or two and coordinate a solution with a critical mass of domestic and foreign heavy hitters.
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[1] There is also the alternative of letting the market unwind the mess even if the threat is catastrophic.
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