Friday, March 20, 2009

Did naked shorting bring down Lehman?

Article here on Bloomberg.com argues that naked shorting (shorting without actually borrowing the stock) might have brought down Lehman (or at least contributed to the downfall).

Ordinarily naked shorting shouldn't drive a firm to bankruptcy, unless a depressed stock price weakens the market's confidence in the firm. Clearly that scenario could play out for a highly levered entity like Lehman.