NEWS

Bloomberg columnist Jonathan Weil (March 24, “John Mack’s Short Story was Too Dumb to Fail”) notes how claims blaming short sellers for falls in financial institutions’ stocks have yet to be proven.

He writes: “It’s been 554 days since Morgan Stanley Chairman John Mack sent his infamous Sept. 17, 2008, memo to employees, saying that ’short sellers are driving our stock down.’ . . . Mack’s claim, for which he offered no evidence, was implausible on its face. As of mid-September 2008, the short- interest ratio, or the number of Morgan Stanley shares sold short relative to average daily trading, represented less than two days worth of volume, according to data compiled by Bloomberg. This suggests that those betting against Morgan Stanley didn’t have a large presence in the market.

“Short sellers, who sell borrowed shares in hopes of buying them back at lower prices and keeping the difference, weren’t responsible for the problems at these companies. The people who ran them were, though for any of these visionaries to have such an outbreak of candor is hard to imagine. Indeed, after the SEC’s short-sale ban took effect, Morgan Stanley’s shares continued falling, until the company finally secured fresh capital in October 2008 from Tokyo-based Mitsubishi UFJ Financial Group Inc.”