The lender can’t lose, only gets interest, right? That’s why he does it?
The lender makes some money on the shares they lend, but of course there is always the risk that their price could go down, which is what the borrower is betting on. It creates a healthy market.
On most stocks, they do not charge interest.
Brokerages are only supposed to allow short sales if shares are available to be borrowed. Problems arise when they allow the short sale w/o having the stock to lend.
On certain bankruptcies like Countrywide Financial borrow fees hit 140%apr.
They are very slimy w borrow fees of heavily shorted stocks. The apr changes daily based on the availability of shares to be lent.
Lastly, the sale obv generates cash. Shorting can also be an inexpensive way to borrow money. Instead of paying a cc 24%, one can short a utility and pay their dividend to the lender, saving quite a bit.