Brevity is the Soul of Wit

Well, that's what they say ...

A blogger I haven't read until today named Paul (never trust anyone with two first names) Nathan has a very concise summary of the panic of 2008 at this link. It's a good read if you're confused by all the storm and fury you hear in the mainstream press on the topic.

Before 2008 I never thought I'd live through something like it. I thought our financial betters had learned their lessons from the Great Depression. I wish.

In some respects, I still doubt that they have ... but don't we all?

Nathan raises the point of two great blunders made by the Securities and Exchange Commission (SEC) that didn't cause but did exacerbate the plunge, mark-to-market accounting and the uptick rule.

Adding injury to insult, at the very time the stock market entered a bear market the government made two disastrous moves. First, it imposed the mark to market rule. ...

Further, the government allowed the uptick rule to expire for the first time since the Great Depression. The uptick rule discouraged massive short selling. By removing it as a governor on short-selling it encouraged shorting just as the market began to dive. Not only were these questionable moves, they couldn’t have come at a worse time, reducing liquidity just when increased liquidity was critical.

It's the uptick rule that still puzzles me. Why did the SEC suspend it? It's a very simple rule that has a powerful effect on preventing bear raids on stocks. Since 2008, the SEC has suspended mark-to-market but has still not re-instated the uptick rule.

So, here's a challenge for the financial press. Let's start dismembering the crash of 2008. Next time you have Chris Cox (SEC) or Ben Bernancke in the box, ask them about the questions Nathan raises. I'd love to hear the answers.