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Short selling saves companies

If you were doing business with Morgan Stanley, your ability to short the stock was a hedge. Say there had been a short-sale ban, or an uptick rule making it hard to short What else might you have done? Well, you might have severed your relationship with Morgan Stanley even faster, accelerating the run on the bank. Or you might have bid up CDS to even more dizzying heights. Or you might have stopped writing Morgan Stanley CDS, prompting others to de-risk in some other fashion.

-- James Surowiecki

[Via Bess Levin and the New Yorker]


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