So, correct me if I'm wrong here: In a idealized vacuum, a company's stock price doesn't change anything. The price could double or triple or drop to pennies and its current assets, liabilies, and owner's equity would remain the same. Fundamentally speaking, stock price isn't a cause of anything; it's an effect. Of course, stock price has very important indirect effects. I've always heard that the most important effect was credit. Good stock performance equals good credit. Bad performance means bad things for its credit. If a company was counting on being able to borrow plenty money on good terms, suddenly not being able to would be catastrophic. I'm assuming that's what happened here, and that's why the shorts have become the SEC's whipping boys. (If there's other mechanisms at work here, please enlighten me.) Step by step, this their line of reasoning as I understand it: 1.The short sellers caused the stock price to fall... 2. ...which caused a shrinkage of credit... 3. which led to insolvency. (The possibility of issuing additional stock complicates matters, but an established company with "strong fundamentals" wouldn't need to do that in order to stay afloat, right?) So yes, I see the connection between short selling and the destruction of a company, but why isn't anyone talking about step #2? If this theory of collapse is correct, creditors (and/or credit rating agencies) made the conscious decision to base their decisions on the existence of short sales. If the "fundamentals were strong", surely the creditors could have ascertained that for themselves and ignored the artificially-deflated stock price, right? I really don't see how you can reasonably blame the shorts for anything. The creditors made the decision to put their faith in the shorts. If the short sellers were simply being malicious, the creditors could have designed systems to compensate for the "artificially" deflated prices, couldn't they? This is more than just a matter of misplaced blame... if we accept that the shorts and the creditors were both acting rationally (and I think that's a pretty reasonable assumption), then the SEC is not only attacking the bears... they're attacking the creditors, who rely on the bears (*and* the bulls) to give them an accurate measure of risk. In other words, in the face of a credit crisis, they've basically decided that the best course of action is to duct-tape our foot to the accelerator and put a blindfold over our eyes. I'm not saying we're headed towards a cliff, but if the SEC continues to remove tools that could conceivably predict or mitigate disaster... Well, I just hope we're not headed towards a cliff.