What really happened is that Lehman brought down Lehman. Grabbing the pitchforks and chasing after naked short-sellers may be a popular pastime, but wouldn't you rather address the problem(s) that brought down Lehman in the first place?
This commie homo has you barking up the wrong tree. Next time, it will be the oil speculators. Next time . . . .
The “other firm” was Bear Stearns.
And I am well aware of what created the buying opportunity for JP Morgan and what took down Lehman. While naked shorting did not “take those firms down”, it did atificially depress share value in the companies during the run-up to their failures, contributed to negative perceptions due to the declining share price, and make it more difficult for these firms to get the liquidity and financing they needed that PERHAPS could have kept them from going belly-up. The naked shorting also turned what should have been an orderly exit buy long holders into routs that cost other investors, large and small, hundreds of millions while the big boys made profits on the volatility.
While not technically illegal prior to the implementation of Reg SHO, it is just part and parcel to what our system has devolved into — if you are in the club, you don’t have to bother with actually settling a trade or following other inconvemient rules that get smaller firms bounced from the business. If a member of John Q. Public wants to short, have the shares or pay through the nose to borrow them. The big boys are STILL doing this, even under Reg SHO. Unethical and even illegal behavior is OK for these creatures, because the fines they have to pay are miniscule compared to the profits they can make. And nobody ever goes to jail, even for conduct like Goldman structuring a deal that they knew was going to blow up, telling investors it is a good investment and selling it to them, and then shorting the investment while making money on all three legs of the deal.
I am not in the energy business so I don’t know about oil speculators. I do know about securities firms and I will tell you once again - if you love the concept of free markets and captalism, large securities firms are not your friends. Sometimes even a commie homo has to be the one to point out that in too many cases, the biggest enemy of capitalism are capitalists.