Here’s another thought. Lehman had huge stock option programs for its senior executives. In the past four years, Lehman bought back $6.5b in stock in order to pump up the value of their stock options. If Lehman had that $6.5b last week, would it have folded? I don’t know. But having kept that cash would have increased Lehman’s shareholder capital by almost 1/3. Should companies with lavish executive stock option programs be allowed to buy back stock? Now that’s a question that’s worth pondering, because it directly affects the solvency of the companies that do the buybacks.
A very simplistic reply to your very well written reply is that I still believe Naked Shorts should be completely eliminated by strong enforcement. THe underlying stocks can be tracked and if they aren’t there, well.I haven’t thought this out in great enough detail to write a cogent response at this time.
I suspect that whatever conclusion I come to will be derided by most as no good for the market. THis is standard argument used in Medicine, Sports or almost any other activity requiring regulation when their ox is being gored. I think less regulation is best but regulations that are necessary must be enforced vigorously. All of this is sort of trite but I haven’t finished enough research to form a complete opinion except for NSS.
For now I see the SEC as the NCAA. The coach makes the big bucks from endorsements and big donors. The coaches and donors do the illegal recruiting and the students and athlets suffer the penalties. The coaches and donors get away scott free. We need to reverse this.
I think WS can be reformed but it may spoil the fun of the high flyers and ignore the Martha Stewarts and the press will hate it.