To the Editor:

Re: “Sold Short: American Capitalism at Its Finest,” Letters, March 25

We live today in a tense economic climate. In the past year, organizations previously thought of as the titans of industry have been brought to their knees, while pension plans and 401ks throughout the nation have been wiped out. All while short sellers managed to turn a profit.

To view short selling as a check on the health of businesses and the root of innovation is dangerous. In fact, short selling is a method of scheming meant to undermine an organization for the profit of the rich at the expense of thousands of workers. In short selling, hedge funds use miscommunication — yes, propaganda, to spread fear in the market about the prospects of a company. As the stock value of the company dips, traders borrow shares at the high price, sell immediately, and buy back more shares at the lower price. When this is done repeatedly and en masse, short sellers can spur the rapid decline of the stock, at a profit!

It is true that short sellers can sometimes find and correct stocks that are overvalued or have fraudulent accounting records. However, they can also cause a healthy company to fail, leading to massive layoffs and lost revenue.

So, what can we do to keep the benefits of short selling without the incredible risks and dangers? The solution is the reinstitution of the uptick rule, a regulation that slows short selling, which was removed in 2007, and would likely have helped ease the market crash that followed soon after.

Matt Danzer ’12